# Marshall Motor Holdings Strategic Acquisition of Eight Volkswagen Group UK Franchises

- Link: https://www.directorstalkinterviews.com/marshall-motor-holdings-strategic-acquisition-of-eight-volkswagen-group-uk-franchises/412801233
- Published: 2019-12-18T07:12:56+00:00
- Author: Giles Arbor

**Marshall Motor Holdings plc** ([LON: MMH](https://www.directorstalkinterviews.com/company/marshall-motor-holdings/mmh.l)),
one of the UK’s leading automotive retail groups, announced today the acquisition
of the business and assets of a portfolio of Volkswagen and ŠKODA passenger and 
commercial vehicle franchises from Jardine Motor Group UK Limited for up to £22.3m
cash including £13.0m of inventory. The Group also provides a brief trading update
on 2019.

**Overview of Acquisition**

The Businesses comprise six Volkswagen passenger car franchises in Aylesbury, Harlow,
Letchworth, Loughton, Milton Keynes and St Albans together with a Volkswagen commercial
vehicle franchise and bodyshop in Loughton and a ŠKODA passenger car franchise in
Milton Keynes.

Each of the acquired businesses operates from properties that are fully compliant
with the latest brand requirements. In aggregate, approximately 400 employees will
transfer to the Group as part of the Acquisition.

JMG also operates a Volkswagen authorised repairer and Approved Used car operation
in Towcester which is excluded from the transaction. JMG will be relinquishing this
franchise as part of the Acquisition.

The Volkswagen franchise in Aylesbury shares a site with an Audi Approved Used business
which is being retained by JMG. Completion of Aylesbury Volkswagen will be deferred
pending completion of the legal process to sub-divide the site. It is expected that
this process and the transfer of the Aylesbury Volkswagen business will be completed
in 2020.

Aggregate revenue for these Businesses was £196.1m in the year ended 31 December
2017 and £212.8m for the year ended 31 December 2018 with a loss before tax in these
years of £3.3m and £2.8m respectively. As a result, the Acquisition is expected 
to be earnings dilutive in 2020 and 2021 whilst the Group improves the operational
performance of the Businesses. We expect the deal to be earnings enhancing from 
2022 onwards.

The total consideration agreed for the fixed assets and goodwill of the Businesses
will be up to £9.3m, including deferred consideration in respect of the Aylesbury
business, funded from the Group’s existing resources. The fixed assets include £
4.3m in respect of freehold/long leasehold properties in Letchworth and St Albans
and the goodwill is £3.6m. In addition, excluding Aylesbury, the Businesses held
£13.0m of inventory of motor vehicles, parts and other stock at completion which
will be primarily funded via the Group’s existing stock funding facilities.

**Strategic Rationale for the Acquisition**

The Volkswagen Group is one of the world’s leading automobile manufacturers and 
the largest carmaker in Europe. MMH partners with all of the Volkswagen Group’s 
core brands: Volkswagen Passenger Cars, Audi, SEAT, ŠKODA and Volkswagen Commercial
Vehicles. Year to date Volkswagen Group’s core passenger car brands accounted for
20.6% of all new vehicles sold in the UK and 11.5% for commercial vehicles. Volkswagen
Group is investing €60bn in e-mobility, hybridisation and digitisation between 2020
and 2024, with the much anticipated Volkswagen ID.3 model scheduled for release 
in the UK in 2020.

MMH first partnered with Volkswagen in 2012 and has significantly strengthened this
partnership over the last seven years. The Acquisition, completed with the full 
support of Volkswagen Group UK, is in line with the Group’s strategy to become the
UK’s premier automotive group through growth with existing brand partners in new
geographic territories in the UK. Given the changing motor retail landscape, that
establishing further scale with our brand partners is of paramount importance.

Following this acquisition, the Group now represents the Volkswagen Group in 53 
operations across the UK making the Group Volkswagen Group UK’s largest partner 
by number of locations. The Group is now the second largest partner in the UK for
Volkswagen passenger cars with 14 retail centres[1]. The Group is also now the largest
partner in the UK for Volkswagen commercial vehicles with six retail centres[2].
The acquisition of Milton Keynes ŠKODA, which follows the acquisition of six ŠKODA
franchises earlier this year, further cements the Group’s position as the largest
ŠKODA retailer in the UK with 12 retail centres[3].

The acquired Businesses are located in excellent locations that are contiguous with
the Group’s existing Volkswagen and ŠKODA businesses. They have excellent potential
for growth and improvement in operating performance as part of the Group’s scaled
and focused Volkswagen and ŠKODA divisions.

