Private equity house Doughty Hanson is set to float ATU, the leading German autocenter chain, by mid June. CVC Capital Partners is similarly planning a summer IPO for the Halfords car accessory chain. It seems likely that when CVC exits its other car aftermarket chain, Kwik Fit, it can anticipate another tidy profit.
Doughty Hanson looks set for a successful IPO as it prepares to name its float price for ATU in the next few days. Meanwhile, CVC Capital Partners is expected to make a good return on its investment in Halfords, the UK car accessories chain.
Halfords and ATU have continued to grow their revenues in the past three years, while the broader car aftermarket has been relatively flat. In part this reflects their strength in the car accessories and tuning sector, which has been growing far faster than the car aftermarket as a whole.
Halfords in particular has capitalised on the growing numbers of young men who are prepared to spend significant sums on performance parts and accessories for their cars. Profitability at the chain has also been improved through a squeeze on suppliers and a focus on overheads. ATU has grown through the continued rapid expansion of its branch network and the development of its car servicing offer to complement the product line-up in its stores.
Attention is soon likely to switch to the performance at CVC’s other aftermarket investment, Kwik Fit, which has been undergoing a more radical overhaul under its private equity ownership. Kwik Fit has exited its operations in Belgium and Spain, sold its UK garage servicing business, and closed both its windscreen replacement business and Hometune mobile servicing operation. Meanwhile the group has consolidated its core Kwik Fit branch network in the UK.
Although Kwik Fit has not released financial results for 2003, revenues are likely to have been hit by the restructuring programme. The key question for potential investors will be the underlying health of the business. Its core exhaust market is in long term decline and the tyre market is very competitive. Nevertheless a renewed focus on the core fast fit operations and a much more competitive price positioning in the UK are likely to help. Furthermore, some believe that CVC acquired Kwik Fit on the cheap, leaving substantial headroom for a profitable exit.