Across the UK there is a visible appetite among large bus groups, private equity companies and individuals of high net worth for coach companies. Recent months have highlighted the value of the coach market to a huge variety of buyers attracted by its potential for turnover and profit levels.
That presents opportunities for operators looking for an exit strategy. But business owners looking at succession plans face unknowns. While there are business transfer agents to assist with the detail, historically there have been few companies that specialise in a particular sector.
An ambition to change that exists with newly formed 21point5 Group. Established in response to the growth of buyer interest in coach, its founders Kevin Wilde and David Ashdown (pictured, below) are creating what they hope will be a definitive specialist advisor for coach business owners seeking clarity on their succession plans.
Backed up by experience
Both of 21point5 Group’s founders have been through the ownership and sale of coach businesses themselves: Kevin most recently ran Mitcham Belle Coaches before operations were sold in April. David meanwhile brings 40 years of transport experience to the duo, having been involved with the handover and sale of South Mimms Travel and Reg’s Coaches to REL Capital in 2023.
The lessons learned by those experiences inform the type of assistance 21point5 Group will provide to operators. Namely, that those looking to exit the sector need to be aware of timescales and costs, and to approach with caution so as to avoid being taken advantage of.
Many things could go wrong if the expertise is not there, from unnecessary costs to a dissatisfied seller. “Part of why we are doing this is because the sale of Mitcham Belle Coaches was uncomfortable,” Kevin reveals.
“I didn’t have anyone I could go back to, except for my solicitors, to help me with that sale. It seemed wise to give other operators the potential to speak to someone regarding the process because it cost the company a fair amount of money which, had I been more aware at the time, could have potentially been avoided, and a better exit strategy sought.”
A matter of timing
21point5 Group is named for the average turning circle of a 12-metre coach, and its name hints at the ambition of presenting business owners with a relatively painless turnaround for their goals.
For Kevin and David, there has nary been a better time to sell. Private equity, large concerns, venture capital, high net worth individuals and overseas entrants seeking to access the UK market present a glut of potential. That is to say nothing of the opportunity for sales to large bus groups, or of the formation of consortiums to gain benefits by economies of scale.
But the minutiae required to sell a business can be overwhelming. Kevin’s own sale involved a relatively small coach business but saw massive demands when it came to paperwork, due diligence, solicitors’ fees and accountancy teams. Simply arming operators with the foreknowledge to predict what the process might cost, and how long it will take, could save a great amount of hassle down the line, and even change someone’s mind entirely.
“If there had been an organisation such as ours to speak to regarding what one has to go through to sell a business, regardless of which way to do it, it would have made the whole process a lot easier to bear,” Kevin reflects.
“There was so much stuff that I found out in terms of due diligence, and it was unbelievable the number of hoops one must jump through. My company was relatively small; for a larger company, those requirements expand and become more onerous. When dealing with private equity or venture capital, anything of that magnitude, the amount of knowledge required is mind boggling.”
There’s also the art of negotiation to consider. “Not every buyer will take every advantage possible, but any flaws or faults they can find will be used against an operator,” David says.
“Very often that will be done a long way down the road, when a buyer is excited and has high expectations. That’s where 21point5 Group will add value — we can deal with those issues before the process begins, and put the buyer in a position where they will struggle to argue on those points.”
A business assessment by 21point5 Group considers all this to limit expenses for a business while framing it against a more emotive angle, and that is to assess whether the business owner is ready for sale on an individual basis. The consolidation trend comes during a time when much uncertainty hovers around the future of coach businesses.
While some owners have children ready to take up the mantle, or the finances to appoint a management team, Kevin and David recognise many operators are struggling to put succession plans in place against a backdrop of changing legislation, government policies and taxation, pressure to invest in decarbonisation, and other regulatory requirements that contribute to an uncertain future for businesses with no future generations. Operators of around 10 coaches, without a specific market niche, may be the ones that face the most pressure there.
As long as a buyer feels they are getting value, it’s a happy marriage. The courts are full of disputes and aftermaths of things that have gone wrong. The more we can reduce that, the easier life is for everyone
“[Business owners] have invested time and effort building these companies and we want to make sure they are emotionally prepared to see the fruits of their labour moved to a PLC, where there will be potentially a completely different way of operating,” Kevin says, highlighting comments made in last month’s routeone by Chris Owens on the often personal nature of a sale.
