Britain's two largest roadside recovery organisations, the AA and the RAC, are each targeting valuations of around £5 billion as their private equity owners explore major exits, either through a sale or a return to the London Stock Exchange.
Dual Paths to a £5bn Exit
The owners of the AA, a consortium including TowerBrook Capital Partners, Warburg Pincus, and Stonepeak, are actively sounding out potential buyers, according to initial reports by the Financial Times. A strategic sale to another private equity firm or a trade buyer is one option. Simultaneously, the consortium is seriously considering a stock market flotation in London, which would mark a significant return to public markets a decade after its previous listing.
In a parallel move, the owners of the rival RAC are also working towards a £5 billion valuation, with a preference for an Initial Public Offering (IPO) in London. The RAC is owned by a group comprising CVC Capital Partners, Singapore's GIC fund, and the US investment company Silver Lake Partners. While a sale remains possible, a flotation is currently seen as the more likely outcome for the 128-year-old motoring group.
Financial Turnarounds Fuel Investor Confidence
These ambitious valuation targets are underpinned by strong recent financial performances from both historic brands. The AA, which was taken private in a £219 million deal in 2020, has undergone a notable transformation. It reported revenues of £623 million for the first half of the year, a 5% increase, with pre-tax profit surging 54% to £50 million. Crucially, the group has reduced its debt burden to £1.9 billion, or 4.1 times earnings, a significant improvement from 6.7 times during its troubled prior stint as a public company.
The RAC is also demonstrating robust health, growing its membership base to 15 million, up from 14.1 million the previous year. Its first-half revenues rose 8% to £411 million, while underlying earnings increased by 12% to £152 million. The company expressed confidence in its outlook for the remainder of the year and beyond when it updated the market in August.
A Contrast to Past Market Struggles
The potential return of the AA to the public market represents a remarkable turnaround from its previous experience. Floated in 2014 at 250p per share (valuing it at £1.4bn) by its former private equity owners, its shares plummeted to a low of 15p in 2020 amid severe concerns over its £2.6 billion debt pile. The current owners believe the refinanced and restructured business now presents a much more attractive proposition for public market investors.
Both the AA and CVC, on behalf of the RAC's ownership, declined to comment on the reports. The plans for both companies are understood to be in the early stages, but they signal a major potential shake-up for the UK's roadside assistance and motoring services sector, with two household names potentially seeking listings worth a combined £10 billion.