> **Alex Smith, Managing Director of Volkswagen Group UK, said:**
> “We are pleased to have extended our relationship with Marshall, a trusted partner
> of Volkswagen Group here in the UK, demonstrated by the fact that it is now our
> largest partner in the UK by number of locations. Marshall has demonstrated its
> commercial and customer focus capabilities over the long term and we are confident
> in its ability to maximise the operating performances of these businesses.
> The Volkswagen Group is investing significantly in its future product portfolio
> and having strong retail partners such as Marshall is key to delivering these 
> exciting new products to our customers.”

**Other Portfolio Developments during 2019**

In addition to the Acquisition, the Group has continued to expand and develop its
portfolio during 2019.

As announced on 4 March 2019, the Group acquired six ŠKODA franchises through two
acquisitions, making it the largest ŠKODA retailer in the UK. We are pleased with
the integration and performance of these businesses.

In September 2019, the Group acquired two Honda businesses in Reading and Newbury
from JMG, reinforcing the Group’s position as the second largest Honda partner in
the UK. The acquisitions were completed with the full support of Honda UK and the
Group now represents the Honda brand in eight excellent locations in the UK[4].

In 2019, the Group was awarded an open point for Volkswagen Commercial Vehicles 
in Lincoln. The new business, which opened in October 2019, occupies one of the 
Group’s existing sites made vacant following the relocation of the Group’s Jaguar
and Land Rover businesses to a new ‘Dual Arch’ site in Lincoln earlier in the year.

It is anticipated that the Honda acquisitions and Lincoln Volkswagen Commercial 
Vehicles will contribute revenue of c£30m in 2020 and will be marginally earnings
dilutive in 2020. It will be earnings enhancing thereafter.

As the largest Volvo dealership Group in the UK[5], we have commenced a new partnership
with LEVC, the manufacturer of electric London taxis owned by Geely Automotive Holdings.
The Group represents the LEVC brand in Nottingham, sharing facilities with the Group’s
Volvo franchise.

In addition, the Group is in advanced negotiations to acquire the Volvo franchise
in Derby. This is expected to complete before the end of the year.

> **Daksh Gupta, Chief Executive of Marshall Motor Holdings, said:**
> “I am delighted that we have further strengthened our already excellent relationship
> with Volkswagen Group UK with this acquisition. While the acquired businesses 
> are currently loss making, we are confident in their future potential. The businesses
> are in excellent locations that are contiguous to our existing Volkswagen and 
> ŠKODA franchises and each site is fully compliant with the latest brand requirements.
> It is an exciting time to extend our partnership with Volkswagen Group UK as the
> impact of its significant investment in electrification and mobility services 
> will be demonstrated. We are extremely proud to represent Volkswagen Group and
> wish to thank the UK management teams of each brand for their support for this
> acquisition.
> I am also delighted that we have been able to extend our partnership with both
> the Honda and Volvo brands, each of which we have long established and scaled 
> relationships with. I am also pleased to establish a new relationship with LEVC.
> Finally, I would like to extend a warm welcome to all colleagues of our recently
> acquired businesses to Marshall and look forward to working with them over the
> coming years.”

**Trading Update**

As has been well documented and previously reported, trading conditions for the 
UK automotive retail market have been challenging in 2019, impacted by continued
weak consumer confidence as a result of political uncertainty over Brexit together
with ongoing cost headwinds and vehicle supply constraints due to the implementation
of further emissions-related regulations in September 2019. The Society of Motor
Manufacturers and Traders’ currently forecasts the UK new car market to decline 
2.8% in 2019 and a decline of 4.4% in 2020 with the next forecast due to be issued
in January 2020.

The Group has performed well in this challenging market and despite trading conditions
weakening further in Q4 2019, the Board’s outlook for the full year remains unchanged.

The Board will provide an update on the trading environment on 10 March 2020 when
it announces its results for the year ending 31 December 2019.

^([1]) Volkswagen Passenger Car Locations: Aylesbury, Barnstaple, Grimsby, Harlow,
Letchworth, Loughton, Milton Keynes, Newbury, North Oxford, Reading, Scunthorpe,
South Oxford, St Albans and Taunton.

^([2]) Volkswagen Commercial Vehicles Locations: Bridgwater, Lincoln, Loughton, 
Reading, Scunthorpe and South Oxford.

^([3]) ŠKODA Locations: Barnstaple, Bedford, Croydon, Harlow, Leicester, Letchworth,
Milton Keynes, Newbury, Northampton, Nottingham, Oxford and Reading.

^([4]) Honda Locations: Harrogate, Hull, South Leicester, Newbury, Peterborough,
Reading, Scarborough and York.

^([5]) Volvo Locations: Bishop’s Stortford, Cambridge, Grantham, Leeds, Milton Keynes,
Nottingham, Peterborough and Welwyn Garden City.

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