The news of Worldpac’s sale to a private equity group was met positively by industry observers and experts, seeing it as a good deal for both Advance Auto Parts and Worldpac.
On Aug. 22, Advance announced a $1.5 billion deal to sell Worldpac, a wholesale distributor of automotive replacement parts, specializing in import vehicle components, to a private equity firm, Carlyle.
“Advance has been struggling with operations and integration and they needed the cash,” observed Kumar Saha, columnist for Jobber News and U.S. vice president and Canadian managing director for Eucon, a global automotive data firm. “Worldpac had remained largely independent in their operations, so the sale was the easiest plug-and-play.”
The sale to private equity was not much of a surprise as many speculated that to be the ultimate path.
Former Worldpac executive and now-retired aftermarket veteran Joe Mercanti figured this was the best result for Worldpac, which was resource-starved as part of Advance and there being a mismatch in business models.
“It just didn’t mix,” he said about the two models. “They tried to mix it, but it just didn’t mix. So I think it’s going to be good.”
“Worldpac had remained largely independent in their operations, so the sale was the easiest plug-and-play.”
Ken Coulter, president of Ontario-based Specialty Sales & Marketing Inc., was encouraged by the sale, expecting it to lead to greater internal investment.
“Since the announcements of a pending sale last year, no doubt many initiatives at Worldpac have probably been slowed down or on hold,” he told Auto Service World. “With a path forward now in place, one can expect to see some investments forthcoming in logistics, human resources, etc.”
However, Saha thought Worldpac could fill the needs of a traditional aftermarket company, given its specialty within the import market.
“I am surprised that a strategic buyer did not target Worldpac, considering its import focus could fill holes for the likes of an AutoZone or Canadian Tire,” he told Auto Service World. “But PEs make the most compelling offers and may have made the most financial sense for Advance.”
Bob Cushing, Worldpac, and Shane O’Kelly, Advance Auto Parts, speak to the media at the 2024 Wordlpac STX event in NashvilleTo that point, Coulter figured that other aftermarket networks probably checked in — and maybe even placed a bid.
“On a purchase such as Worldpac, it would have to make sense to an existing network in all aspects — strategic, financial, logistical, etc.,” Coulter observed. “If it fit all categories with an existing network, we would probably be reading a different news brief today.”
Mercanti said he didn’t hear about an aftermarket company being included in the process but figured if one ultimately closed the deal, they’d face the same integration problems Advance had because of the different, and unique, model that Worldpac is.
“You can’t mix the two. It’s two different things,” Mercanti said in an interview. “I think it’s great that it’s an equity company and they’ll see that Worldpac makes money.”
“I think it’s great that it’s an equity company and they’ll see that Worldpac makes money.”
And there doesn’t seem to be much of a concern about a private equity owner — any fears that the company may be slashed to either improve the bottom line or spun off again weren’t there for the experts we spoke to.
Coulter called it a good move. “Carlyle is extremely diverse and not oblivious to our aftermarket historically or currently,” he said, pointing to Axalta as being a market leader.
Carquest was also mentioned at the same time back in November as being for sale but no deal has been announced, neither has an update been provided. Coulter doesn’t believe there’s as much urgency to sell Advance’s Canadian operations.
“Carquest Canada is still a viable entity today with decent corporate store capacities and an extremely loyal associate following,” he pointed out. “There are also different means in which Canada can contribute to the transitions taking place with Advance/Carquest south of the border. That does not mean to say that if someone came along with a cheque today [that] a sale would not take place.”
But Carquest will be a harder sell, Mercanti predicted.
“It’s going to be hard to separate it from what they have now,” he explained. “I mean, their computer systems are all hooked into Advance and a lot of other things. I think it’s not going to be an easier sale.”
He noted other large groups could be interested in Carquest, like LKQ or NAPA — but they’re so big already that they don’t really need it.
“So who’s going buy? I mean, someone can buy it just get rid of a competitor,” Mercanti said, adding that it could instead be an entry point for an American company to move north.
“Once key elements have been addressed, look for aggressive marketing and sales strategies in an attempt to garner growth and market share in the coming years ahead.”
Now that one of the biggest deals has taken place, what will change in the aftermarket?
“Private equity corporations don’t buy companies to stay the same or hum along as they were,” Coulter explained. “Canada is different, so we will probably see a different approach here, as opposed to the USA.
“Once key elements have been addressed, look for aggressive marketing and sales strategies in an attempt to garner growth and market share in the coming years ahead.”
Mercanti agreed and echoed Coulter’s earlier sentiments about Worldpac now being able to grow with this chapter now closing.
“They’ll put all kinds of resources into it and then grow it,” he predicted. “Because even when I was there, I know we were being starved of growth. I know if they put in 10 more locations, they can double their business.
“Their business model works. That’s the thing. The business model works.”
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