Blogs

AUTOMECHANIKA BIRMINGHAM HIGHLIGHTS 2017

This year’s Automechanika Birmingham show attracted over 800 exhibitors and 12,000 visitors including garages, motor factors and parts retailers.

With the extra hall space and longer opening hours meant aftermarket professionals had more opportunities to discover new technology, learn new skills and network with other industry experts.

For those who missed out  can watch show highlights in the video below and get a sneak peak into the third edition taking place next year.

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MILLENNIAL MILESTONE FOR PAGID ‘PROUD TO FIT’

Pagid has given its seal of approval to the 1,000th garage in its Proud to Fit concept, which celebrates brake installers and mechanics across the United Kingdom.

Merityre Andover was the millennial member to join the scheme, and will now benefit from the branding, kudos and superior training that comes with the title and being part of Pagid Proud to Fit.

Once strict quality criteria are met, and the extensive Pagid and IMI Accredited training is complete – to ensure all mechanics within the workshop are fully-compliant when fitting OE-quality Pagid brake parts, in the recommended fashion – a Proud to Fit garage will graduate to become a Pagid Professional garage.

With both Proud to Fit and Pagid Professional, garages benefit from customer confidence, branding and continued training.

Sylvie Layec, Sales Director, IAM at TMD Friction, commented:

“Pagid Proud to Fit has proven to be a hugely successful concept, with the UK’s best garages gaining the badge of honour, and Merityre Andover is precisely the type of workshop we created the programme for.

“With 24 locations under the brand, Andover may be the 1,000th garage to become a Proud to Fit, but 23 other Merityre locations have also joined the concept. The benefits to their customers are vast; with far higher-calibre brake installation taking place.”

Dene Arnold, Director at Merityre, commented: 

“We’ve been using Pagid for a few years now, with 90% of our brake work using Pagid parts. We’re focused on giving our customers a quality service with quality products, so Pagid has always been the obvious choice. After speaking to Pagid about our training needs, we decided to sign up to Proud to Fit.

“One person from each of our 24 garages is taking part in the training, and the results have been superb; not just for our mechanics, but for our company-wide expertise and ability to expand into more brake work and increase vehicle servicing scope as a company.

“We look forward to completing the training to earn the Pagid Professional status.”

Pagid will continue to collaborate with Merityre’s 24 locations, and the 976 other workshops nationwide in the Proud to Fit concept; to keep training and servicing as high quality as the OE parts themselves, and to help more garages graduate to Pagid Professional status.

Independent garage owners in the UK can find out more about Pagid Proud to Fit and Pagid Professional, and apply to join, by visiting pagid.com/pagid-pro/proud-to-fit.

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GARAGE CUSTOMER £70K FINE FOR FALSE CLAIM

A JUDGE has ordered a woman to pay £70,000 in costs and damages following the ‘implausible’ claim that an independent garage deliberately tripped her up.

In a story that first appeared in the Mail Online, Yvette Thomas had lodged a £200,000 compensation claim against the workshop, saying that an alleged fall had left her injured and unable to work.

She also claimed she had been forced to cancel an overseas holiday, quit dancing lessons and could no longer go to the gym.

Southwick Service Centre in Trowbridge, Wiltshire denied that she tripped and said a hosepipe in a valeting bay had only brushed against her leg.

Hospital records show that Thomas had been examined at A&E by medical staff but X-rays showed no signs of trauma.

District Judge Francis Goddard told Bath County Court: “In my judgment the case that Mrs Thomas puts forward simply does not add up.

“I do not find her story in any way believable notwithstanding that she may well have by now convinced herself that what she said happened did happen.

“Something happened on that day that caused Mrs Thomas to come up with a version of events that, on a hearing of the evidence, is quite implausible.

“It was not a pre-thought out plan.

“The story put to the court germinated on that day and was elaborated upon over the months and years that followed.”

Thomas had said the alleged incident took place when she dropped her daughter’s Mini Cooper at the garage for an MOT, saying that a someone cleaning a car had deliberately tripped her up with an industrial pressure washer hose.