“That was the perfect example of someone who didn’t want to sell to a large operator, feeling that the whole ethos of the business would be lost. Those kinds of issues can disappear into the ether during a sale, so we want to introduce them to the entrepreneurs running these companies and help them get their heads around the fact that their hard work will be going into new hands.
“That involves ensuring they have a real plan of what they will do after they exit, and whether they can handle the funds, the time they will have on their hands, and if that change will have a detrimental effect on them. Reflecting on my own experience, this is one of the biggest things I wasn’t prepared for.”
Options on the table
Every coach company is different, so the process of finding an ideal exit strategy is undertaken on a bespoke basis, informed by factors such as local competition, interest and encroachment by larger operators in a particular region, as well as personal factors such as an owner’s age, family situation, ill health or financial targets.
“This is about working out a strategy of where an owner wants to go with their business and whether they feel it’s the right time for them. It’s also important that they’re happy with what will happen after they have sold their business if successful,” Kevin explains.
“21point5 Group’s aim is to devise a plan which is not ‘one-size-fits-all’ but suits every individual operator that contacts us. We’re here to help find a way for someone to leave the industry and be satisfied with how they have done it. These are huge decisions, as I have found out personally. You have a void in your life, and it makes sense for us that our clients are ready for what comes after.”
David says an endearing thing he has learned over the years is the attachment many owners have to values established within their businesses. “As much as they can, owners want to ensure that their companies move on to an entity that will maintain their brand ethos or refocus it and send it to places the original owner perhaps couldn’t go, either because of financial or time constraints.
“That’s where we like to gauge an operator’s perspective. Where would they want their company to go, if they were given the option? That’s where we will gear any potential sale, educating operators on what it will provide in terms of that value.
“Many business owners may wish to see a company progress within a larger group and want to act as a controlling manager for another couple of years before stepping back and handing it over to a management team.”
When is the time right?
While Kevin and David say now is a great time to sell, how does a business know it’s in the strongest position to begin those discussions? That, they say, is based on assets.
An easy fix to maximise a company’s value is to look at its asset schedule and understand whether there are too many, and whether asset sales are buoyant. Serendipitously, values are high for Euro VI coaches, and asset ratios can be scaled down on that basis while optimising turnover.
Some business owners may not have the time to do in-depth analysis of how to make their business more profitable ahead of a sale. 21point5 Group will look at balance sheets, examining profit and loss, as well as finding a personalised service to see where simple-to-introduce efficiencies can be made.
From a buyer perspective, profit levels aren’t the be-all and end-all of a sale. With franchising being rolled out across England, many bus companies are looking to appease shareholders by building operating bases in new geographical areas.
They may take an interest in coach companies purely to establish a base in the region to avoid starting from scratch. An existing operation in a desirable area could be seen as a perfect fit and an option to assist burgeoning bus routes. Another option is to on-board private equity funding to bring smaller operators together to get better deals on fuel and vehicle purchasing.
This is about working out a strategy of where an owner wants to go with their business and whether they feel it’s the right time for them. It’s also important that they’re happy with what will happen after they have sold their business if successful
“We’re not just going in as an independent consultant and saying things are black and white, or that they should be done in a certain way,” says David. “We want the knowledge of what the buyer is looking for so we can potentially say to somebody what is or isn’t right, look at alternatives, or let them know if we think they are not quite ready yet.
But we can get someone to that state. The most important thing is allowing a business to maximise its price and ensure a seamless (or seamless as possible) exit.”
How long will the process take? Kevin and David recommend a provisional timeline of 12 months to identify an ideal succession plan for a client and the work needed to get to the position they want, with a recognition that some will take less time.
While 21point5 Group says its job is not to provide criticism, it says there will be some situations where owners aren’t aware of flaws in their business, and it will work to identify those to strengthen the business’s position at the negotiating table.
Over time, they hope to establish a reputation in the industry as experts in the field. “Price is about value and there is a difference,” David says. “For both sides. As long as a buyer feels they are getting value, it’s a happy marriage.
“The courts are full of disputes and aftermaths of things that have gone wrong. The more we can reduce that, the easier life is for everyone.”
