Following our previous article looking at the automotive transaction market over the last 10 years, we now focus on the buyer.
- The large consolidators such as Lookers, Vertu Motors, Marshalls and Cambria. These companies have well-funded and low geared balance sheets through stock market fund raising or (in the case of Marshalls) significant wealth generated historically from other parts of the business. As a result these businesses have been present in the market throughout the recessionary period and have been responsible for the majority of deal activity in recent years. They appear to hunt with a pack mentality and recent focus has been firmly placed on the prestige brands such as Audi, BMW and Jaguar Land Rover as well as volume opportunities that are located in premises / towns with sufficient scale.
Also of interest are recent announcements by Pendragon that they intend to once again commence an acquisition strategy, further increasing competition for the best businesses.
- The medium size, fast growing businesses such as Ridgeway, Spire, Swansway, Vantage and Motorline. Such companies have aggressive acquisition based expansion strategies by virtue of strong manufacturer relationships, quality management and excellent access to funding. Similar to the large consolidators, such groups have continued to grow rapidly throughout the recent recession.
- Other “Top 200” groups. Typically they have been relatively quiet through the recession and have looked to reduce gearing or focus on operational efficiencies rather than take unnecessary risks. Such buyers are now re-examining their strategies and concluding that maintaining the status quo isn’t really an option. Such buyers increasingly returned to the market in 2014 and we expect this trend to gather pace in 2015.
- The rest of the UK. Typically they will look to expand on an opportunistic or defensive basis (e.g. if a neighbouring territory becomes available). Again, these companies have “battened down the hatches” through the recession although they are starting to emerge again and consider acquisitions as profitability and cash generation improves.
- Overseas buyers. Whilst low in volume, actual deal value is relatively significant for this buyer type. They typically view the market differently to the UK based buyer and will often value a business on a different basis as a result. There are no particular trends in terms of volumes of activity from this type of buyer although certainly the current instability in Russia and South Africa is generating interest with wealthy owners in those countries considering a safer home for their asset base.
Overall then we are currently seeing strong appetite from all buyer segments and expect this to continue throughout 2015.
In future articles we will examine “The Seller” and “Availability of funding”.
This article by Paul Daly was originally published in AM Online, Franchise Dealer Report 2015.