Deal Snapshot: RANDYS Worldwide Automotive

RANDYS Worldwide Automotive (RANDYS) is a leading supplier of drivetrain products, such as differentials, driveshafts and manual transmissions. RANDYS caters to all channels in the aftermarket, including installers, big-box retailers, remanufacturers, e-commerce retailers and enthusiasts.

Harris Williams recently advised RANDYS on its sale to Tailwind Capital. Here, Joe Conner, a managing director in the firm’s Transportation & Logistics Group, shares his insights on what made RANDYS an exceptional investment opportunity, as well his advice for other buyers and investors interested in the space.

1. What makes this an appealing space for buyers and investors?

randys.gifConner: “Broadly speaking, the automotive aftermarket offers buyers and investors recession resistance, steady growth and a high level of fragmentation. The aftermarket as a whole is a huge industry, estimated to be approximately $50 billion in annual revenue.1 As average vehicle age continues to rise and exceed warranty periods, consumers increasingly look for non-dealership options for their repair, replacement and maintenance needs. That creates opportunities for independent service providers and the companies that supply them, as well as for companies that cater to do-it-yourselfers.

“Given vehicle sales trends between 2012 and 2017, there will be even more vehicles entering the sweet spot for the aftermarket over the next few years. And if there is a change in the business cycle, these dynamics intensify. People will keep their cars longer, those cars will need more repairs, and consumers will be looking for cheaper alternatives to dealership service departments.

“RANDYS occupies a particularly ‘mission-critical’ sub-segment—drivetrain failures keep vehicles out of service until addressed. And when someone is replacing a part that is so critical to their vehicle’s operation, they tend to put quality above price.”

2. What made RANDYS particularly appealing to its investor?

Conner: “It’s very unusual for companies that make replacement parts to have strong brands, but RANDYS is well-known for high-quality, high-value products. In fact, RANDYS is the go-to brand in the drivetrain space for mechanics and do-it-yourselfers, with a reputation for meeting or exceeding original equipment (OE) quality levels at competitive prices.

“In addition to its strong brand, RANDYS has a focus on parts for trucks and SUVs, which are outpacing passenger cars in terms of sales growth. Even more importantly, RANDYS has proven its ability to expand its product offerings for these vehicles through M&A and internal development. The company is very good at identifying and acquiring niche suppliers of top-quality parts and integrating them into its brand, as well as developing new products they can easily fold into their portfolio. Given the fragmentation of the aftermarket and the number of components that eventually need repair or replacement, RANDYS has plenty of runway left to keep expanding its offerings.

“Finally, the company has a clear path forward in terms of geographic expansion. There are specific areas it can quickly and easily target by opening new distribution centers, which has the potential to drive additional growth.”

3) What advice do you have for other buyers and investors interested in the space?

Conner: “Regardless of the business cycle, the automotive aftermarket is a great place to invest. It has strong fundamentals, and because of that, competition for the best assets is intensifying.

“If I was looking for quality assets, I would focus on products that are very technical in nature, and that offer differentiated performance and/or quality. What we’ve seen with RANDYS is that brand name does in fact matter to mechanics and consumers in this space, and the halo effect of a strong brand can open the door for significant growth.”

1. Automotive Aftermarket Suppliers Association

Published June 2019