Paris-based PAI Partners is paying private equity group CVC GBP800 million to purchase Kwik-Fit, the leading European fast fit group. CVC, which paid GBP330 million for the company three years ago, has achieved what it terms as a “classic turnaround”, by shedding less profitable operations and focusing on Kwik-Fit’s core fast fit activities.
A CVC spokesman described the company’s ownership and sale of Kwik-Fit as a “classic turnaround”. The private equity group will indeed be very satisfied with its three year patronage of a company that was considered to be in some difficulty when CVC acquired its stake. This sentiment was reflected in the GBP330 million it paid in 2002, in comparison with the GBP1 billion that Ford paid for Kwik-Fit in 1999.
The subsequent CVC turnaround was a textbook case of how to improve shareholder value. The group closed its international operations in Spain and Belgium, which were small and lacked potential for economies of scale, focusing instead on the core operations of the UK, France, Germany and the Netherlands. Kwik-Fit also sold or closed businesses that were peripheral to the core fast fit operation, including the glass replacement, home servicing and non-fast fit service centers in the UK. Furthermore a radical overhaul of the UK business led to the closure of many sites that were considered small, uneconomic, or where catchment areas overlapped with other sites.
Having simplified and streamlined the business, the new management also worked to rebuild the core operations. The company returned to TV advertising after an absence of several years. Initially the campaign stressed the price-competitiveness of the chain – an important element in its rapid growth during the 1980s and much of the 1990s, but this image had been lost somewhat in more recent years; the current campaign focuses on the service element. Among other measures, the company has also invested in trials of new-format fast fit centers and a small bolt-on acquisition of the French repair group Axto.
The challenge now will be to further increase profitability through organic growth of the business. However the advantage for Kwik-Fit is that it operates in one of the few growth segments of the aftermarket – the fast fit and autocenter segment.
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SOURCE: DATAMONITOR COMMENTWIRE (c) 2005 Datamonitor. All rights reserved. Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon.
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