Allan Otley sells AM100's Cars2 to its employees, remains in post

Yorkshire-based AM100 dealership group Cars2 has been sold by its shareholders to an Employee Ownership Trust (EOT).

Cars2 operates from 17 sites, retailing new and used vehicles from brands including Hyundai, Nissan, Renault, MG, Dacia and Seat, as well as Chinese manufacturers Omoda and Jaecoo. Alongside this, the company operates a prestige used car dealership, stocking premium used cars, including McLaren, Ferrari, Bentley and Porsche. 

An EOT allows company owners to sell part or all of their business, free of capital gains tax, to their employees, without requiring any changes to the management structure, as the buyer is typically a trustee acting in the interest of all staff.

This business structure allows employees to collectively have a controlling interest in the business although they do not take direct ownership of any shares as they are beneficiaries of the trust. Once a company is owned by an EOT, it can pay annual bonuses to its employees free of income tax.

Two main conditions enable the tax breaks - the trust must hold more than 50% of the shares in the company, and if employees receive any benefit from the trust they must all be included and on the same terms.

Following completion of the sale for an undisclosed sum, founding owner Allan Otley will remain as chief executive, alongside the rest of his senior management team which will remain in post to oversee the company through the next stage of its growth.

Otley said: "I am thrilled to be able to pass on the success of Cars2 to the employees, and to see them rewarded for their efforts in driving the business forward."

Now employing more than 250 staff, Cars2 has expanded significantly since Otley started the business in 2006 as a single site used car business.

From the start, Otley’s vision was to create a small group of franchised car dealerships, within an hour’s drive of one another, which would maintain a 3% RoS.

In 2007, he realised his plan to add a franchised site when he acquired Citroën in Keighley, before selling that location five years later as the group looked to establish a more compact market area.

Cars2’s breakthrough came in 2008, when it joined the Hyundai franchise. The brand was about to embrace the Government’s vehicle scrappage scheme which took its registrations from 28,000 in 2008 to 56,000 in 2009 and revenues from £3.3m to £13.8m within three years.

In 2011, Cars2 added Hyundai Bradford to the portfolio after it acquired a former Audi site in the city to create a ‘flagship’ facility for the South Korean brand, before acquiring the Barnsley Peugeot franchise from Harratts in December of the same year.

Cars2 went on to install Fiat/Abarth and Renault/Dacia in a multi-brand site on the site of that Peugeot franchise, after the group decided to end its relationship with the PSA Group brand.

Car2’s success was evidenced by the bid in late 2022 by Scottish car retail giant Arnold Clark to acquire the business which had broken into the AM100 rankings that year as the 99th largest UK dealership ranked by turnover. Negotiations between the two businesses however failed when the two parties could not agree financial terms. The business has since risen to 96th place in this year's AM100 rankings.

In an AM dealer profile interview, Otley described how it had taken over a decade to transform what was a solus independent used car forecourt on Pontefract Road, Barnsley, into a cash-rich franchised retail group with aspirations of becoming a £250m turnover business while maintaining its return-on-sales (RoS) figure of more than 3%.

Cars2 joins franchised car retail business West-Yorkshire based Peter Ambrose Peugeot and AM100 franchised dealer Glyn Hopkin Group as an EOT.

Founder and managing director Peter Ambrose also remained in position as part of a 2022 handover process of the £25 million turnover business to the newly-formed Peter Ambrose (Castleford) Trustee operation. 

Glyn Hopkin Group said its 2024 acquisition by an EOT ensured that the group could continue its growth strategy, safeguarding the brand’s legacy, ethos, and core values, while also securing a smooth succession plan without altering the leadership team

Josh Stokes from Yorkshire-based Castle Square's Corporate Finance team advised Cars2 on transaction value, structuring, manufacturer approval and the fundraising process.

Legal advice was provided by Lisa Wallis and Ellie Davies, while Alex Angelides and Adrian Hackett, all from the Sheffield office of law firm Freeths, advised on tax. Sam Drummond, from the Barclays Retail & Wholesale team, worked to provide funding on behalf of the bank.