The headlines
2021 at a glance
- Transactional activity started slowly however, in the nine months from March 2021, 32 deals were completed. This is at a level close to that of 2018, demonstrating a real demand for expansion from many businesses.
- Two headline-grabbing deals completed; with Cambria being taken private off the AIM market and the significant acquisition of Motorline Holdings by Marshalls.
- The disruptor eyes up retail entry with Constellation (Cinch and BCA) agreeing the acquisition of 64.4% of Marshall Motor Holdings PLC, likely to complete in April 2022, also taking them private. A deal no one could have predicted.
- Strong international interest remains with several new international investors appraising UK acquisition opportunities.
- Goodwill is very much back on the agenda, and significant sums paid in a number of the deals completed.
Outlook for 2022
- Potential for big deals in 2022, with businesses delivering record performances in 2021 and a significant pent up demand for acquisitions.
- Regional consolidation looks set to accelerate with acquirers sat on large cash balances and smaller operators considering an exit off the back of 18 months strong financials and a healthy order bank moving forward.
- Continued activity within the auto tech market is likely, with a significant number of deals completed during 2021 and a number of pipeline deals currently.
Our predictions
Big deals in the offing
With record profits reported by many for YE 2021, international interest stronger than ever and PLCs in buying mode, now could be the time for some of the privately owned larger groups to make their move. Motorline was one of the first in Q4 of 2021, but it would not be surprising if others follow suit. As ever, timing is everything.
Cazoo to follow Constellation?
With the Constellation acquisition of Marshalls looking very likely to complete and manufacturers uncertain how to react, would it be unthinkable for Cazoo to follow? Rumours have been circulating for some time, and with the war chest behind them, almost every group could be a potential target.
Regional consolidation
Towards the end of 2021, we saw a number of smaller dealerships swallowed up by the PLCs and regional groups looking to expand. After a couple of years of good profitability, privately owned one to three site businesses may be well suited to a larger player that can benefit from economies of scale and fit in with the longer-term network plans of their manufacturer partners. We predict an upsurge in 2022 and are having numerous conversations with dealers considering an exit; providing substantial opportunities for those looking to grow.
Distressed opportunities
With profitability having been so strong for 18 months, cash balances in the main higher than ever and a lack of supply meaning strong margins and little pressure on dealers, it is unlikely that we will see any distressed opportunities in 2022. Should supply return significantly in the latter part of the year, dealers will need to keep a close eye on working capital which will undoubtedly tighten, potentially bringing the odd distressed opportunity; however, we do not envisage many, if any.
As 2022 unfolds…what’s ahead?
With an increasing number of transactions in 2021 and a very strong pipeline and active marketplace as we have entered 2022, we envisage deal numbers will reach the highest levels seen during the past decade, with some strong valuations also likely. Some dealers have concerns regarding the future of the sector and agency agreements. Others are very bullish and moving with the times, taking advantage of strong market conditions. Both suggest there could be plenty of activity over the next 12-24 months.
We expect to continue seeing strong demand for the right business; however, it is critical to identify the strategic buyer early in a process to deliver maximum shareholder return. Opportunities will continue to become available as privately owned businesses look to liquidate their investments after a couple of solid years trading, as well as some much larger groups taking advantage of the consolidators and international entrants looking for a substantial acquisition.
Want to know more?
Download our 2022 Automotive Outlook and turn to page 3 to read the full article, as well as our other predictions for the year ahead.
