Face to face: Relationships key to Vantage’s growth plans

The strength of a business can usually be measured by the strength of its relationships and this has been essential to Meridian Motor Group, which trades as Vantage.

The value the group places on friendship and trust is what is carrying it towards expansion with other brands after 10 years with Toyota.

The group is in a transitional phase as it looks to grow with three new brands and beyond its Yorkshire territory with its acquisition of Sytner's Lexus and Toyota business in the Midlands without losing its family values, as well as breaking into the AM100 with a turnover of £125 million.

The expansion into the West Midlands brings the Lexus brand into the group for the first time with Sytner’s Fort Dunlop dealership near Birmingham as well as Toyota centres at Fort Dunlop, Solihull and Tamworth.

All will operate under the Vantage banner, with the rebrand and launch accompanied by “significant investments” in site upgrades.

The acquisition, which brings the number of Vantage dealerships to 12, is a signal of the group’s ambition to become a "national force".

The group is led by Mark Robinson, who worked at Sandicliffe as operations director for almost five years before joining Pendragon from 1998 until 2002.

e then joined Lookers as a director before branching out to create his own business in 2003.

Robinson started out on his own as one of 12 Toyota sponsored operators before acquiring three Vantage Toyota centres in Lancashire to unite all of the group’s dealerships under the Vantage name.

In June 2010, the group relocated its Bridlington showroom to its new premises in Scarborough and a year later it expanded beyond the Japanese brand for the first time with its purchase of Vantage Hyundai in Salford, Manchester. 

Vantage now has Toyota showrooms in Knaresborough, York, Scarborough, Blackburn, Colne and Preston.

After running the business for three years, Robinson invited Phil White to join the board at Vantage following a friendship which had been built up after meeting in their hometown of Harrogate.

White had just stepped down from running the National Express Group and was ready to take on non-executive positions.

The pair went out for dinner and Robinson popped the question: “Will you sell cars with me?”

At the same time White joined Vantage he was also approached, coincidentally, by Lookers to chair its board just after Pendragon made a failed £258m bid for the business in March 2006.

Robinson said: “When you start a business after working in a PLC environment it can be very lonely.

"Having Phil on board is a bit like having a set-up like Dragon’s Den. I can run ideas by him and he keeps me on my toes.”

White is also chairman for Kier, Unite Group and non-executive director at Stagecoach Group and VP PLC.

White’s role is very much a traditional PLC-type chairman and he’s not in the business every day. However, he acts as a mentor for Robinson and they are in contact every day.

White said: “It’s useful to have a partner. Sometimes it’s nice to be challenged and to share ideas with each other.

"It’s a very mature relationship and we trust each other. We’re not clones and we have skills in different areas, but they tend to complement each other. You can see clearer from a distance too."

"When you’re in a day job you can sometimes miss the obvious when you have so many pressures to deliver.”

White has learned all about the motor trade from Robinson and his time at Lookers and has been instrumental in helping the group with its relationships with banks and funding.

The relationship with RBS during the recession was particularly useful in helping the group react in 2008 and deal with what Robinson describes as a “roller coaster” with the Toyota recall in 2010 and the Japanese tsunami in 2011.

It’s clear long-term relationships are important for the business and, as White explains, the partnerships you can truly depend upon are always highlighted when a business hits difficult times.

White said: “RBS bent over backwards to help us get through the recession and this was because of the relationship we had built with them.

“The same thing has happened with Toyota.

"The more we have developed our relationship, the more opportunities have been coming our way.”

Vantage adjusted the business in 2008 to what Robinson describes as “global financial Armageddon” and bounced back with the group’s best year in 2009.

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The group has been building on its success since then, with a pre-tax profit of just over £1m in 2012 and return on sales of 1.7%. 

It has been profitable every year since it started, no matter how hard the business and its customers have been pressured by the UK economy.

Vantage is very retail focused and is currently out-performing the Toyota national average for sales versus objective and it is in the top three for customer satisfaction in the UK.

Manufacturer relationships

Toyota is the brand which gave Robinson his start and Vantage will develop with it because of the bond that has grown over time.

Robinson said: “We’ve got total belief in the brand which is why we continue to invest with it.

"The product line-up in terms of the positioning in the UK has been disappointing in the past few years.

"However, there has been a big global change with Akio Toyoda at the head of the business who is focused on making desirable products that are fun to drive.

“The new Auris was well overdue, but it’s such a shift from the previous generation. It’s a vehicle which is desirable and a shift has been made with the new RAV4 too.”

Toyota introduced a new plan 18 months ago which is about putting fun and excitement back into the product range.

It has been delivering with products like the GT86 coupé.

White said: “Manufacturer relationships are key. If you don’t have them you don’t have a business.”

Robinson added: “Toyota has consistently demonstrated through challenges like the recall and tsunami that it is a responsible manufacturer that genuinely cares about its network and customers.”

Robinson sits on the dealer sales and marketing committee with Toyota and helps to develop marketing programmes across the network with the brand.

He is now vice-chairman of the national Toyota dealer council and will become chairman in 2015.

He said: “I feel passionate about being able to work with Toyota and the leadership are all accessible and they listen.”

But how did Toyota feel when “the H-word” was mentioned?

Robinson said: “It wasn’t a surprise when we took on Hyundai because we have always adopted a no-surprises policy with its management team.

“We meet with it formally twice a year and review the performance of the businesses.

“During those discussions we always talk about our future plans and we have explained that we want to develop with Toyota, but we need to look at other opportunities with other brands providing they fit our criteria.