Car valeter, Edward Slow said: “I was rather angry when I heard what she was saying. “I remember her coming in.

“She was walking around and she said the hosepipe rubbed against her leg and that it was an accident waiting to happen.

“Then suddenly it became this whole story that I had deliberately tripped her up – something I would never do.”

Solicitor Tim Marshal of DFE Law who acted on behalf of the garage told the Mail: “Mrs Thomas painted a picture of being a very disabled woman as a result of this. She said she couldn’t leave the house without a walking stick, drink a cup of tea or clean her teeth”.

“But a surveillance firm hired to follow her found that she was walking fine and there was no sign of any physical impairment – no walking stick, nothing”.

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A POINT OF GARAGE DIFFERENCE

Sometimes it’s good to take a bit of time out to think through why a customer should choose you, as opposed to any other garage in the area.

Thinking about your business from your customers’ perspective is an exercise worth taking. After all, we can be so immersed in what we do that we lose track and take things for granted.

Personally, I think I can safely vouch for your typical customer and tell you that most find it very difficult to differentiate between one garage and another. Many independent garages unfortunately do appear the same. They all say they do brakes, clutches, servicing; some offer air conditioning services and other’s MOTs, but there never seems to be a lot of difference between them.

This makes it very difficult for customers to make informed decisions on which garage to use. They have very little to go by. They may have driven past your premises, seen your signage, again reiterating that you do what everyone else does.

Some premises will be big and others small; in these cases, price will probably go through the customer’s mind, big = expensive (but perhaps they have more capabilities); small = cheaper (but can they work on new cars?).

LOYALTY
This could be a reason why some customers don’t stay loyal and change garages from year to year. Or, worse still, you lose out on a major repair because the customer wasn’t aware that you could do it and went elsewhere.

Very often customers are left to read the ‘signals’ that independent garages put out and to decipher for themselves who to use.

But this means for those who do reach out to their customers, who are prepared to communicate and engage with them, there are great opportunities to win them over. Customers do need more information to help them with their decisions. It’s not all about price and where you are.

To the majority, the mechanics of cars are a mystery. Most never lift their bonnet from year-to-year and as technology rapidly advances, people understand less and less. This only increases their difficulty with decisions. Who is really up to the job – can that small garage down the road really handle my particular car?

DIFFERENCE
So how can you make yourself more appealing to customers? You need to differentiate yourself from the crowd. You need to help customers with their decision making so they gravitate to you.

In an industry where this is rarely done (outside of the dealerships), there are opportunities for those prepared to put in the effort. And this is what marketing is about – it’s not necessarily about hard-sell offers and saying how great you are. It’s about helping customers, informing them and going that extra mile. It does take time and effort but it can pay off.

If you take a leaf out of other industries it might help you understand what I mean by ‘differentiation’. Take the airlines; you’ve got Easyjet, Virgin and British Airways, all fly planes and take passengers fromAtoB–butallare distinctly different and spend a lot of money communicating how different they are and evolving services to back this up. Customers know pretty much what to expect.

Then there’s the supermarkets, who do you choose Waitrose or Lidl? Extreme cases I know, but with one you know the products have been chosen with a more discerning approach, plus you can pick up a nice lifestyle magazine with hints, tips and interesting stories. Whereas the other has a more, no frills, pile ‘em high, sell ‘em cheap approach – both are clearly different.

It has been said that those that are too ‘middle-ground’ or too general are the businesses that are struggling. You’ve only got to look at some big high street names that have gone to the wall. In most cases, it was because they lost their way and,
in the eyes of the customer, weren’t different enough.

So how can you differentiate your garage? As I’ve already said, in most towns there are great opportunities for those who are just bothered to communicate; to actually do something like sending out regular mailings. This is because most don’t do anything.

But the key here is ‘communicating’, after all, it’s no good being good at something, or offering something different if you don’t tell anyone.

For those bookish types out there, I recommend reading any book by Jack Trout the author of ‘Repositioning’ (an updated version of his earlier book ‘Positioning: The battle for your mind’, or ‘Differentiate or Die’. These books will give you greater insight into differentiation techniques.

