Report on Effective Investment Plan for BC Partners

Running head: ECONOMICS RESEARCH REPORT
Economics Research Report
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1ECONOMICS RESEARCH REPORT
Executive Summary:
The current report aims to develop an effective investment plan for BC Partners, which is
a large private equity firm based in the city of London. It is specialised in buyouts and
acquisitions financing in Europe and US and it invests across all industries. It is planning to
invest in Auto Trader Group Plc, which is involved in new and second hand automotive sales
including cars sold on the part of the private sellers and trade dealers.
The increased value of additional consumers and increased engagement has been
complemented through a rise in physical stock on site, since the average number of cars has
increased from 437,000 in 2016 to 450,000 in 2017. With the gains made on the products both
outside and within the core classified packages, ARPR has increased by £162 to £1,546 in 2017.
Based on the above evaluation, it has been decided that BC Partners would invest a sum of £12
million in the organisation with six annual instalments of £2 million each for six years.

2ECONOMICS RESEARCH REPORT
Table of Contents
1. Introduction:................................................................................................................................3
2. Appropriate analytical tools and techniques to analyse relevant economic data:........................3
3. Broader economic conditions and trends, particularly changes in government policy:..............5
4. Potential of the business to be a market leader and to attain the required revenue growth under
the foreseeable economic conditions:..............................................................................................7
5. Communication of the investment plan to the company:..........................................................10
6. Conclusion:................................................................................................................................12
References:....................................................................................................................................13

3ECONOMICS RESEARCH REPORT
1. Introduction:
The current report aims to develop an effective investment plan for BC Partners, which is
a large private equity firm based in the city of London. It is specialised in buyouts and
acquisitions financing in Europe and US and it invests across all industries. It is planning to
invest in Auto Trader Group Plc, which is involved in new and second hand automotive sales
including cars sold on the part of the private sellers and trade dealers. It is listed on the London
Stock Exchange and it is a constituent of the FTSE 250 index. Therefore, the first segment of the
report aims to deal with the appropriate analytical techniques and tools for evaluating pertinent
economic data. The second segment concentrates on consideration of broader economic trends
and conditions with special reference to changes in government policy. The third segment
evaluates the potential of the business as a market leader for accomplishing the needed revenue
growth under foreseeable economic conditions. Finally, the report sheds light on communicating
the plan of investment to BC Partners.
2. Appropriate analytical tools and techniques to analyse relevant economic data:
There are certain analytical tools and techniques for assessing relevant economic data for
this proposed investment include the following:
Surveys:
As BC Partners is planning to invest in Auto Trader Group Plc, it needs to make survey
of the automobile industry. This method is approximate, as it depends on intentions, beliefs and
future government budgeting (Anderson et al. 2014). It indicates the future course of events in
the organisation. This method could be carried out with the help of personal contact, which
means to meet the business personnel and to record conversations regarding their intention in

4ECONOMICS RESEARCH REPORT
investing money. This is based on the kind of automobiles and the overall industry in future
along with making an evaluation of the same. Hence, a representative sample of individuals in
the identical industry might be an effective survey.
Indicators:
The behaviour of this technique is like a barometer, which provides indication of the
economic process with the help of cyclical timings. This is a method of finding indications of the
future associated with the business depressions and prosperity of the business (Bartoloni and
Baussola 2014). Thus, this approach enables in determining the lagging, leading and coincidental
indicators pertaining to economic activity. Such indication works geographically and with the
help of various monthly and weekly periods. In addition, since it provides the leading indication,
it depicts the type of production activity, the variations in the productivity direction and the turn
of the direction of change in the economic activity (Biondi and Zambon 2013).
Diffusion indexes:
The diffusion index is a method, which takes into account the various indicators into a
single overall measure and it provides strengths and weaknesses of a specific time series of data.
In this method, both the micro and macro aspects of the UK automobile industry are taken into
consideration through combination. Thus, with the help of this method, BC partners could take
together the coincidental, leading and lagging factors for summarising them along with inferring
a specific composite answer.
Economic model building:

