Investcorp drives away with KSI Trading, plans auto-aftermarket platform

Investcorp has made another automotive-aftermarket deal.

The Bahrain investment firm said April 12 that it acquired KSI Trading Corp. Terms weren’t disclosed. Wayne Jan and Nelson Rodgers, who co-founded KSI in 1984, were the sellers.

Investcorp is buying all of the South Plainfield, New Jersey, company, said Steve Miller, a managing director of Investcorp’s corporate investment group in North America.

KSI supplies automotive aftermarket parts, like side-view mirrors, bumpers and headlights, to distributors. The company has 25 locations in 14 states, mostly on the East Coast. It employs more than 600. Christopher Patti, a Keystone Automotive Operations executive, will be KSI’s CEO.

Miller estimates that 260 million cars are on the road. KSI’s sweet spot is used cars that have been on the road three to 10 years. KSI sells parts not directly to customers but rather to repair shops. “If you are a repair shop, your lifeblood is getting the car fixed as soon as possible,” he said. “They make more money on the labor.”

The automotive aftermarket is fairly fragmented and KSI will be a platform deal for Investcorp, Miller said. “We want to expand [KSI] geographically,” he said.

Investcorp does not have a private equity fund but operates on a deal-by-deal model. It will use its balance sheet, which has more than $1 billion in cash or cash equivalents, to fund the acquisition, Miller said.

It will then syndicate out its equity interest to its partners it works with on deals, including many wealthy individuals, he said. “We will keep some on the balance sheet,” he said. “We are the largest shareholder in every single one of our deals.” Investcorp, Miller said, typically invests between $100 million equity to $200 million equity per deal.

While it may not have a dedicated PE fund right now, Investcorp is out fundraising for a technology fund. The pool, Investcorp Technology Partners IV, held a $220 million first close last year, press reports said.

Investcorp’s prior automotive aftermarket deals include American Tire Distributor, which TPG acquired in 2010 for $1.3 billion. TPG also picked up FleetPride, a heavy-duty truck and trailer partners retailer, from Investcorp for more than $1 billion in 2012.

Investcorp is an investor in Arrowhead Engineered Products, a distributor of replacement parts for the U.S. specialty vehicle market. “All our deals in the space were quite successful,” Miller said.

Kirk Fleischer, an Investcorp principal, corporate investment-North America, sourced KSI through Steven Rathbone, a managing director of Stout Risius Ross, who also advised on the transaction.

KSI executives could not be reached for comment.

Action Item: Contact Steve Miller at +1 212-599-4700

Reacquired Volkswagen and Audi diesel cars sit in a desert graveyard near Victorville, California, on March 28, 2018. Photo courtesy Reuters/Lucy Nicholson