Inchcape, a UK-headquartered independent automotive distributor, is seeking acquisitions to help it scale up globally, group chief financial officer Adrian Lewis told Mergermarket.

The FTSE-listed company, which reported 1H25 revenues of GBP 4.3bn and adjusted pre-tax profits of GBP 200m, has a strong M&A appetite, he said.

The multi-brand distributor is seeking complementary businesses to help it expand its geographic footprint and scale up in existing markets, particularly where its market share is below 10%, he said.

This scope stretches from the Asia-Pacific region and Europe, in which there are big opportunities, to Central and South America, he said. Inchcape is targeting smaller, less-developed markets, where original equipment manufacturers (OEMs) are unlikely to undertake vehicle distribution themselves, he said.

In Europe, for example, this would likely be countries in South-East Europe, and would probably exclude Germany and France, he added.

Inchcape already has businesses in Romania, Bulgaria, North Macedonia and Greece, Lewis noted.

“These countries are good examples of where we have an existing footprint and where, if there were appropriately-sized and interesting strategically-aligned opportunities for us to expand, we would be very interested,” he said.

In existing markets, there is potentially even greater scope to add value by capitalising on the existing team, retail network and market knowledge, Lewis said.

Targets are likely to be businesses with revenues of around a couple of hundred million pounds, he said.

The company has a “broad, active and engaged” pipeline, and is currently looking at a handful of opportunities globally, he said, declining to specify if it could make any more deals this year.

Even though Inchcape is the global market leader by number of vehicles sold, it still has only 3% market share, Lewis noted, adding that its long-term aim is to achieve 10%.

“We see enormous opportunity to consolidate a hugely fragmented market through acquisitions,” he said. There are more than 1,000 independent automotive distributors worldwide, he noted.

Deal sourcing is a combination of reaching out to potential targets and advisor-led sale processes, he said. In some cases, processes have been entirely bilateral on the back of building relationships with targets over one year or more, he explained. Sellers are typically family-run businesses, he said.

Inchcape has a dedicated M&A team in each region, he noted.

The company uses external financial and legal advisors for due diligence, he said.

In July, Inchcape announced the acquisition of Icelandic automotive distributor Askja, its first acquisition for two years. Askja generated revenues of GBP 150m in FY24, according to a press release.

Inchcape now plans to accelerate its pace of M&A, he said, and Iceland is an exciting new market for Inchcape, Lewis noted.

Askja is a great example of the type of acquisition that Inchcape is seeking as part of its growth strategy, he said. It has strong market share, is the right scale to fit well into the group, leverages existing OEM relationships that Inchcape has, and brings new ones, as well as having a great team, he said.

“Askja is right in the sweet spot of our acquisition profile – good scale, a place where we can add value, and a great team,” he said.

The deal closed on 1 September, Lewis noted.

In 2022, Inchcape acquired Derco Holdings, the largest independent automotive distributor in Latin America, for a cash and shares consideration valuing Derco at GBP 1.3bn.

The Derco deal emphasised the value of synergies, Lewis said. However, Inchcape is now focusing on smaller bolt-on deals of a similar size to Askja, he said.

Deals are largely financed using Inchcape’s balance sheet, Lewis said.

The company has a highly cash-generative business model and has a profit after tax-to-free cash conversion ratio of around 100%, he said. It has plenty of capacity to fund M&A, in addition to its ongoing share buyback programme, he said. Inchcape has repurchased GBP 168m of its GBP 250m share buyback programme that was announced in the spring, he said. It expects to complete this by 1Q26, he added.

At the same time, Inchcape prides itself on its very disciplined mindset towards capital allocation, Lewis said. The group is run at leverage of below 1x, he said, noting that leverage was 0.3x at the end of 2024 and 0.6x at the end of 1H25.

The capital allocation is currently skewed towards share buybacks given the value this represents, he said.

M&A is a key aspect of the group’s Accelerate+ growth strategy based on two pillars – scale and optimisation – and also includes new distribution contracts and expanding into adjacent vehicle segments, he noted.

Inchcape focuses on smaller, more complex markets that jointly account for 20% of the global 90 million-car market and are not well served by OEMs, Lewis said. This includes countries such as Chile, Peru, Colombia, Indonesia, Singapore, Hong Kong, Bulgaria and Romania, he said.

In addition to continuing to support OEMs that are established exporters, it will play a key role in providing a route to market for Chinese OEMs that are looking for a greater share of international markets, Lewis said.

The company, which had 2024 revenues of GBP 9.3bn, delivered a resilient operational performance in 1H25 against a backdrop of a market that declined 2%, and is confident of improved second-half growth, he said.

“This is in the context of a global marketplace that went into fairly significant turmoil, with news emerging in the second quarter about tariffs that disrupted both consumer confidence and consumer perspective, and threw the automotive industry into a bit of a spin as it tried to work out which way it was all going to land,” he said.

Inchcape will continue to optimise its retail network, having largely completed its divestment plans with the sale of its UK retailing business and related owned real estate to US company Group 1 Automotive in April 2024, as reported. The deal value was GBP 346m (USD 439m), as reported.

Further optimisation will involve individual sites and small-scale transactions, Lewis said.

“We have done a significant transformation over the last few years, pivoting away from retail. Now, the distribution muscle is coming to play in what is a pretty tricky backdrop for automotive players,” he said.

“I am really excited about the prospects for Inchcape as we look to the future. We play in a really interesting part of the automotive market. The sector is going through an enormous transition and the role that we play in the value chain is really important for both existing OEMs and Chinese OEMs, as they look to access greater parts of the international markets,” he added.

Although Inchcape has been largely shielded from any direct impact from tariffs since it has almost no business with the US or US manufacturers, it has had to carefully monitor supply to the market, he said. Tariffs also hit consumer confidence, particularly in the premium segment in parts of Asia, he said.

Inchcape’s services to OEM partners comprise product planning, logistics, brand and marketing, channel management, and retail and aftermarket services, according to its website.

The company operates across 40 markets, in smaller, more complex and harder-to-reach markets, which tend to be higher growth with low motorisation rates. It combines in-market expertise with its unique technology and advanced data analytics, according to a company press release.

AI plays a key role in helping the company operate across multiple markets with multiple OEMs, helping it to make pricing decisions on spare parts and manage the consumer journey on its website, for example, Lewis said.

Inchcape is headquartered in London and employs more than 17,000 people globally, according to a company press release.

The company has a market cap of GBP 2.5bn.