Falling £ Opens Doors to Overseas Investors      

Automotive sector consultancy MHA has fuelled debate that the dismal performance of the pound, following the arrival of our new Prime Minister,  throws the spotlight on potential investments into the UK car retail sector from overseas.

Having already asked a few months ago if now is a good time to sell a Retail Car business?, MHA’s Alastair Cassels now says that more dealers are now evaluating future options and that MHA is seeing pockets of activity that suggest there is still a healthy appetite for investment in the sector.

Says Cassels: “The changing of the UK Prime Minister has resulted in the pound slumping to 37 year low against the US dollar. This might be depressing news for some FOREX traders but it represents a huge opportunity for some foreign investors. We’ve seen activity that would seem to back this up with acquisitions by Group 1 Automotive, Supergroup and a failed bid for Pendragon by US based Lithia Motors.

“The buying power of a US based auto investor has never been stronger. In 2014 a pound was worth $1.7 whereas now we appear to be approaching currency parity. In the context of dealer acquisition this is significant. If we consider Lithia’s recent offer to the Pendragon Plc shareholders of £0.29 per share in the context of the depreciating pound it’s not difficult to see why there is an appetite for foreign investment. The offer amounted to c£400m which would have been around $580m less than a year ago. Today that conversion stands at c$460m or a 20% discount.

“When you also consider that UK property is still seen as a growth asset class in the long term then its no wonder that there is appetite to expand into this sector. Other buyers from Europe, Middle East and South Africa are also established in the UK and known to be acquisitive.”