ON THE MONEY

On the Money On the Money

Very much a 21st century phenomenon, private equity (PE) firms have been gobbling up extensive swathes of the developed-world motorcycle industry aftermarket. Their modus operandi is to buy-out, consolidate and internationalise often fairly small and long-established companies into grouped portfolios of power and profitability – brands, wholesale distribution channels and retail opportunists – sometimes mixed and matched.

PE firms borrow money to buy and load the debt onto their victims’ books, exhorting them to earn their way out of this burden and maximise value at pace. They then either sell on to a bigger PE presence with greater resources, float the end result off through a public equity offer or establish a long-term returns generator for capital-providing backers. Whatever the choice, there are plumptious management fees, tax-efficient profit shares and highly lucrative exit largesse along the way.

THE DUTCH FACTOR

Powersports Distribution Group (PDG), behind which sits Dutch PE firm Torqx Capital Partners, is a typical work in progress. PDG was established by Torqx in September 2017, when it acquired Netherlands-based trade distributor Hoco Parts from British bike industry veteran David O’Neill and his colleagues. Another Dutch motorcycle parts distributor, Motoria, was snapped up by PDG two months later. Hoco Parts subsequently extended its reach to dealers throughout the Benelux countries and Denmark.

PDG then went shopping in Belgium. In July 2018 Torqx funded the purchase of bike battery and transmission supplier DC AFAM and added Belgian parts operation Rhino Trading in October 2019. Simultaneously, back in Holland, the world’s largest vintage motorcycle parts specialist Consolidated Motor Spares joined PDG too.

Focus then shifted to the UK, where PDG bought regional trade distributors Rob Hunter and Bradbury Bros just a month later. They were rolled together as Bradbury Hunter and re-named as Hoco Parts UK in June 2020. A Hoco Parts Online UK website was also launched, replicating B2B tech system delivery to Hoco Parts dealers across Europe.

More business acquisitions were pursued to enlarge the Hoco Parts UK platform. British Putoline lube and accessories supplier Neo Distribution was swallowed five months later. Lincolnshire-based parts and accessories distributor B&C Express became yet another asset in November 2021. Meanwhile, earlier last year, PDG parent Torqx had done a deal with fellow Dutch PE firm Nedvest Capital to take Motorcycle Storehouse – a leading European specialist supplying custom parts, accessories and apparel into the Harley-Davidson firmament – off its hands.

FRENCH LESSONS

Motorcycle aftermarket brands in France have been an amazingly complex money-go-round fuelled by private equity since the 20th century’s final decade. Where to start? Once upon a time in 1993, the venerable Bering bike apparel brand’s parent Holding Trophy was bought out by PE firm TCR Capital. With more TCR finance, Holding Trophy later acquired the Segura apparel and Bagster luggage brands, respectively in 2004 and 2006, but was left teetering on the brink of bankruptcy by October 2011.

In parallel, French motorcycle helmet brand Shark sold a 15% stake in its business to PE firm Naxicap Partners in the early 2000s, to finance a new factory in Portugal. Naxicap sold that stake on to another PE firm, Atria Capital Partners, in 2005. Eventually, in March 2011, PE firm Perceva Capital acquired Shark in its entirety. And in November that year, Perceva also bought the insolvent Holding Trophy operation, to form the FIK group. Naxicap Partners reappeared on the scene in 2015, to buy out FIK and remoniker it as 2 Ride Holding (2RH). An additional Cairn bicycle helmet brand was tacked on. Naxicap cashed in its 2RH chips three years later, selling to much bigger French PE firm Eurazeo PME, a listed public company with £19.4bn-worth of assets under management. Eurazeo fronted the inevitable “undisclosed sum” to acquire Italian helmet manufacturer Nolan Group in 2019. Its 2RH brand roll-call is now thus – Shark, Nolan, Grex and X-Lite motorcycle helmets, plus Cairn, Bering, Segura and Bagster.

ONLINE AND ON TARGET

Hybrid aftermarket retailing figures large in the privateequity zone too. Notable player here has been London-based PE firm Equistone Partners Europe. Its first move into this arena in January 2015 was to acquire the Polo Motorrad und Sportswear retail chain, comprising 80 bricks-andmortar stores in Germany and seven in Switzerland. However, Equistone’s underlying interest was development of an already major Polo online presence targeting both countries.

To achieve this, it bought the highly-rated and purely online UK parts, apparel

International Share Prices

USA – SHORT LIFE FOR OPTIMISM

Renewed confidence in US equities market growth didn’t even last a week, after it transpired that the past month’s recovery had been primarily driven by hedge funds unwinding bearish bets designed to profit from decline, rather than any fresh appetite for investment risk.

A bright start for US stock indices staggered erratically and then faded away. The blue-chip S&P 500 and Dow Jones Industrial Average finished on respective 1.2% and 0.2% weekly losses. S&P’s MidCap 400 fell further by 1.4%.

Harley-Davidson shares began with some leaps of faith, rising by 1.8% on Monday and a firmer 3.6% on Tuesday. But Wednesday warned of worse to come, the price retreating by 1%. Thursday’s 1.3% bounce-back proved to be temporary, followed in short order by a 2.5% decline on Friday as markets went thoroughly sour.

EUROPE – SPREADING PRESSURE

The UK wasn’t alone in the inflationary mire with July’s 10.1% annualised increase, its highest rate for 40 years. Eurozone inflation had also risen, from 8.6% in June to 8.9% in July, pushing up yields on Germany’s ten-year Bund and Italy’s equivalent. And the former is now officially teetering on the brink of recession.

Unsurprisingly, equities traders in both these leading industrial nations ran for cover and market indices sank. Frankfurt’s Xetra Dax lost 1.8% and the FTSE MIB in Milan dropped by 1.9%. All four motorcycle-related European listings fell in value, led by maximum misfortune for BMW. JAPAN – THREE OUT OF FOUR AIN’T BAD

Japan’s Nikkei 225 index repeated the previous week’s 1.3% gain. Honda, Yamaha and Suzuki continued to bask in investor approval for quarterly corporate results, largely displaying the efficacy of their Asian operations. Although Team Green’s motorcycle division deserved a share of their glory, less enthralling sectors of the Kawasaki Heavy Industries conglomerate spoilt any biker party.

INDIA – CALM BEFORE SALES STORM

During the run-up towards the Indian autumnal festival season, concluding with the peak-sales frenzy of Diwali, Mumbai investors tend to slumber. The Bombay Stock Exchange Sensex 30 index virtually flatlined over the past week, on a marginal gain of just 0.3%. www.britishdealernews.co.uk