January 23, 2018
The UK remains a leading producer of cars, with over 13 million manufactured last year – 16% of global production.
Longer term changes to the automotive sector are finally beginning to catch up with the industry. Operators are expecting mass disruption to be caused by well-publicised driverless car technologies being developed by Google and others. In addition, greater consumer awareness around environmental issues, especially climate change, has resulted in large manufacturers beginning to take electric cars seriously. These factors, combined with the ever-increasing complexity of both exterior design and interior functions has resulted in significant cost increases for OEMs operating in the automotive space.
Despite these concerns, appetite for acquisition of UK firms in the space has stayed strong. The number of buyers based abroad has increased by 14 percent to 55%, with over half of this interest coming from the USA.
Private equity has only made up a small portion of activity in the sector, buying less than 1-in-8 companies sold. The majority of buyers were companies active in the same area, looking to extend their geographical reach and product offering. The highest profile example is Genuine Parts Company, a distributor of automotive replacement parts, and its acquisition of Alliance Automotive Group, a supplier of spare parts for commercial vehicles for £1.5bn.
Alliance Automotive Group have been the most active in the market during 2017. The company acquired parts suppliers LDS Motor Factors and Fast Parts Wales, as well as being acquired by Genuine Parts Company in September.
Often talked about, driverless cars are anticipated to be a regular sight on roads within the next 5 years. Whilst there may be some initial trepidation by users, consumers and policymakers are likely to be taken in by the promise of an enormous reduction in driving-related casualties.
Longer term, it is likely that many people will not own an individual car but instead will ‘call’ a driverless car when needed, much in the same way Uber is used now. This could potentially result in a 20-fold fall in the number of cars manufactured, as it is currently estimated that the average car is parked 95% of the time. This suggests that, following the introduction of these cars, the growth in the sector will shift away from companies involved in the manufacturing supply chain or those providing aftermarket services, towards those developing safety technologies and driving software.
A response to this longer-term threat may be for larger companies to shift their operations towards safety and software development. This has begun to play out already, through acquisition, with firms looking to make sure they have sufficient software capabilities.
Even longer in the making, electric cars are getting to closer to the mainstream. This has primarily been pioneered by premium car producer, Tesla. The greater public profile combined with the increased move away from diesel is bringing us closer to the tipping point at which mass consumer adoption begins.
When this happens, the likely impact on the automotive industry cannot be understated. Electric vehicles contain fewer moving parts and require a simpler and less capital-intensive production process – which also includes less labour. This shift will require large investments into new manufacturing facilities and as such will favour the larger players in the market.
This dramatic shift in the manufacturing process is likely to lead to the larger companies in the market acquiring smaller players that have the capabilities at each stage of the new production process. A noticeable increase appetite for powertrain developers has been observed and powertrain companies are the leading segment globally in automotive deals.
With automotive manufacturers having complex supply chains, deeply embedded throughout the EU, there will be a significant impact on their operations depending on the terms on which the UK leaves the union. PA Consulting has estimated that finished car costs could increase by over £2,000 if the result of negotiations is a so called ‘Hard Brexit’.
It is currently very difficult to predict what the ultimate outcome will be. Carmakers may wish to move operations elsewhere within the EU, if tariffs are imposed on UK-made vehicles. Conversely, the UK government may lower corporation tax and provide an incentive for manufacturers to base their operations in the UK, even if this is not currently the case. The uncertainty the vote has comes at a time when the industry is likely to face significant technological changes in the next decade.
OEM’s have taken much of the profitability away from interior design businesses, now only asking them to manufacturer to specifications which have been designed inhouse. Autonomous vehicles are expected to change this, allowing for much greater creativity and originality in automotive interiors.
“We were delighted with the services that Bluebox offered us. Bluebox’s attention to detail through their Diamond Programme ensured that we were well prepared for when the business was taken to market and that the sale process itself was managed expertly.
We challenged Bluebox with finding the right strategic buyer and thereafter negotiating a deal that met our requirements. In helping initially to identify and to secure the deal with Mountville Mills they accomplished just that. Communication throughout was excellent and professional, managing each stage of the process. I would have no hesitation in recommending Bluebox to any corporate shareholder or private business owner looking to divest their business.”
Richard Millward, Former Client
“We were delighted with the services that Bluebox offered us. Bluebox were challenged with finding us the right strategic investor and, thereafter, negotiating a deal that met our complex requirements. In identifying and securing the deal with LGC they have done exactly that. The process itself was efficient and smooth, largely due to the excellent communication from the Bluebox team, who also demonstrated excellent experience at managing a very engaging auction process. I would be delighted to recommend Bluebox to any corporate shareholder or private business owner looking to divest a business.”
Helen Dickinson, Former Client
It has been a real privilege working with the team at Bluebox over this last year or so. Bluebox’s attention to detail ensured that we were well prepared for when the business was taken to market and the sale process itself was managed expertly. Starting the process, I had no idea exactly what this would entail and the volume of work that has been produced by everyone and the result reached today is nothing short of brilliant.
Hugh Morris, Former Client
We are delighted with the services that Bluebox was able to offer. They showed an intimate knowledge of a deal cycle, managed a tight auction process and were highly communicative from the start. I would happily recommend Paul and his team to business owners contemplating a sale of their business in the next 24 months. Experience is key and this has paid off for us.
Laurence Seward, Former Client
Aligning ourselves early with Bluebox, and entrusting the team to guide us through their process proved to be a highly rewarding investment from all viewpoints. Bluebox’s support significantly enhanced both the value of our business and its ‘saleability’. I would highly recommend Bluebox to business owners contemplating an exit in the next two years. The earlier the engagement the better so far as I am concerned.