MAKING A DIFFERENCE

  • Becoming the local expert
  • Offering guarantees
  • Providing a unique approach to serving customers
  • Specialising in types of vehicles
  • Providing more customer endorsements
  • Providing additional products and services that others don’t n Doing charitable work
  • A long track record or unique story

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MICHELIN: EASY WAY TO INCREASE YOUR CUSTOMERS’ SAFETY

PROMOTIONAL ARTICLE ON BEHALF OF MICHELIN

 

MICHELIN OFFERS AN EASY WAY TO INCREASE YOUR CUSTOMERS’ DRIVING SAFETY

Few factors impact driver and passenger safety more than driver visibility, and the best way to ensure safe driving is to have a clear and unobstructed view through the windscreen.

Studies show that the majority of motorists’ driving decisions are based on how well they can see the road, and driving in poor weather conditions, such as rain, sleet, hail or snow, significantly increases the risk of collision.

That’s where the innovative MICHELIN Stealth Hybrid wiper blade can make the difference between clear and safe – or unclear and unsafe.

Design that drives excellence
MICHELIN Stealth Hybrid wiper blades are durable, high-performing and quiet, bringing together the best performance components of traditional and frameless blades.

They combine the latest in wiper blade technology with MICHELIN’s unique ‘Smart Flex’ technology, to create a blade that adapts to the windscreen’s shape for superior contact and clear vision.

MICHELIN Stealth Hybrid wiper blades incorporate five key design features to deliver superior performance, time after time:
1. Riveted smart hinge delivers optimum wipe performance by holding down each end of the wiper on the windscreen.
2. Smart Flex secondary system ensures better windscreen contact across the entire length of the wiper blade.
3. Spring-loaded technology provides enhanced responsiveness across the windscreen.
4. A durable cover protects the blade from ice, snow and road debris, helping to extend blade life.
5. EZ-LOK connector system means blades are quick and simple to install in minutes – so driver safety is never compromised.

Improve sales – and satisfaction
Specifying MICHELIN Stealth Hybrid wiper blades is a powerful opportunity for garages to maximise both sales and customer satisfaction.

As more and more OEMs move to hybrid blades, MICHELIN is the brand that consumers know and trust to deliver superior performance and quality. The sleek, modern styling of the Stealth Hybrid wiper blade appeals to consumers, making it a smart choice for customers and a more profitable opportunity for garages.

 

For more information call: 01206 808158

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TEXTAR LAUNCHES PREMIUM BRAKE PADS WITH DAMPENING SHIM

PROMOTIONAL CONTENT ON BEHALF OF TEXTAR

Global leader in OE brake technology, TMD Friction, has developed Textar Q+, an innovative dampening shim to provide the ultimate noise reduction, which is now available on a wide range of its premium Textar brake pads.

As an OE supplier, TMD Friction has an established reputation for excellent braking performance and as modern vehicles become quieter, the company is continuously developing new technology to reduce brake noises.

An established but also complex possibility to prevent the transmission of brake noise from the brake pad to the brake system is the use of dampening shims on the backing plate. They prevent direct contact between brake pistons and backing plates. Thus vibration transfer will be effectively dampened.

Textar has extensively developed these dampening shims with the innovative textile-like texture, which dampens and decouples the brake pad effectively from other braking components. The texture is complemented with a unique adhesive to further enhance the dampening function, as it also dampens high frequent vibrations. These unique components are called Q+, meaning ‘quiet’, while the ‘+’ symbolises the improved dampening characteristics. Textar Q+ dampening shims can be easily identified through the textile surface structure as well as the imprinted Q+ Logo.

Scott Irwin, technical manager at TMD Friction, said: “Being at the forefront of technology is one of TMD Friction’s objectives and the Textar Q+ is the latest in a long line of innovations to help improve the driving experience for customers worldwide.”

Comprehensive tests, including a dynamometer test and on the road test, showed significant comfort improvements with Q+. The best results will be achieved when new Q+ brake pads are combined with Textar brake discs as these components complement each other.

