Inchcape Retail hopes to emulate the strong profit performance at Bates Motor Group across its franchise divisions after paying £22.3m for the business.

Bates, the AM100 top performing dealer for return on capital employed, offered a “strong motor retail culture and good profit performance”, said Inchcape Retail managing director Robert Hazelwood.

“Inchcape has significantly improved the way it operates, but we can still learn a good lesson from Bates,” he said. “The key to the success of this acquisition is the cross-fertilisation of good ideas and best practice.”

The £105m turnover Bates Group operates four BMW outlets, three Audi and three Volkswagen in London/Essex. This portfolio – and Bates' confined geographical location – attracted Inchcape, which has Audi and BMW at the forefront of its expansion plans.

Inchcape has already implemented a new business structure, integrating the BMW and Audi dealerships into two divisions, to ensure the group operates efficiently.

Mr Hazelwood said: “We are maximising focus through these two franchise divisions and are looking at ways to take costs out of the business. For example, it may be possible to centralise PDI or parts.”

The acquisition, which surprised industry analysts, will need to be handled well if it is not to backfire on Inchcape.

One analyst said: “Bates' cultural and quality standards might be diluted in a large group – it has happened before with other dealers.

“The challenge is to not destroy the value Inchcape has bought – maintenance of the brand and control of the management processes will be vital.”

Inchcape is in talks to sell Bates' three VW outlets “as part of an agreed market area strategy” with the carmaker.

In return, the group will be given the opportunity to expand its existing territories with VW.

“We have a good relationship with VW – we bought two dealerships this year and we are negotiating for two more,” said Mr Hazelwood. “It's all down to market areas.”

Bates chairman Edward Belcher will remain with Inchcape for at least 12 months as business development director. He will manage relationships with BMW and Audi and look at new acquisitions.