When CVC Capital Partners, Permira and Barclays Capital backed the £1.75 billion buyout of Automobile Association (AA) in July 2004, cost cutting measures were cited as one of the main reasons why the business could stand the strain of taking on £1.3 billion of fresh leverage.
A key aspect of the plan was the sale or closure of 126 unprofitable vehicle service centres. This process has now been concluded with the sale of 50 of the centres to Nationwide Autocentres, the car servicing and MOT provider backed by NBGI Private Equity, for an undisclosed sum. In so doing, the AA management team has beaten its self-imposed deadline of mid-2005 for the sale or closure of the centres. The other 76 centres in the portfolio have been shut down.
As part of the deal with Nationwide, a new business relationship has been formed between seller and buyer. This will see the AA refer its members to the Nationwide centres, which over the next year will be re-branded AA Approved Service Centres. “While the service centre business was unprofitable for the AA, it still wanted to be able to offer the service to its members, and the business relationship was formed around that,” Mark Owen of NBGI Private Equity told PrivateEquityOnline.
Owen said Nationwide restricted its purchase to only 50 of the centres, partly because of their actual or potential profitability, and partly because of their geographic fit with existing Nationwide locations. In total, Nationwide now has 227 service centres around the UK.
Nationwide Autocentres was formed in January 2001 when NBGI Private Equity backed a management buy-in team that acquired 41 vehicle service centres from RAC, following RAC’s acquisition by Lex Service. After initially deciding to focus only on larger centres, Lex Service then decided to focus on vehicle recovery rather than fixed-site service and sold its remaining 96 centres to Nationwide in April 2002. In February 2003, Nationwide acquired 54 “Stop n Steer” centres from Kwik-Fit.
Owen said NBGI will soon be looking for an exit from Nationwide as it has owned the business for almost four years, and normally exits its portfolio companies within five years. He said NBGI would explore trade sale and IPO options.
NBGI Private Equity was launched in June 2000, with a €100 million fund targeting investments in established small to medium sized “traditional economy” businesses in the UK.