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TYRE DEALERS URGED TO CAPITALISE ON ‘BUDGET’ TYRE PRICE INCREASE

 

Micheldever Tyre Services (MTS) is urging tyre retailers to take advantage of unstable pricing at the budget end of the market and upsell mid-range tyres to offer consumers better value and maximise their margins.

The combination of rising raw material costs, Chinese pollution regulations and Brexit- fuelled exchange rate fluctuations have created a perfect storm for the budget sector. In recent months, budget tyre prices have been rising disproportionately compared with the mid-range and premium sectors, significantly reducing the cost price differential between typical budget and superior mid-range tyres in the same size.

Alan Baldwin, MTS Sales Director, comments: “With the difference between a budget and mid-range tyre now less than a fiver, it’s time for tyre retailers with a ‘that’s all my customers can afford’ attitude on price to change tack. With prices now so close, there really is a fantastic opportunity to offer a significantly better alternative for a negligible additional outlay. By doing so, garages are not only providing their customers with better quality tyres, but also improving their own profitability.”

Post-recession, the appeal of a Chinese budget tyre from a consumer point of view was clear; cheap raw materials, few regulations in Chinese factories and a favourable exchange rate meant budget tyres were often up to half the price of a mid- range alternative. With few consumers fully understanding the importance of their tyres,
the cheapest option is often the default choice, especially when that’s what the garage is recommending.

Baldwin continues: “Drivers are interested in their safety, longevity and quality but have become fixated by the cheapest option and too many retailers have become conditioned to appeasing this demand. With the price barrier all but removed, selling the benefit of a better quality tyres should now be a much easier conversation for retailers to have and customer retention is always going to be higher from giving the driver better value and a recognised brand.”

Confusingly, the increasing cost of a budget tyre has led some budget brands to position themselves as mid-range. Alan Baldwin suggests the simplest way to distinguish mid-range from budget is: “If it hasn’t got OE; it’s budget. Any tyre manufacturer that doesn’t produce OE tyres for major car marques is not mid-range.”

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DIAGNOSING AND FIXING FAULTS FIRST TIME AROUND

Dinos Christoforou takes us around his family-run garage business, ‘Spiros Motors’ in North West London.

Ex-F1 technician, Spiros Christoforou, opened his garage business in North West London 35 years ago, and has enjoyed steady growth ever since. “We have got contracts with HR Owen Sports Car, which means we get a lot of prestige sports cars coming through from the dealership” said Spiros’s son Dinos – who is also a master technician at the firm. “This includes Lamborghini, Ferrari and Maserati. We have our own USP of fast cars that we service on a regular basis”.

While some garages have been known to still use older diagnostics, coupled with the newer technologies coming into the market, technicians should be regularly updating their skills both in terms of equipment and training, according to Dinos. “It’s hard to stay up-to-date in this industry because everything is changing” he said. “If you don’t keep up then you will start falling behind and I think many garages find it difficult because they’re always trying to cut down their prices”, adding that his staff are fully up-to-speed with tooling, training and the technical know-how to repair these models correctly.

WORKSHOP LAYOUT
This was evident from the workshop layout, which has a new automatic tester lane (ATL) installed for MOT on the right hand side with five dedicated service ramps lined up on the left. The site also contains an engine room as well as a dedicated car park space outback, which Dinos notes, is the only independent to possess one in the Park Royal area. With a handful of garage networks operating in close proximity and JT Car Repairs next door, we were curious to find out if this has impacted business. Dinos said. “There are around eight to 10 local garages in this area but we’re all in different leagues with one another so there is no cross over or competition between us”.

DIAGNOSTICS
Being a diagnostic specialist for most car models, means the team is well equipped for whatever enters the ramp. For troubleshooting and detecting fault codes, Spiros technicians will use Launch UK diagnostics and for more complex issues, the Autologic or Bosch KTS tool is the preferred unit of choice. Being a Bosch Car Service member also has its perks, according to Dinos, which is noticeable in the foyer area where many Bosch training qualifications are framed and hanging on the walls. “The Bosch training is world class”, he said, “They provide us with training from diagnostics up to service and master level technician”, adding that himself and his uncle are the two qualified master technicians on site.

