Itâ€™s only a few months since CAT last went to have a chat with John Neill, boss of Unipart Automotive.
At that time he had already been approached by a private equity firm that wanted to buy
a stake in the business. Neill didnâ€™t let on.
The two companies started working together to see if they were a good fit, and nine months later came our recent visit to Cowley to learn that H2 Equity Partners was to take a 50.1 percent controlling stake in Unipart Automotive for an undisclosed sum.
H2 managing partners Patrick Kalverboer will take the reigns from Neill and run the new company as executive chairman. A new buying group called AP United has also been created in the hope of securing even greater purchasing power.
The move will mean â€˜ambitious growthâ€™, say both Neill and H2 managing partner Patrick Kalverboer.
They say it gives the company new scale, nearly doubling the number of parts it will offer to 160,000, as well as a route into Europe, a market Unipart has unsuccessfully tried to crack before. Express Factors will continue and thereâ€™s to be more investment in infrastructure.
But is it a good idea? Is selling a controlling stake in one of Britainâ€™s aftermarket crown jewels to a Dutch private equity firm the right thing to do? Arenâ€™t they just looking to make a fast buck? Does it matter?
Kalverboer says: â€œAnything you read in the papers about private equity often involves a focus on very short term financial trickery.
â€œWe are not a private equity firm consisting of financial engineering type people. Our team members have a background either in management consulting or have managed companies with themselves as the CEO.
â€œWe focus on businesses where we can add value with our hands-on involvement. Our approach, and itâ€™s pretty clear if you check our credentials and our background, is one of long term involvement with the business that we invest in.
â€œWe have a lot of experience in wholesale distribution businesses and we have specific experience in the automotive wholesale distribution business.
A SIMPLE PHILOSOPHY
â€œOur philosophy is very, very simple. Once you know an industry it is much easier to continue to grow that business in that industry. It is much lower risk than getting into something completely new, that youâ€™ve never done before. â€œThis is a sector we like, itâ€™s an industry we like, and itâ€™s a long term commitment for us.
â€œWhat we do is build better businesses and to do that takes time. On average it takes us five to seven years.â€
Kalverboer was in charge of H2â€™s purchase of a controlling stake in another European automotive aftermarket parts distribution company called Sator Holdings, the market leader in Benelux and Northern France.
â€œI know this industry,â€ he says. â€œIâ€™ve done this. Itâ€™s not something new to me. We are very committed. We want to create a market leader in the UK. Unipart lost its way a little bit, but we want to get it back on track.â€
Does Neill agree that Unipart Automotive lost its way?
â€œI think undoubtedly. After Unipart bought Partco, the Unipart guys werenâ€™t running the business, so it did lose its way. I think itâ€™s found its way.â€
Is this the first step of the group divesting itself of the business entirely, though? Has the automotive arm suffered as the Group became more interested in logistics, repairing satellite equipment and showing Her Majestyâ€™s Revenue and Customs how to save a billion pounds?
â€œNo, absolutely on the contrary. You can see at 49.9 percent that Unipart remains absolutely 100 percent committed to the success of this business and will continue to support it in any way that we possibly can.
â€œThis is a complex, difficult, sophisticated industry, so if you can be world class at managing automotive supply chains you can actually go and manage other supply chains.
â€œThe auto industry, the body of knowledge you need to be world class is actually highly relevant to all our other industries. Itâ€™s part of our heritage that weâ€™re proud of.
â€œWeâ€™re scaling up outlets through the hub and cluster network and thatâ€™s working very well, but for systems scale I really did want a big partner, and a European one.â€
The hub and cluster network has the enormous 1 million sqft warehouse in Cowley at its heart, and 18 regional distribution centres around the country. In the HQ area there are already deliveries being made two to three times a day to the â€˜Cowley Nineâ€™ and that is the goal for the whole UK.
Kalverboer says itâ€™s a priority: â€œWeâ€™ll finalise the rollout of our hub and cluster which is very important. Itâ€™s nice to say Iâ€™ve got 160,000 parts, but where have you got them? Can you get them to the customer within the hour? Thatâ€™s the key question.
