Consumer
Vertu Motors
In mid 2006 Brewin Dolphin was retained as broker to the newly incorporated Vertu Motors. A team of successful senior executives from within the motor retail industry identified the potential to consolidate the highly fragmented volume motor retail market, establishing Vertu Motors with this strategic aim.
From the beginning Brewin Dolphin worked closely with Vertu Motors to develop their proposals providing guidance on structure and corporate governance, shaping the investment proposition, advising on the management incentive package and offering input to the investment presentation. Key to this process was Brewin Dolphin’s close links with institutional investors and the team’s detailed knowledge of the quoted equity environment.
This initial process culminated in the flotation of Vertu Motors on AIM in December 2006 raising £25m of new money. At this point the company had no trading assets and was valued at £28m. The cash balance placed Vertu Motors in a strong negotiating position to acquire a meaningful position in the motor retail market.
Shortly after flotation Vertu Motors opened negotiations with Bristol Street Motors, a business with good geographical coverage across England, a strong representation with many of the major volume manufacturers, significant customer profile and a level of turnover that made it one of the top ten dealership chains in the UK.
Bristol Street Motors represented an ideal platform deal for Vertu Motors and a total consideration of £69m was agreed to be financed by a mixture of cash (£31m) debt (£29m) and shares (£9m). In March 2007 a second round of equity funding was sought and a further £25m was raised at a 25% premium to the flotation price in December 2006. This expanded shareholder base provided adequate capital to fund the Bristol Street Motors acquisition and the capacity for more deals. Three smaller deals followed in the next 6 months.
Brewin Dolphin has advised Vertu Motors since its flotation in 2006 taking the story from an initial concept to becoming one of the largest motor retailers in the UK with reported sales for the year to February 2009 of £750m. The Group operates 45 volume dealerships mainly across the Midlands and the North East of England.
Through 2008 conditions in the consumer sector became increasingly difficult, with extremely weak like for like trading being recorded by all the main operators. Although performance was down Vertu suffered less than its peers as investment in management, systems and process ensured that Vertu Motors operational metrics exceeded the wider market.
Vertu Motors also adopted a conservative financial approach, deferring any acquisition activity and repaying most of their debt, leaving them with a balance sheet that was strongly backed by tangible assets.
The challenging market conditions hit much of the sector extremely hard and in early 2009 the opportunity to press ahead with expansion at historically attractive prices was compelling. Based on the platform of Vertu Motor’s strong management and excellent operational performance Brewin Dolphin led a successful fund raise targeting new and existing investors which culminated in June as Vertu Motors raised £31m of expansion capital at a minimal discount.
Commenting following completion of the transaction Robert Forrester (CEO) said “Brewin Dolphin offered excellent support throughout this transaction and have provided expert advice since we were established three years ago”.