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The big picture: 2006 will be a year of change

Consolidation will quicken next year. Across each sector of the industry we will see more acquisitions and, unfortunately, more failures.

Franchised dealers, independent car retailers, repairers, bodyshops – numbers will fall for each. It’s inevitable.

Pendragon will continue making purchases, irrespective of whether it’s successful in its bid to take Reg Vardy (expect it to be). Other plcs such as Inchcape and Lookers will need to make their own acquisitions to keep up.

Lookers has already signalled an intention to diversify by buying two used car supermarkets and the FPS parts distributor. Its interest in Reg Vardy suggests key shareholder GE Capital is keen to branch out its business as a bank.

The make-up of the AM100 top 20 is being transformed after a period of stability. Reg Vardy will not be represented in the next listing, while Sytner is set to grow by £185m to £1.8bn if the purchase of William Jacks goes through, to vie with Arnold Clark for second place. HR Owen, at No 12, is set to focus on specialist marques, and will drop down the table, while EMH has acquired Smith Knight Fay to propel itself into the top 10.

Arnold Clark will continue with piecemeal acquisitions; Jardine’s strategy is on premium brands and profit; Camden Motors is more interested with increasing its penetration via its fleet division than buying more dealerships.

Many smaller dealers will close. Competition is fierce from bigger rivals, while larger sites and the impact of the internet enable them to sell more cars, both locally and nationally.

In the bodyshop market the number of outlets continues to fall. The largest groups are making more acquisitions, led by Nationwide Crash Repair Centres. And in the service/repair sector, Nationwide Autocentres is heading the consolidation charge, while smaller companies sell up or close.

This year has laid the ground for consolidation. Next year, expect big changes.

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