â€œWe will put more stock closer to the customer. We will put more stock in volume and more stock in the number of parts available.
â€œThen, in a central warehouse, we will make the full range available. The customer should see a better availability of parts, a wider range and actually get them.
â€œThe impact of that rollout is very visible. We see better availability in those locations where weâ€™ve already implemented it, where itâ€™s been running for a couple of months.
Much of this increase in the number of parts availability will come from one of Satorâ€™s subsidiary companies Nipparts, an importer of parts for Asian models. It sells into Benelux and France, but also Eastern and Southern Europe.
â€œItâ€™s probably comparable to ADL here in the UK,â€ says Kalverboer. â€œWe have a client base who buy those sort of products. Weâ€™re very interested to see if we can introduce the Unipart brand, specifically related to European cars, together with the Nipparts brand.
â€œWeâ€™ll introduce it through our existing network in Benelux and Northern France. We think the main opportunity lies with combining it with our Nipparts operation. It is on our agenda to introduce the Unipart brand in Europe.â€
AN ENDURING BRAND
Kalverboer says the Unipart brand will endure: â€œItâ€™s going to be around for a long time to come. We believe that the brand has an added value in the market, although we will review certain situations with certain instances were the brand is used where I would say everybody knows thereâ€™s a proprietary brand in the box.
â€œThereâ€™s a high likelihood that the proprietary supplier is supplying to Sator and as part of the rationalisation we will of course look at the reason for putting it into a red, white and blue box.â€
Neill is happy, relieved perhaps, to have someone to brave the European waters with this time: â€œTheyâ€™ve done all the work. Theyâ€™ve got the catalogue, theyâ€™ve done the training, theyâ€™ve got those things. Itâ€™s the sensible thing to do.â€
As far as the UK and Express Factors go Kalverboer says: â€œThey are an integral part of our network. They help us service our major account customers and regional customers. If you look at our wholly-owned branches, 175, the total network is over 200, so it is unrivalled compared with anybody else.Now we have to bring the range to an unrivalled level as well.
WILL THE MARKET ACCEPT THE NEW UNIPART?
The support and help with scale does appear to make sense for United Automotive as long as the interest is long-term, but what does the market think?
Our poll on Catmag.co.uk is reasonably positive, with 54 percent of respondents saying itâ€™s a good move, 35 percent saying theyâ€™re not sure and just 11 percent opposed.
The level of affection for the company is palpable, however. A group of ex-employees meet three or four times a year to talk about Unipart. Theyâ€™re called Unipatriots
One of the group expressed concern for their former employer. â€œWhen I started the core of Unipart was its parts business. Now I know times have changed and the company is essentially logistics now, but I canâ€™t see how anybody could sell 50.1Â percent. It was pretty much Neillâ€™s baby. He was there when it was born, he nurtured it, and he saw it grow into adolescence. I donâ€™t see why they would sell their core business in the UK. â€
Another industry insider was more sanguine: â€œIt had to happen. The automotive side of the business had been haemorrhaging for years and maybe new investment and a new team could help. The rest of the Unipart Group is doing so well â€“ logistics, rail, and so on.â€
Once upon a time the automotive arm was everything for Unipart; now it accounts for less than 20 percent of the turnover of the group at around Â£180 million. Since Unipart isnâ€™t publically listed, however, itâ€™s impossible to tell how much of a contribution the automotive business may have made to the groupâ€™s 2010 profits. These group profits stood at of Â£9.5 million on the back of overall turnover of Â£1 billion.
A DIFFERENT WAY OF THINKING
â€œYou might be thinking why would you sell a controlling interest in a business that youâ€™ve had for a long time and value highly,â€ says Neill.
â€œThe big strategic reasons are outlet scale and systems scale. Itâ€™s going with the flow, nothing thatâ€™s going to make people say â€˜thatâ€™s the wrong thing to doâ€™ because itâ€™s exactly the way we think the business should run.
â€œWeâ€™re very happy to partner up with the right people, so this is not something new for the company.â€
The thing is, though, selling 50.1 percent of the company is different. Very different.