Butler Capital Partners Case Study

Founded in 1990, Butler Capital Partners is a successful French Private Equity Firm owned by Walter Butler. The first fund of the company, European Strategic Fund, which was closed in 1991, primarily focused on small family owned companies and on divisions of larger companies. This fund provided a gross return around 38 and 39% to investors.

His second fund, French Private Equity II, closed in 1998 and amounting FF 1,100 million, was created to mainly focus on investments in France on a larger scale than the first one. It rapidly became one of the largest private equity funds in France.

On April 29, 1999, a new and attractive investment opportunity arose for Butler: Autodistribution (AD), an entrepreneurial company, leader in car parts distribution in France.

Autodistribution, an independent wholesaler in the French auto parts market, started its business in 1962 as an automotive parts-purchasing association controlled by independently owned affiliates. In 1976 AD had expanded its business to seven different countries, through an international subsidiary - AD International. During the 1980s, AD increases its purchase power by starting to acquire wholesalers (both affiliate and nonaffiliated companies). By the end of the 1990s, AD had become the largest independent automotive parts wholesaler in France.

The Auto Parts After-Market Industry

The auto parts aftermarket is an extremely competitive industry with no single firm having a significant market share. Within this industry, companies manufacture and/or distribute aftermarket automotive parts through wholesale/retail auto parts stores. In Europe there are four major players: Germany, France, the UK, and Italy. In the beginning of the 1990's the industry faced a steady growth, with France having the highest growth rate. After 1994 the market grew steadily at a 2-3% rate, with prospects to keep these levels from 1999 onwards.

Things worked slightly different in the French market. There were some constraints for independent wholesalers, namely, they were not allowed to sell some parts that were sold by car manufacturers, or agreements between the latter ones with car dealerships and agents that specifically prohibit them to do business with independent wholesalers.

There are mainly five drivers for growth in this industry: the flow of cars, aging car fleet, technological development in car parts, legislation related to car inspections, and finally deregulation towards European standards. The last one has a significant impact in the competitiveness of the sector since it would allow independent wholesalers to penetrate in a segment restricted to car manufacturers only.

Problem statement

By the end of April 2009, Walter Butler had a tough decision to make. His private equity company, Butler Capital Partners, was considering the acquisition of Autodistribution