Workshop contains five service ramps

SERVICES
To say the garage only conducts MOT and general repairs would be an understatement as there are many other services within its remit including air conditioning, bodyshop repair and fitting AlloyGators, which we were lucky enough to see Dinos fit to a BMW Z3 fresh off the track. Explaining his reasons for offering this service, he said. “It started with my mother who had a Porsche Carrera. She kept hitting the kerb and had to change her tyres nearly every two to three months as a result. They should normally last up to 12,000 miles on that vehicle.” He adds. “We told her to get rid of the car because it’s costing thousands on tyres a year, but someone from the racing community suggested AlloyGators and we have been impressed with them ever since”.

However, after fitting AlloyGators for nearly 10 years now, the master technician has found a number of fitment errors among some tyre fitting centres. He elaborates. “I have found people have failure of alloys because they have gone to a tyre fitment centre, where they have pumped up the tyre, handed back the keys but haven’t gone back around them for the final fitment”. Dinos makes sure that every AlloyGator fitted has ‘sunk in’ properly by applying pressure with a rubber mallet around the wheel, once they’ve been trimmed and fitted accordingly.

Although there’s been discussions between Spiros and his son about opening a second garage, they have decided to put it on the back-burner for now due to the growing demand of vehicles entering its current site as Dinos points out. “The way our business operates, it’s very hard to open a second garage because me and my father are hands on. Every job that goes through the garage, goes through us so we will carry out the quality controls and road test the vehicles when jobs have been completed”. He concluded. “It’s difficult to expand for these reasons however, we want to continue providing that high level of service and be there for our customers”.

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KEEPING UP WITH THE TIMES

With so many diagnostic tools available, when is the right time to upgrade? 

Nowadays with advanced vehicle technology, diagnostic tools have become an essential
piece of kit for garages whether the job involves re-f lashing ECUs to pulling out fault codes However, with the wide range of products and updates on the market, are workshops keeping their tools in check?

TOOLING UP
“There’s a lot more realisation now with anyone possessing old kit that they’ve got to look into upgrading” said Dave Richards, Managing Director at Launch UK. “The older kit predates the electronic park brakes where service resets were just a part in the dashboard. But on a Range Rover, it’s a programming function where you have to re-program five ECUs to reset all the service lights.” Julian Goulding, UK Marketing Manager at Delphi, points out that there are some older devices being used by technicians. He says, “There are still old and out-of-date tools out there, however, with the coverage we provide, that is dependant on the workshops updating to the latest software”, adding that the firm is continually stressing the importance of using modern units to trade customers.

HGS Mega Macs tool

From a tyre dealer perspective, Colin Webb, MD at TPMS firm Bartec Auto ID, advises technicians to consistently update their diagnostic equipment and software, due to the ongoing growth of new passenger cars and sensors making their way off factory lines. “The market is moving very quickly so tyre shop technicians need to have their tools updated as soon any new car comes onto the roads, otherwise, they will have trouble repairing the next car coming over the threshold”, highlighting that this could incur loss of business to OE franchise dealerships.

PRICE DRIVEN
Neil Hilton, Head of Business Development at Hella Gutmann Solutions, notes that many technicians are driven by price when it comes to upgrading their toolbox and do not necessarily understand the differentiations and benefits between what a budget and a premium tool can bring to the workshop. A challenge the firm is consistently educating garages and bodyshops about, as Hilton explains. “The comparison is you pay a little extra and buy a better quality machine that has more capabilities from day one and also has a longer lifetime”. He continued. “A customer who buys price driven compared to a customer who buys one of our HGS devices, the HGS customer has spent less in the long term because he’s purchased a machine that’s seen him through five years plus whereas the alternative customer has brought two or three more in that space of time and had less coverage”.

