Tag Archive | "acquisitions"

ACQUISITIONS NEED PLANNING

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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 But remember, financial information can be months out of date and cannot be relied upon to give an accurate view of a firm’s financial health.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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AUCTION HOUSE ACQUIRED BY MBO


Aston Barclay sold in MBO

Auction house Aston Barclay has been acquired in a management buy-out. The full details have not been disclosed, but investment firm Rutland Partners have contributed a ‘significant investment.’

The MBO has been led by new Chief Executive Officer Neil Hodson, who brings 25 years’ experience to Aston Barclay, following stints at Manheim, HPI and Experian.

Glenn and David Scarborough, formerly MD and Commercial Director respectively, will both remain the company’s shareholders as non-executive Directors. The continued investment by the Scarborough family helps keep Aston Barclay’s family-run ethos. Laurence Vaughan is also joining the Board and investing as Non- Executive Chairman. Laurence was previously CEO and is now Non-Executive Chairman of dealer chain Sytner Group.

Aston Barclay’s Glenn Scarborough said: “We are delighted to welcome Neil [Hodson] and his management team as investors in Aston Barclay supported by Rutland Partners. These are exciting times for the remarketing industry and we are confident this support and the investment will enable Aston Barclay to exploit the opportunities for growth the market has to offer.”

“We have really enjoyed working with the Livingstone team on what was an important transaction for us and an exciting development in Aston Barclay’s future. They showed commitment and hands-on support from start to finish and we are grateful for their valuable guidance throughout the process” he added.

The deal was advised on by mergers and acquisitions firm Livingstone Partners.

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BREAKING: PARTS ALLIANCE SOLD TO UNI-SELECT

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BREAKING: PARTS ALLIANCE SOLD TO UNI-SELECT


BREAKING: The following release comes directly from The Parts Alliance

The Parts Alliance Group has been acquired from its private equity owner HgCapital by Uni-Select Inc., a Canadian publicly listed, North American Automotive aftermarket distributor.

New owners Uni-Select operate as a market-leader in the USA and Canada, distributing automotive aftermarket parts, equipment and refinish products through a network of 14 distribution centres, 270 corporate stores and over 1,100 independent wholesalers with 3,000 employees generating sales of $1.2 billion USD per annum.

The Parts Alliance, through a series of 10 acquisitions since 2012 has grown to become a market- leader by investing in people and technology and putting their customers first

“This has been a fantastic journey, building a market leader in just over 4 years through 10 acquisitions and consistently strong organic growth,” said Peter Sephton.  “I and our management team would like to thank HgCapital for all their support as our 2,900 colleagues look forward to continuing that journey with Uni-Select, helping build a great international autoparts business together with the Uni-Select leadership team.”

The Parts Alliance emphasise that for customers it’s very much ‘business as usual’ and look forward to working under trade owners with a deep understanding of the automotive aftermarket. The existing management team will continue to operate the business and Peter Sephton, Chief Executive of The Parts Alliance, will join Uni-Select’s executive team while continuing his leadership role in the UK as President and CEO of the European business segment.

Uni-Select’s origins are similar to those of The Parts Alliance; Uni-Select . was founded in 1968 by 12 Québec businessmen who joined forces to form a purchasing group for aftermarket parts.  The business now trade as a listed company on the Toronto Stock Exchange (TSX: UNS).

“We are excited to establish a third growth pillar in the large UK parts aftermarket that is expected to be immediately accretive in a market with great upside potential from future consolidation opportunities. Parts Alliance is a great organization, with a market leadership position and national scale, a proven growth platform and an experienced management team that has demonstrated its ability to drive profitable growth both organically and through acquisitions,” said Henry Buckley, President and CEO of Uni-Select. “Our two companies are a perfect fit in terms of business profile, customer focus, entrepreneurial culture and commitment to people development.”

Martin Block, Partner, HgCapital, said: “We are delighted with the sale of this very special business to Uni-Select.  They will be a fantastic partner for the next phase of Parts Alliance’s continued growth and development.  As a buy and build in a fragmented and dynamic sector, our management team were able to create a business of scale and real capability through their drive, professionalism and determination. The Parts Alliance brings together a high-quality group of distinct brands with a common culture and local identity.  We wish both the team and the new owners every success for the future”.

