Critical List: Kwik-fit

Perhaps Kwik-fit fitters aren't as good as we once thought...

Last Updated: 31 Aug 2010

Set up in 1971 by rags-to-riches Hibernian entrepreneur Sir Tom Farmer, the tyre-fitting company became a household name in the 1980s thanks to a series of TV ads featuring its blue-overalled workers jigging along to 'you can't get better than a Kwik-Fit fitter'. A car insurance arm was set up in 1995 and Farmer flogged the whole lot to Ford four years later for a hefty £1bn. The company was then owned by a succession of private equity houses, its asking price falling each time it changed hands, until current owner PAI Partners paid £800m for it in 2005. Now saddled with debts of £820m, Kwik-Fit is rumoured to be up for sale again.

Danger signs: There have been a few bumps in the road over the years for Kwik-Fit. Its rapid expansion in the late 1980s and early 1990s took its toll on profits and left it short of cash, but it managed to maintain momentum. More recently, the economic downturn hit the company hard as cash-strapped car owners put off non-essential vehicle maintenance. And, with some 1,800 outlets across Europe, the weakness of sterling didn't do it any favours. Things may finally be looking up for the motor industry - sales of new cars are on the rise again, thanks in part to the car scrappage scheme - but Kwik-Fit may not see much benefit, as many new cars now come with all-in servicing packages.

Prognosis: A £20m injection from its French owner means that Kwik-Fit isn't about to grind to a halt. PAI was forced to stump up the cash after the group breached the terms of the loans it took out to buy Kwik-Fit five years ago. Selling off its insurance arm later this year could ease its debt problems. But rumours remain that the entire group is up for sale - for as little as £250m, thanks to all that debt. Interested parties apparently include rival private equity houses Blackstone, KKR and Permira, as well as Japanese tyre manufacturer Bridgestone. But can any of them really make Kwik-Fit's balance sheet fitter?

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