Delphi’s Julian Goulding agrees and expands: “There are still some technicians driven on price and this feeds through to diagnostics. What we try to stress to people is look at return on investment, what price you pay and the capabilities it gives you across a wide range of vehicles”. Similarly, Bartec’s Colin Webb says the firm has developed a method to take the hassle out of reminding tyre technicians and fast fit centres through regular wifi updates. He explains more. “We offer wifi updates so the technician doesn’t have to remember to do the update so they will always be ahead”. He elaborates, “The TECH500 is our latest tool containing wifi and software updating on it as well as wireless charging”, adding that the gadget also allows users to detect vehicle faults and re-program universal sensors on a range of vehicle models.

BUYING TRENDS
Launch UK’s David Richards said the firm has spotted a buying pattern between technicians who are keen to upgrade their apparatus. Speaking about his findings, he said. “One of the trends which we are trying to address is that technicians are wanting to up their game but don’t want to wait around for the boss’s tool. Most of those guys are not looking to spend £2,500 so we have products in the £500 to £1,000 range, which are affordable for them because they’ll usually spend around £500 on a set of spanners”. He continued, saying, “We’re already seeing some cases where you almost get the tablet for free but you’re committed to five years of software updates. Launch UK doesn’t operate like that and instead, offers two years free software for the customer”.

Launch UK’s X-431 PRO 3

ADAS DIAGNOSTICS
It’s all well and good having a unit that performs general diagnostics, but garages may struggle if the system can’t detect faults on ADAS systems, according to Hilton, who says many workshops are unaware of the business implications this could cause in the future. “Through our ADAS awareness seminars, it is clear from the shocked faces that most of the workshops, bodyshops and to an extent, glass companies, are still not aware of these systems on the vehicles they’re working on and the risks it poses to their business by not carrying out the correct processes or procedures”. He concluded. “All of our HGS Mega Macs equipment is capable of calibrating ADAS systems (some vehicles require additional hardware). We also offer a diagnostic tool that is purchased as a standard tool but also incorporates the required software at no extra cost to have the capability to calibrate ADAS vehicles”.

Although suppliers seem to hold a certain level of responsibility to encourage workshops to keep up with the times, it is crucial in this day and age for technicians to take charge by familiarising themselves with not only the diagnostics and software available, but not allow pricing to get in with the way of potential ROI opportunities.

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ACQUISITIONS NEED PLANNING

Takeovers are in fashion in the aftermarket, but you need to find a company that’s the right fit, writes Adam Bernstein

The question of how to grow a business is one that has perplexed many for generations, namely: organic growth or acquisitive growth? It makes no odds which route is taken, the end goal is the same – greater profitability.

Acquisitions seem to be in vogue for the aftermarket at the moment. You’ve probably already read in this issue that Canadian parts giant Uni-Select has acquired The Parts Alliance, which has itself been on the lookout for smaller factors to buy. GroupAuto’s parent company AAG has made numerous acquisitions in the past year, including FPS and LKQ’s attempted tie-up between ECP and Andrew Page has attracted the attention of the Competitions and Market’s Authority, for which we await the decision in November.

There’s nothing wrong with organic growth, it’s just that it takes time. And compared to setting up a new unit from scratch acquisition takes less time, resources and finance that many firms struggle to provide. So how should firms acquire? What are the issues to be aware of?

DUE DILIGENCE
Understanding what is being bought is key. Although acquirers will usually be able to obtain warranties (think guarantees) from shareholders, there is no substitute for extensively checking the detail of the transaction through “due diligence.” The process falls into three distinct areas – legal which will be handled by lawyers; financial and tax which will be dealt with by accountants; and commercial which falls to the acquirer. If any skeletons in the cupboard are identified, these can be turned into indemnities and, as such, the risk stays with the vendors.

But while due diligence is important, desktop research should be completed before any approach is made along with market and commercial due diligence. Research is much easier nowadays as so much information is available in the public domain through Companies House, online databases, the web, and other information gained discreetly through industry sources. But remember, financial information can be months out of date and cannot be relied upon to give an accurate view of a firm’s financial health.

Skimping here will mean the acquirer will have no idea about the veracity of what they are being told.

WORKPLACE CULTURE CLASH
Acquirers need to recognise that buying the assets of a firm is one thing, but businesses also come with staff already employed and they must get along with the acquirer’s own employees. There are countless examples where mergers and acquisitions have failed because of culture clash – Daimler and Chrysler, AOL and Time Warner, HP and Compaq.

