2017 acquisition activity in the retail automotive sector

20 February 2018

2017 was an interesting year for transactions in the motor retail sector, with deal flows starting to show signs of moderation following several years of intense activity. Once again the UHY automotive team were very busy, having been involved in 30% of completed deals.

In a series of blogs over the coming weeks, we will share some of our key findings on the 2017 market as well as our prospects for 2018.

2017 at a glance – the headline stats:

  • 38 transactions completed to the end of 2017, compared to 41 in  2016.
  • Significant reduction in levels of UK motor retail plc activity, with international buyers driving the market in 2017 against ongoing sterling weakness.
  • Increase in levels of BMW related consolidation with five smaller retailers acquired by larger players.
  • Substantial fall in the level of premium franchise activity at 22% of total transaction volume, compared to 60% in 2016.

Predictions for 2018

Predicting appetite for a particular business is an inexact science at best. However, the market remains active and our current pipeline of deals in progress is strong. We would expect the following trends and themes to emerge as 2018 progresses:

  • A potential return to a greater volume of distressed businesses entering the market. These businesses, with or without the assistance of an official receiver, are likely to be traded around asset value making them attractive to turnaround specialists.
  • Further consolidation in the premium space as demand for these businesses remains undiminished, despite trading performances that are showing signs of peaking. There may be further activity in the BMW network in anticipation of five year contract renewals due in October 2018.
  • Recent events such as the VW emissions scandal and Vauxhall’s takeover by PSA have created significant levels of uncertainty in the market for the brands concerned. We anticipate dealer group’s with significant exposure to single brands will react to this and look to diversify their risk through selective acquisitions within their geographical market area.
  • At the smaller end of the market, Kia is one of the highlights that businesses are looking to add to their portfolios. It is seen to offer a strong product range, reasonable investment levels and a very stable UK management team.

Want to know more?

Over the coming weeks we will look back at the key factors that have driven value during 2017 and delve further into our predications for 2018.  Visit our blog next week for our second post of the series, in which we will look at deal volumes and value trends.

In the meantime, if you are contemplating your options for 2018 or you have any questions in relation to any of the above, please contact David Kendrick or Paul Daly.  Alternatively, please contact an automotive expert at your nearest location.

The road ahead

Today we have also released our 2018 Automotive Sector Outlook which includes our views on the consolidation of the automotive industry as well as a number of other key issues currently affecting the industry, from GDPR compliance to the FCA’s stance on car finance. The report also includes an ‘expert perspectives’ piece, summarising the opinions and insights from our panel of experts on their views on the likely year ahead.  You can download the report here.