An attractive market

Overview

We seek to buy businesses in sectors and markets that we understand, at sensible prices, and to increase shareholder value by sharing best practice, promoting organic growth and improving operational efficiency. Although we have an overall strategy for each market, every investment must have a clear rationale.

Our systematic approach to acquisitions

We focus on interesting geographical markets with scope for growth, and normally identify potential acquisitions through our own local network of business contacts.

We operate a cluster-strategy whereby we can build our presence in a city-region, and then bolt-on subs-scale businesses that can share local overheads and generate efficiencies.

Why this market is attractive

Long-term political and economic factors across Europe make public transport an attractive sector for investment. Key features:

  • A widespread political consensus about the role that public transport can play in tackling social issues around mobility, accessibility, economic growth and climate change
  • A new emphasis on deficit-reduction at national and local level is creating fresh opportunities for private sector companies that can deliver improved services at lower cost to the taxpayer
  • Robust demand for local transport across the economic cycle, that create stable revenue streams
  • Cash generative
  • Stable cash flows
  • Complex regulation creates high barriers to entry
  • Extremely fragmented ownership structure, with many sub scale firms
  • Difficult for local businesses to access growth capital in many markets
  • On-going liberalisation at national and EU levels
  • Long term consolidation trends

The German bus market

The German market has several unique characteristics that create positive conditions for investment:

  • Fragmented across thousands of SMEs and hundreds of municipal companies
  • Incremental deal size is too small for the international players
  • Complex regulatory structure
  • Difficult for SMEs to access capital for growth
  • On-going liberalisation
  • Numerous privatisation and tendering opportunities

Economic Model

Local public buses
Strategic control Passenger transport authorities (PTAs) or market initiative
Licensing Companies
Buses
Drivers
Routes
Exclusive rights Yes
Regulatory level National and regional
Fares and tickets Price levels usually set by PTAs or regional operator associations
Routes and times PTA and operators set routes and times
Payment Gross Cost – Bus operators are paid per bus KM or per bus day
Net Cost – operator takes revenue risk within a fares pool
Contract period Three to eight years per route or city franchise