Private Equity-Backed Listing Making Headlines in the UK


March 20, 2015

Online car marketplace Auto Trader Group saw it shares rise by over 16% on its debut in London Stock Exchange on Thursday. The private equity-backed initial public offering was Britain’s largest such listing and it comes after fierce interest to buy the company before the IPO.


The Auto Trader Group flotation valued the company at $3.5 billion. But on Thursday the shares increased from the initial offer price of 235 pence to nearly 274 pence at the peak. Furthermore, the news comes amidst some concern among analysts over the strength of the company’s future growth. According to the Telegraph, analytics firm Eagle Alpha had published ‘a bearish analyst report’ before the listing.


Auto Trader Group, which is backed by the private equity firm Apax Partners, managed to raise around £437 million. Apax also sold 59% stake of the company, reaping nearly £926 million from the sale.


Growing the Business
The company was founded in the 1970s as a magazine posting car sale ads. The private equity firm got involved with the business in 2007 and took the weekly magazine digital in 2013. The decision was supported by the fact that traditional magazine sales were down and customer interest had moved online.


It quickly grew to be Britain’s leading website for buying and selling cars. It has recently focused its attention to tapping into the huge smartphone and tablet markets, with over 400,000 users utilising the Auto Trader searches each day. The company previously had operations also in Italy, the Netherlands and South Africa, but it sold these business units. It now operates mainly in the UK and Ireland.


Apax Partners’ Involvement
As mentioned above, Apax got involved in the company in 2007 when it acquired 49.9% of the company from the Guardian Media Group. At the time, the deal valued Auto Trader at £1.35 billion. In 2014, the firm acquired rest of the company in a further £619 million deal.


It has now sold 59% of its shares and Reuters reported it has an over-allotment option for 15% of shares. This would leave the firm with around 25% stake in the company. According to Reuters, the current offering is much larger in size than usual listings, with the required share amount standing at 25% in the UK. Reuters’ source had told the news agency, the firm “took the opportunity to reduce their overhang”. “They could have priced higher but they chose instead to do the bigger deal,” the source said.


Interest from Other Private Equity Firms
The listing comes after Auto Trader attracted plenty of interest from other private equity firms. The firm opted for the dual track process – looking at a possible listing while also scouting for possible buyers. According to the Financial Times, it had considered selling the company to Hellman & Friedman before the decision to list. The US-based private equity firm had reportedly offered £2 billion for the company.


The success of Auto Trader’s listing is a good sign, as IPOs so far haven’t been able to generate as much money as they did last year. According to Thomson Reuters data, global IPO deals have raised 16% less money compared to the same period last year. On a more positive note, the number of listings is on a par with 2014.

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