“It knew who we were talking to before we agreed to purchase the Hyundai business and we wanted its blessing.

"There was never any confrontation because of the relationship we have.”

Everything Vantage is doing is fully disclosed to its brand partners and Robinson believes “involvement equals buy-in”.

He said he has seen some peers in the industry make mistakes with not being open enough with how they have looked to expand.

The Hyundai senior management team are well known to Robinson because most, including president and chief executive Tony Whitehorn, are ex-Toyota management.

Robinson said: “We knew Tony very well already because of his links with Toyota.

"When we set out our strategy for growth we knew we only wanted to align ourselves with a small group of manufacturers that have a vision for growth in the UK.

“Clearly the Koreans fit that profile.

It was also important for us to demonstrate to ourselves that we were capable of doing something successful outside of Toyota.”

It’s been a big challenge for the group. The first opportunity to take on Hyundai has been in a challenging market in Manchester.

The business in Salford has been operating under Vantage for two years and is now providing a positive profitable financial contribution to the business. All dealerships within the group are profitable.

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Block exemption rules have not hindered growth plans

Robinson has been involved with the working group to develop Toyota’s new dealer contracts and how those might change under a general block exemption. 

Toyota has involved the network with a “strong consultation” with dealers on the changes to the new centre agreements and standards.

He said: “Dual franchising is never going to be a preference, but Toyota is open to it provided certain conditions are met. 

"Brand separation floor to ceiling is required, but there’s nothing under a general block exemption which worries us as a group.

“If anything, I think the new rules have made things a lot clearer on what we can and can’t do which helps us plan for the future.”

There has been much commentary about how new general block exemption rules will hand more power to manufacturers to control business relationships and group expansion by having the power to veto any changes of ownership or acquisitions, but Robinson believes this has been blown out of proportion.

White agrees: “The manufacturers have always had a lot of power and if you fell out with them before you wouldn’t have much of a business left really. It’s the same with Lookers. 

"You have to understand what your stakeholders really want from you and that hasn’t changed.”

Preparing a business for growth

White believes that while the business has now reached 10 years it is still in its infancy. 

As the business takes steps to grow, these plans have certainly not been rushed through. 

Focusing on making sure the funds and infrastructure is in place is essential before acquiring more sites.

White said: “We have a reasonably strong balance sheet. 

"It could be stronger, but we’re a private business so we have to rely on our own internally-generated funds to make our growth plans happen.

“We don’t have a rich parent like some of our competition so we have to rely on ourselves and our relationships with our manufacturers, suppliers and banking partners.”

The group is ambitious, but increasing its portfolio of brands and sites must be controlled.

White said: “We have a strong board, which is not only Mark and myself but we have two strong executive directors who specialise in finance and operations. 

"We could all probably be working for much larger companies, but we’re focused on developing something which is our own and developing that over time rather than exposing ourselves to risks we can’t manage.

“One thing I have learned about business and our business in particular is that you have to expand in a very controlled way. The quality of service you offer must be maintained because if you grow you can quickly lose that.”

Vantage currently has businesses it can easily touch and feel every day and it wants to make sure any growth won’t impact heavily upon that way of working.

White said: “We have spent a lot of time planning this so we can make sure we can get the right sort of deals for the right prices in the right locations where we can still physically manage them.

“You never know what the optimum size is until you go beyond it and by then it’s too late. 

"We’re not afraid of size or growth and provided we have the right team I wouldn’t be afraid of doubling the size of the business in the next 10 years to a group of 20 sites.”

Robinson is also confident that now is the right time to push forwards with leaders in each dealership which drive, love and own their business.

He said: “Knowing we have the right people in place enables us to go to bed at night and sleep.

“We want to remain privately owned and keep the management structure as flat as possible.

"I think the danger you have when you grow is you end up putting too many tiers of management in place and you lose control of what’s going on.”

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According to White, it can be all too easy for a business to grow by acquisition before it is ready and lose the family-owned focus to customer service.

He said: “It’s very easy to grow a business through acquisition, but when you look at infrastructure within the business like systems, those areas grow much slower so you have to make sure you are built to be able to handle it. 

"If you don’t do it that way, that’s when you start running into problems with the way the business is run.”

Vantage has reached heads of agreement on a major acquisition in the Midlands which will be announced shortly.

Robinson said: “It’s the easiest thing in the world to buy a business, but integrating it within a group is the real challenge.”

White added: “It’s not the price you pay, it’s what you do with that business afterwards that really matters.”

The geographical challenge

Robinson and White admit that expanding out to the Midlands is right on the boundary of how far it will be willing to expand beyond its Yorkshire base.

Robinson said: “We always said we would only have businesses that were less than one-and-a-half hours drive time from the hub. 

"If there’s something wrong, we can reach that business very quickly. These acquisitions do push that boundary to about two hours.

“The M42 corridor is probably the border of where we can push to and make it work going south and the Scottish border would probably be the maximum distance north.

“If you think of all the major conurbations within that geographical area it’s a huge opportunity.”

By the end of the summer, Vantage will represent five manufacturers, including Toyota and Lexus. Robinson has also exchanged terms of agreement on some land to build a new Hyundai showroom in Stockport.

Robinson said: “We have an awful lot of work to do to integrate what we already have before we start looking to pick up more beyond what we have planned.”

White said: “I think we’ve needed this 10-year time scale to prove that we can deliver before taking this next step. 

"We’re not just a short-term player.”

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