5ECONOMICS RESEARCH REPORT
According to Bottazzi, Secchi and Tamagni (2014), the trained professionals could use
this technique for finding out relationships between two or more variables. In order to implement
this technique, BC Partners could make one dependent variable and one independent variable for
finding out an association between the same. The main reason behind drawing up these
associations is to find out a forecast of the direction and magnitude.
3. Broader economic conditions and trends, particularly changes in government policy:
As BC Partners is planning to invest in Auto Trader Group Plc, it needs to take into
account the current economic conditions and trends with special reference to government policy.
These are discussed briefly as follows:
Economic conditions and trends:
The economic forces are of special significance in the context of the automobile industry
of UK. The economic crisis has severe effects on this sector. As commented by Bottazzi, Secchi
and Tamagni (2014), there is fall in the prices of vehicles during poor economic conditions. In
UK, the demand for high-priced or luxury vehicles is influenced adversely during the poor
economic conditions. In addition, taxes on high-priced vehicles are high in UK automobile
industry. However, in UK, since the buying power of the customers is higher, the automobile
firms in the nation experience greater amount of sales. Thus, the size of the economy and
economic conditions has significant influence on the profit margin of the automotive industry
(Buckley 2016). Auto Trader Group Plc has concentrated on bringing low cars to the UK market
for tapping the larger customer segment to improve the overall profit margin.
Government policy:

6ECONOMICS RESEARCH REPORT
In the words of Clark, Lusardi and Mitchell (2017), the political factors play a crucial
role and they have direct effects on the profitability of the automobile industry. With the rise in
globalisation, the UK government is favouring low emission vehicles. In addition, taxes on the
fuel guzzlers and luxury vehicles have increased rapidly. The UK government provides subsidies
for the low emission vehicles. The environment friendly vehicles have obtained greater
governmental support for low environmental impact. The UK government is providing support
for their lower environmental impact.
Specifically, the government rules and regulations have direct influence on the revenues
of the vehicle brands. The fuel-efficient technology and low on emission could pass the
government regulations easily. In addition, the export and import norms vary from nation to
nation (Cowling 2016). The changing regimes of the government and the political regulation of
the market from time to time could result in favourable or unfavourable variations. Some of the
organisations in the automobile industry of UK have transferred their manufacturing bases to
nations, in which the wage-related norms are lenient. The organisations are required to manage
their costs and the political factors could play significant role in this area.
For this reason, most of the UK-based automobile firms have shifted their manufacturing
bases to China due to low cost of labour, since the wage regulations of the nation are lenient
(Stiglitz 2017). The export and import norms, which vary across countries, could be troublesome
for automobile organisations in case of the countries, in which there are stiff import laws
(Cucculelli and Bettinelli 2015). Thus, the government policies in UK have direct influence on
the growth of the automobile companies in the nation.

7ECONOMICS RESEARCH REPORT
4. Potential of the business to be a market leader and to attain the required revenue growth
under the foreseeable economic conditions:
Auto Trader Group Plc has remained focused on delivering its strategy to be the leading
digital automotive marketplace along with enabling to improve the processes of purchasing and
selling vehicles for retailers, consumes and manufacturers. The following points have been
considered to evaluate the potential of the organisation as a market leader and in attaining the
needed revenue growth under foreseeable economic conditions:
Advert views, consumer audience and utilisation of valuation tools:
In 2017, the audience of Auto Trader has continued to rise, as the cross platform visits
have risen from 47.9 million per month on average in 2016 to 55.4 million in 2017. The minutes
devoted on the marketplace have increased by 12% to 582 million minutes on average each
month in contrast to 521 million in 2016. On the other hand, the full-page advert views have
increased from 242.8 million each month in 2016 to 247.4 million each month in 2017
(Autotrader.co.uk 2017). The consumers have conducted number of valuations, which have
increased from 13.7 million in 2016 to 17.1 million in 2017, which is buoyed through the
initiation of the part-exchange guide product.
Fairness and trust in the marketplace:
Auto Trader has gained popularity with purchasing and selling cars over the last 40 years.
Such heritage has enabled the organisation to build a reliable position that it has leveraged to
become an advocate of transparency, part-exchange guide, delivery of free consumer valuations,
reviews of the dealers, vehicle checks and price indicators benefitting the users of the overall
marketplace (Disch 2016).