Culture is something that should be looked at closely; compatibility is one of the key requirements. Inevitably there is a learning curve following acquisition, but many find that due diligence meetings usually indicate if the businesses can adapt. Others suggest looking at the top to board level for clues on possible culture issues.

TAKING PRECAUTIONS
Of course, some businesses are bought when they are in trouble and here the purchaser should be particularly cautious.

Firms in trouble often find themselves the target of creditors who can apply pressure; this must be considered when arriving at a valuation.

A question to ask is what is the reason for the decline? Is it the loss of a major client or a bad debt? Is the firm out of step with the market and unable to compete? Can the decline be reversed? Some buyers choose to wait until the target goes into a formal insolvency process before making an offer to the administrator or liquidator when the price the target can be acquired at should be considerably lower. But there is a warning – there will be no warranties and the acquisition will be on a ‘buyer beware basis’. Buying a business from an administrator is risky; their job is not to help the buyer but to realise the greatest possible value for the creditors.

It’s important to also look out for Crown debt arrears such as PAYE and VAT. If these exist a time to pay arrangement is crucial if a rescue is to be completed. But buying a failed firm may mean that existing customers may lack confidence in the business. Similarly, creditors who would have suffered due to the business failure – will be wary too.

ACQUISITION COST
Acquisitions involve significant costs and many are not insignificant. Purchasers should budget for the corporate finance finder’s fee, accountant’s costs, legal fees (legal drafting, due diligence and deal completion matters), insurance warranty payments and costs allied with any associated funding. These can be over 10% of the purchase price.

Also, buyers should not ignore property and any stamp duty that is payable. And just as importantly is the hidden cost of the Transfer of Undertakings (Protection of Employment) Regulations 2006 – TUPE – which crystallises if there is a staff restructure following the takeover. Employees involved in a business acquisition can sometimes have a significant level of protection under TUPE – which in practice means that dismissing employees following an acquisition can be restricted or costly. Acquirers also need to consider any changes that have to be made to accommodate staff with disability issues.

There’s also the threat of loss of business due to change of control, changing relationships and the possible loss of key staff following the takeover. But these can be managed by having close liaison with customers and offering staff revised employment contracts that come with incentives. Further, existing contracts and arrangements will need to be honoured once the former management leaves.

But there is one more expense that is harder to quantify – time. It is important to make sure that the acquisition doesn’t become a huge distraction and the underlying business is not neglected.

BOLD MOVE
An acquisition is not for the faint hearted – acquirers should consider if they are better off focusing energy on organic growth or proceed ahead by taking a larger risk with an acquisition.

The adage that “people buy people” applies to staff as much as it does to the seller and customer relationship. Ignoring and potential staffing and culture issue can do more damage than any over-valuation.

NOTABLE AFTERMARKET ACQUISITIONS

  • There have been thousands of takeovers in our sector over the years. Here are a few that sprung to mind:
  • Lookers PLC took the decision to sell FPS Distribution, BTN Turbo and Apec Braking to Alliance Automotive Group (AAG) in 2016.
  • American recycled parts firm LKQ Corporation acquired Euro Car Parts in 2011 after months of rumour and speculation around the aftermarket (much of it incorrect). More recently, LKQ has acquired Arleigh International, a large distributor of touring and leisure products.
  • In 1973 Burmah Oil acquired Quinton Hazell ltd from the man of the same name. Hazell didn’t take to working as part of a large corporation and took a stake in the Supra Group, where he started competing against his former company.
  • ZF and TRW came together in 2016, though Helmut Ernst, CEO of ZF was keen to stress to CAT that TRW as a brand was ‘an asset that would remain’.
  • Cash and carry chain Maccess was sold in 1999 in an MBO valued at £68m. It was a rare example of then-parent Finelist selling a company for profit. Finelist Group collapsed in 2001 while Maccess lasted until 2015 before it ran out of ‘time and customers’ according to the then owner Tetrosyl.

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