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BMS SUPERFACTORS ACQUIRED BY PARTS ALLIANCE

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BMS SUPERFACTORS ACQUIRED BY PARTS ALLIANCE


Business group The Parts Alliance has acquired BMS Superfactors, their Greater Manchester-based associate member. BMS Superfactors has four branches in Bury, Oldham, Rochdale and Dukinfield, collectively employing over 120 staff. Prior to the deal, BMS had been an associate member of the Parts Alliance.

Founded 25 years ago, BMS Superfactors begun as an accessory shop and has grown into a business completing 1,000 trade deliveries per day. Since joining The Parts Alliance in December 2012 it has posted double-digit annual sales growth.

“We’re delighted to be taking what seems a very natural next step with The Parts Alliance,” said Tony Parr, Managing Director of BMS. “Joining the group and gaining access to their OE parts ranges, outstanding AlliCat parts catalogue and overall business support has been central to our success to date.

Peter Sephton, Chief Executive of The Parts Alliance said:  “We welcome BMS Superfactors and all our new colleagues.

“The growth they have achieved bears powerful testament to the skills of the management team led by Tony Parr, Chris Morley and Neil Hardisty as well as the hard work of a loyal staff team. This important acquisition strengthens our group’s position in one of the UK’s prime metropolitan areas.

“Chris and Neil will continue to run the business, whilst Tony will be available to help as necessary.

“We very much look forward to developing the business further under what’s a well regarded local brand by bringing more of our technology, distribution and sourcing capabilities to support Chris and his team wherever we can.”

BMS becomes a wholly-owned business within The Parts Alliance Group  but will continue to trade under its own name. Chris Morley will continue to lead the business and will be joined by Neil Hardisty on The Parts Alliance’s management team.

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ARLEIGH INTERNATIONAL ACQUIRES A.S.A.P SUPPLIES

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ARLEIGH INTERNATIONAL ACQUIRES A.S.A.P SUPPLIES


Arleigh International Ltd, a Euro Car Parts company, announced today the acquisition of marine distribution specialist A.S.A.P. Supplies Ltd. Based in Suffolk, A.S.A.P. is one of the UK’s largest stockists of marine equipment and spare parts.

Established in 1989, A.S.A.P. provides a huge breadth of marine products for customers’ maintenance, repair and overhaul projects. A.S.A.P.’s offerings are supported by a highly-skilled customer service team that provide guidance across its vast product mix of more than 70 trusted brands.

Arleigh International was itself acquired by ECP in August last year along with the Nova Leisure and Midland Chandlers brands. The brands are among the largest in the touring and leisure boating sectors.

Martin Gray, CEO of Euro Car Parts, said: “A.S.A.P Supplies is a complementary fit with Arleigh and is a further enhancement of Euro Car Parts’ Specialist Products Division. This agreement further cements Arleigh as the market-leading distributor of products to the UK caravan, leisure and marine markets.

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BOSCH ROTATING DIVISION SOLD TO CHINESE BUYERS

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BOSCH ROTATING DIVISION SOLD TO CHINESE BUYERS


Bosch’s starter motor and alternators division has been acquired by China-based supplier Zhengzhou Coal Mining Machinery Group Co., Ltd. (ZMJ) for an undisclosed sum.

ZMJ and its business partner China Renaissance Capital Investment (CRCI) signed the agreement yesterday, which will see the purchasers take control of Bosch’s division comprising 7,000 associates, 16 locations across 14 countries.

Speaking of the acquisition, Chengyao Jiao, CEO of ZMJ, said: “We are very pleased that we can now add to and successfully further extend our business with these new associates, their expertise, and the excellent products of the Starter Motors and Generators division.

“In the future, we want the Starter Motors and Generators division to play a central role in our company. Above all, we look forward to working with the existing management team to build up a business in the rapidly growing emerging markets. In addition, we want to further strengthen our position in the markets in which [the Bosch Starters and Generators division] is already a leader.”

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ECP ACQUIRES IRELAND-BASED TEAM P R REILLY AND KARKRAFT

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ECP ACQUIRES IRELAND-BASED TEAM P R REILLY AND KARKRAFT


Factor giant Euro Car Parts has acquired the business of Team P R Reilly, a Dublin-based car parts, accessories and bodyshop business  as well as Karkraft (N.I.) Ltd  a paint and collision repair supply specialist. The deal expands ECPs operations across Ireland, following the acquisition of distributor Hella Ireland.

