Motor Matters - Prepare for more consolidation
‘Consolidation’ is a fitting word to describe the automotive retail sector in the UK to the extent that it’s definitely happening and because it’s likely to continue. Q1 of 2016 sees two major groups with big East Anglian presence having just acquired or seeking to assimilate new businesses following significant purchases.
Marshall Motor Group acquired SG Smith last November in a £24.4m deal taking on around six new locations and Group 1 announced the acquisition of Spire Automotive adding a further 12 properties to their expanding portfolio and while not necessarily the main factor in either transaction there will be significant property matters to resolve and new opportunities to explore. These two transactions typify the way consolidation has been happening over the last few years. Highly acquisitive groups have sprung out of the wings of some of the earlier ‘super deals’ which took place during the noughties and key personnel from groups such as Reg Vardy and CD Bramall and some of the more regional players like Wayside Group have spawned the likes of Vertu, Spire, Cambria and Endeavour who are growing into attractively sized, highly successful businesses with the ability to either continue their growth or become very attractive targets for larger or internationally backed groups. Such acquisitions can also change the balance of power with manufacturers and lead to new relationships or the adjustment or termination of existing ones.
All of this provides the potential for significant property angles, problems and opportunities which range from simple refurbishments to major site relocations for the ingoing party, but which may leave the outgoing party with the opportunity to secure valuable commercial investments by letting the properties on appropriate lease terms. Alternatively selling the business on and leaving the incoming party to source the long term site solution may provide useful short term rental income while lucrative development proposals are worked up and brought forward.
Essentially consolidation is an opportunity for both parties and whilst there are many aspects to consider let me make the appeal on behalf of the property side. Those purchasers and those vendors who have planned ahead and fully understood the property issues proactively have the advantage of being prepared and armed for negotiations based on a strong foundation putting them in a far stronger position with greater certainty early in the process. The last thing a deal in the making needs is the discovery of a £400,000 dilapidations liability followed by a price chip or uncovering a break clause or a defect in a lease.
Consolidation will continue and for some business owners in the East, which will mean becoming part of a national group and for others there may be the possibility of early and comfortable retirement, shoring up a pension income or taking a career change into property investment and development. The best route to all of those outcomes is to be prepared and to think ahead, and having a property strategy, whether on the buying or the selling side will be invaluable, but it may just uncover something you hadn’t thought of too.
BSc (Hons) CEnv MRICS
The content of this article is for general information only. For further information regarding consolidation in the automotive retail sector, please contact a member of our motor industry team. Law covered as at April 2016.