Mike Minett, Former Client
We began working with Bluebox in early 2015 through their Blue Diamond Programme, as we were contemplating an exit. We found that the process focussed our minds on the key areas of growth in the business, and prepared us well for the inevitable rigours of due diligence. During the sale process itself, the advice offered by the Bluebox team was invaluable. We found them to be helpful, straightforward and honest.
David Stokes, Former Client
When selecting our adviser, it was extremely important that they had access to international buyers and were experienced in cross-border M&A. The team at Bluebox proved to be invaluable by identifying a strategic acquirer from America who was not known to us and by negotiating an excellent deal for all parties. I was also impressed with the process management from Bluebox, which ensured that the deal was closed in a timely fashion.
Jeff Weinstein, Former Client
When I first engaged with Bluebox, I was hesitant as to the benefits of using an advisor to firstly, find a buyer for my business and secondly, to get a deal over the line. However, now that the deal has completed with KPM, I can honestly say that the finer negotiation points handled by Bluebox and their overall management of this process has been nothing short of first class. I would be delighted to recommend Bluebox’s services to any entrepreneur contemplating the sale of their business.
Bill Ballard, Former Client
Bluebox worked closely with us over the following six months and helped us to implement some key initiatives which made InferMed a more attractive acquisition target. Once we decided to sell the business, the Bluebox team were very diligent in ensuring that no stone was left unturned. They negotiated expertly on our behalf to ensure we got the best deal possible.
Alan Montgomery, Former Client
The pre-sale planning programme that we signed up for with Bluebox made us develop our strategies and focus on the bigger picture. It proved to be a very rewarding investment from all viewpoints and significantly enhanced both the value of our business and its ‘saleability’. I would highly recommend Bluebox to business owners contemplating an exit in the next two years.
Nigel Parsons, Former Client
I have experienced first hand the value that can be created through highly structured pre-sale planning. It amazes me that it is not something that everyone does. It is so disappointing to see around 90% of transactions collapse before they complete and pre-sale planning will not only enhance your price, but also significantly enhance your chance of a closed deal.
James Caan, Investor
We worked incredibly closely with our advisers who provided expert knowledge of the sale process with which we were not familiar. We were truly delighted with the results.
Marten Nielson, Former Client
We appointed advisers to manage the sales process after we had received a number of unsolicited approaches for the business. I was incredibly impressed by the immense value that could be created by expertly negotiating with a group of already interested parties.
Paul Duckworth, Former Client
I was delighted with the service that the team offered and their real attention to detail. The deal was not without its complexities and it was reassuring to have such experienced advisers assisting me throughout the negotiations.
Peter Bennett, Former Client
Truly delighted with the way my sale process was managed. The fact that the team I worked with achieved such a great multiple is testament to their experience and their ability to create some true competitive tension.
James Averdieck, Gü, Former Client
The team at Bluebox provided invaluable support in negotiating this complex transaction. Their access to international purchasers, and exceptional knowledge of cross border M&A ensured that the deal was concluded efficiently, achieving a highly successful outcome for us all.
Jon Parslow, Former Client
“We selected Bluebox after a fairly long round of evaluating potential advisors because of their scientific, yet challenging approach to maximising value. During our initial meetings they showed us how far short of “ready” we were and consequently we completed more preparation in the early stages which meant we were equipped for what was to come. We were delighted with our choice of Corporate Finance partner. I do not hesitate in recommending Bluebox for any SME to consider.”
Simon English, Former Client
Bluebox provided invaluable advice in managing the negotiations with incoming investors. Their skills in handling these discussions were evident from the outset and the vital interface that they provided between the incumbent team and the incoming investors was truly beneficial.
Henry Braham, Former Client
Bluebox have a professional, dynamic and experienced team that is greatly assisting me with my focus on my exit within the next 24 months. Their structured approach is very refreshing and their ‘Blue Diamond’ programme is adding immense value.
Matt Evans, Former Client
The team at Bluebox provided me with a seamless service from the start of the engagement until our deal was completed. Attention to detail was commendable and their understanding of corporate M&A very impressive. I could not recommend them highly enough.
Victor Lewis, Former client
Having tried to sell my business previously – and failed – I was only too aware of the importance of pre-sale planning. This is a talented team offering a service that most people find out about, but too late.
Simon Hulme, Former Client
Bluebox are a quality outfit. Their access to International acquirers and relationships with the highest quality domestic investors was impressive. My shareholders and I received excellent service from start to finish and it was refreshing to be dealing with a senior team throughout the sale exercise.
Michael Clapper, Former Client
I cannot recommend the team at Bluebox highly enough. Their expert guidance throughout the entire sale exercise resulted in my shareholders securing an excellent deal with which the entire team was delighted.
Mark Rodol, Former Client
I’m really pleased with the service Bluebox provided. The team demonstrated excellent knowledge of the process to follow and led negotiations for the hospital in a way that allowed us to ensure we received appropriate value whilst focusing on reputational risk. Communication and service were of a very high standard.
Steven Davies, Former Client
With Bluebox’s expert advice we were able to find the right buyer that will benefit our business strategically. We’re delighted with the outcome and look forward to starting our new chapter
Clive Hillier, Former Client
The advice offered by the Bluebox team throughout the process was invaluable to the shareholders. We strongly believe that participating in Bluebox’s pre-sale planning programme was a significant driver behind the success of the deal. Their project management and negotiation skills throughout the sale process itself resulted in an exceptional deal being delivered to all parties involved.
Harpal Singh, Former Client