Target Information

Bain Capital Credit has formed a strategic partnership with Open Road Capital to engage in long-term equity investments in the automotive sector. The partnership primarily focuses on dealerships involved in automobiles, heavy trucks, recreational vehicles, and heavy equipment, as well as other transportation companies. To enhance this initiative, InterPrivate, a family office-backed investment firm, is set to contribute additional long-term capital for selected future opportunities. This platform aims to build a substantial and diverse portfolio by collaborating with top-performing operators across the United States.

Industry Overview

The automotive dealership industry in the United States has shown resilience and adaptability, aligning with changing consumer preferences and technological advancements. From traditional car sales to the increasing importance of electric vehicles, dealerships are evolving to meet the market's demands. As of late 2023, the industry has also experienced a significant shift towards online sales and digital services, which have become essential components of operations in response to consumer trends.

Moreover, the heavy truck and equipment segment continues to grow, driven by infrastructure investments and increased demand for logistics capabilities. Market players are focusing on enhancing customer experience, transitioning towards integrated service offerings that include financing, maintenance, and aftermarket support. This transition aims to capitalize on growth opportunities while maintaining competitive advantages in a dynamic market landscape.

Furthermore, the recreational vehicle sector has gained traction due to rising interest in outdoor activities and travel. With younger consumers increasingly seeking adventures and experiences, dealerships are diversifying their offerings to cater to new customer demographics. The combination of digital innovation and more robust supply-chain management systems positions the industry for sustained growth.

Amid these trends, investment opportunities are abundant for firms capable of identifying and partnering with high-performing dealership operators. The need for capital for expansion, succession planning, and operational improvements presents an attractive intersection for investors looking to enter or expand in the automotive market.

Rationale Behind the Deal

This partnership is a strategic response to the evolving landscape of the automotive industry, aiming to address both current and future challenges facing dealerships. By providing equity capital, Open Road Capital and Bain Capital seek to facilitate ownership transitions and growth plans for family-owned dealership groups, thereby preserving the legacy and operational excellence that many of these organizations have built over decades.

The deal also emphasizes the importance of maintaining competitive advantages through strategic investments in partnerships with established operators. The model fosters an environment where dealerships can operate independently, ensuring the entrepreneurial spirit remains intact while benefiting from the support of experienced investors.

Investor Information

Open Road Capital combines extensive automotive dealership experience with financial backing from Bain Capital. The firm's focus is on creating value through strategic partnerships that align with the goals of its dealer partners, whether through succession planning, diversification, or capital for growth. Open Road's unique understanding of the dealership ecosystem positions it as a valuable ally for operators seeking to navigate a complex and competitive market.

Bain Capital Credit, managing around $42 billion in assets, is a prominent global credit specialist that invests across various credit strategies. Its seasoned team conducts rigorous analysis to realize value across multiple asset classes, providing a strong foundation for this partnership. The collaboration seeks to leverage Bain Capital’s resources and extensive network to support the objectives of automotive dealerships efficiently.

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This partnership presents a compelling investment opportunity by addressing a critical need in the automotive dealership industry—capital to facilitate transition and growth. By focusing on partnerships with high-quality operators and providing resources tailored for their specific needs, the strategy aligns with emerging industry trends that favor adaptability and innovation.

Moreover, the targeted approach of preserving the legacy of family-owned dealerships while promoting operational excellence is a significant advantage. This strategy not only safeguards the ethos of these businesses but also enhances their ability to scale effectively in a competitive marketplace.

Lastly, the collaboration's emphasis on independence for dealer groups allows the continued entrepreneurial spirit and operational integrity that often drives success in the automotive sector. In this respect, the investment appears well-conceived and timely, as the industry continues to evolve in response to market demands.

Overall, the partnership is set up to meet the challenges head-on while tapping into the growth potential of a dynamic industry, which positions it as a potentially lucrative investment for stakeholders involved.

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