Terms of the deal were not disclosed, although the new owner announced that the 150 employees affected by the deal ‘will benefit from professional opportunities and training across LKQ Corporation’s global platform”. The senior management team from P R Reilly will remain in place.

Martin Gray, CEO of ECP said: “A strong track record, significant market expertise and a cultural approach so like our own, meant that the opportunity to work alongside (P R Reilly Owner) Norbert Reilly and the senior management team at Team P R Reilly was not to be missed. We immediately felt that we had the same goal in mind: to deliver exceptional customer service, keep the independent aftermarket competitive and support the industry in developing its own profile. Over the coming months, we will share best practices and take advantage of the opportunities to learn from one another across market sectors and distribution channels.”

Gray continued: “We are particularly excited about leveraging our global sourcing network to equip our customer partners with unparalleled choice of mechanical and collision parts, paint and specialist equipment.”

UK Chairman and LKQ Board Member, Sukhpal Singh Ahluwalia, added: “I’m delighted to welcome Team P R Reilly colleagues to the family and the next stage of the incredible Euro Car Parts journey. Team P R Reilly has a heritage stretching back more than 75 years and we have a duty to our customers, partners, employees and suppliers to ensure that we build relationships that will lead to sustainable and considerable growth. Everyone has a part to play in our ambitious growth plans and I look forward to working with the senior team to support their strategic direction and leadership.”

 

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FERDINAND BILSTEIN ACQUIRES KM AUTO TECHNIK

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FERDINAND BILSTEIN ACQUIRES KM AUTO TECHNIK


Component company Ferdinand Bilstein will take over southern German clutch brand KM Auto Technik (KM), effective April 3, having acquired 100 percent of the firm. Terms of the deal have not been disclosed.

Company bosses Karsten Schüssler-Bilstein and Jan Siekermann will lead future development and strategy of KM in Durmersheim. The KM brand itself will join febi, SWAG and Blue Print, which are already under the Bilstein Group umbrella. Integration of the newcomer is expected to be complete in 2018.

“KM is an established and successful brand for clutch technology. With its integration into the bilstein group, we will be able to offer our customers an even wider range of spare parts. KM’s partners will benefit in future from our additional services, our international presence and our efficient logistics processes,” said a joint statement from Schüssler-Bilstein and Siekermann.

KM was founded in 1988  by Robert Kary and Albert Mangler.

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VALEO ACQUIRES GERMAN START-UP

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VALEO ACQUIRES GERMAN START-UP


acquisition

Automotive parts supplier Valeo has announced the acquisition of Gestigon – a German start-up company specialising in vehicle cabin 3D image processing software. Terms of the deal are yet to be disclosed.

The firm said the joint venture will prove a valuable asset to Valeo’s automated drive strategy, allowing the company to further develop its cabin comfort and driver assistance operations. The parts manufacturer also plans to utilise Gestigon’s software to provide a comprehensive offering of object and occupant detection features for autonomous and connected cars in the future.

“We are delighted to welcome gestigon to the Valeo community,” said Marc Vrecko, head of Valeo’s Comfort and Driving Assistance Systems Business Group. “By combining our skills in a larger team, we will sharpen our edge and reinforce our leadership in autonomous and connected cars.”

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AAG ACQUIRE MULTIPLE FACTORS WITH TURNOVER OF EU 44.1M

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AAG ACQUIRE MULTIPLE FACTORS WITH TURNOVER OF EU 44.1M


Trading organisation, Alliance Automotive Group has confirmed that it acquired six UK businesses in the last quarter worth a total turnover of EU44.1m, with another two more recent purchases yet to be confirmed.

The 19-branch Mill Auto was the best-known acquisition by the trading group, with the annual turnover amount confirmed as EU 36.7m. The next highest value was Stockport-based CV Parts with turnover of EU 2.1m.

Other light vehicle distributor acquisitions include Keighley-based KG Motaquip, Hartlepool-based Advanced Motor Components and Newcastle upon Tyne based Northumbrian Motor Factors, each of which are single-branch factors.

Cargo Motor Factors, based in Newcastle under Lyme in Staffordshire was also bought.

Within the past week, there have been reports that a multi-branch factor in the North of England and a single branch firm in the South East have also been acquired.

Ed’s note: An earlier version of this story confused sale price and turnover. Apologies for any confusion it may have caused. 

 

 

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