Unitas sees 3x return on Australia auto parts turnaround

Genuine Parts bought 30% of Exego - best known for operating auto repair stores under the Repco brand - for $150 million last January. It agreed to pick up the remainder of the business for $800 million, a valuation said to equate to 9x EBITDA, once the company reached certain earnings thresholds. These were met last month.

"We reached the threshold at least one year ahead of what we had expected," said John Lewis, Unitas' CEO. "Genuine Parts was willing to pay a higher multiple of a higher underlying level of profits, once they had been in the business for a while. For us, it was a significantly better gain than if we had sold the whole company at the beginning. For them, it was a low-risk approach."

The private equity firm acquired the business in 2006, three years after it was taken public following another PE-led restructuring. While the brand was well known in Australia and New Zealand, the company was in operational and financial disarray, having lost its way after the previous CEO and management cashed out in through the public offering.

"We saw an opportunity in taking the company private to do an operational turnaround and take advantage of the latent potential of the brand," Lewis explained.

Unitas' investment was priced at 8.6x EBITDA, translating into an enterprise valuation of around A$570 million (then $460 million).

It proceeded to hire a new CEO and built a strong management team around him; improve expense controls and internal financial reporting; and appoint the former CEO of US auto parts player AutoZone to the board, not only to offer strategic guidance but also access to a global network of contacts that proved invaluable when it was time to identify potential buyers.

Unitas claims that Exego's EBITDA has more than doubled during its ownership period with annual revenues topping $1 billion. This came through building out the trade and retail sides of the business. The former was boosted by inventory investments that meant Repco could serve mechanics phoning up in search of parts; the latter benefited from improvements to store layout and appearance.

Efforts were also made to develop Exego's other business lines: lighting, electrical devices brand Ashdown-Ingram, motorcycle helmets and clothing manufacturer McLeod Accessories, and engine maintenance services provider Motospecs.

"Ashdown-Ingram performed particularly well, delivering double-digit growth during our ownership period as it entered new market segments such as mining," Lewis noted. "It has become quite a significant contributor in terms of overall operating profit."

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• Topics
• Exits
• Australasia
• Support services
• Buyout
• buyout
• Exit
• Trade sale
• Unitas Capital
• automobiles
• Australia