Parts Alliance (Sold)

BUSINESS DESCRIPTION

The Parts Alliance is an automotive aftermarket parts distributor. It currently consists of fourteen parts distributors and a central organisation which acts as a ‘virtual head office’, supplying the distributors with a full suite of central services, such as national sales and marketing, IT, procurement, product and category management and central warehousing.

We originally acquired seven members of the Parts Alliance (CES, Allparts, SC Motor Factors, GMF, BMF, CPA and BMS), the central buying group and its IT development arm (the Parts Alliance and DDS), and 15 branches from the Unipart estate. In 2015, we announced the acquisition of GSF, and in 2016 we added SAS Autoparts and Waterloo Ltd.

Customers range from independent garages to multi-branch workshops and fast-fits, and they are served by a fleet of over 1,000 vehicles and more than 2,900 staff across the group membership.

WHY DID WE INVEST?

The £5.2 billion UK car parts market is amongst the most fragmented in Europe, with c. 1,400 participants, and is characterised by high levels of owner-management. We believe several market, regulatory and commercial catalysts will encourage consolidation of this sector in both the UK and Europe, which will offer a number of interesting investment opportunities and exit options.

HOW DO WE INTEND TO CREATE VALUE?

We intend to create value in the investment in three ways: improving gross margin with better procurement, category management and more effective pricing; building EBITDA margin by improving productivity, performance management and customer segmentation; and removing duplication in the back office.

WHAT HAS BEEN ACHIEVED?

The business has been scaled through M&A and the management team has been focused on sustainable growth from the core estate, as well as improving the online offering by utilising DDS (the IT development arm of the Parts Alliance).

Management’s key focus remains: improving gross margin; implementing EBITDA margin improvement opportunities; and harmonising the management information systems.

HOW IS IT PERFORMING?

The Parts Alliance has seen a continuation of its positive trading performance over the last couple of years driven by scale benefits.

HOW WILL WE CRYSTALLISE VALUE?

In June, HgCapital announced the sale of Parts Alliance to Uni-Select Inc., a listed Canadian distributor of automotive, refinish and industrial paint products and aftermarket parts, for a transaction value of £205 million.

The sale of Parts Alliance has been fully reflected in the June valuation and has led to an uplift of £6.5 million in the Company’s valuation of its stake.

Sector Location Date of Investment Residual cost £’000 Unrealised Value £’000
Services UK Aug 2012 10,495 21,125