8ECONOMICS RESEARCH REPORT
Value creation for the customers:
By delivering enhanced value to the customers, the organisation has been able to execute
successfully its annual pricing event in the initial quarter of the financial year. The increased
value of additional consumers and increased engagement has been complemented through a rise
in physical stock on site, since the average number of cars has increased from 437,000 in 2016 to
450,000 in 2017. However, there have been marginal lower forecourts in 2017 to 13,296 from
13,514 in 2016. With the gains made on the products both outside and within the core classified
packages, ARPR has increased by £162 to £1,546 in 2017.
Product penetration:
Auto Trader has raised the number of managing forecourts from 1,900 in 2016 to 2,500
in 2017 for moving additional customers up the staircase of selling package. However, according
to the management expectations, the revenue of retailing solutions has fallen from search engine
optimisation and pay-per-click products along with the re-platforming of the purchasing portal
and website templates (Dostál 2013).
Enhancing relevance and value to manufacturers:
The organisation has continued to increase its relevance to the manufacturers, which is
depicted in greater display advertising revenue in the year having growth of 16% (2016: 23%)
despite the uncertainty in lead up to the EU referendum. The management of the organisation is
of the notion that there is a considerable opportunity in display, as further shift from the
manufacturers could be foreseen from conventional marketing channels to digital marketing
channels (Fischer 2016). The major priority of the organisation is to increase its popularity to the

9ECONOMICS RESEARCH REPORT
consumers, agencies and manufacturers as a place for new cars. Thus, it has included above
6,000 brand new cars to the marketplace, which is called virtual stock.
Operating simpler, leaner and additional data-oriented business:
In 2017, Auto Trader has operated in agile and lean way and it has continued advantages
from consolidation into two offices. Despite continual investment in newer products, front-line
sales personnel and developers, it is expected to maintain the current headcount. It has become
increasingly more data-oriented attaining over the higher performance levels (Fricke, Grogger
and Steinmayr 2015).
Creation of price transparency:
The most recent launch of the organisation, Price Indicator, addresses directly the way
the retailers could provide higher transparency level in pricing to the customers, since it labels
stock with “great price”, “good price” and “priced low” indicator. With the help of valuation
algorithms, these indicators could be powered and this has been applied to incorporate features
like live market movements, optional extras and specifications (Gillespie 2013). There is
constant change in the market, in which there are above 12,000 price changes each day on Auto
Trader and nearly 20,000 cars are included or removed. Therefore, the organisation has advised
retailers to price to the market for seeing an indicator on the advert (Miller 2015).
Promoting finance solutions for the retailers:
After gaining the authorisation of FCA, it enables the organisation to depict the monthly
cost of borrowing of a particular vehicle based on the preferred lender of a retailer (Granger
2014). Nearly 1,300 retailers are benefitting from the finance product, initially free of cost.

10ECONOMICS RESEARCH REPORT
Finance is a major stream of revenue for the customers, with above 86% of new cars sold on
finance and growth of 11% in the overall value of finance agreements for used cars in this
period. Therefore, this is considered as a valuable proposition for the retailers (Horn and
Tangerås 2016).
Pricing and stocking to the market:
Along with driving transparency and trust in the marketplace, the organisation has
advocated the power to utilise data to price and stock vehicles rightfully. At the end of the
period, nearly 2,500 retailer forecourts listing 34% of trade stock have been using data
intelligence managing products and retail control or i-Control. Such products enable the retailers
to use data pertinent to them for enabling them to purchase the most desirable stock (Stiglitz and
Rosengard 2015).
5. Communication of the investment plan to the company:
To,
The Directors,
Auto Group Trader Plc
Subject: Investment Plan
After critical evaluation of the economic factors and the current political conditions of
UK, BC Partners has decided to invest in the organisation for ensuring better growth of both the
firms. This is because taxes on high-priced vehicles are high in UK automobile industry.
However, in UK, since the buying power of the customers is higher, the automobile firms in the

11ECONOMICS RESEARCH REPORT
nation experience greater amount of sales. Thus, the size of the economy and economic
conditions has significant influence on the profit margin of the automotive industry (Lung 2014).
With the rise in globalisation, the UK government is favouring low emission vehicles. In
addition, taxes on the fuel guzzlers and luxury vehicles have increased rapidly. The UK
government provides subsidies for the low emission vehicles. The environment friendly vehicles
have obtained greater governmental support for low environmental impact. The UK government
is providing support for their lower environmental impact.
It has been found that Auto Trader has raised the number of managing forecourts from
1,900 in 2016 to 2,500 in 2017 for moving additional customers up the staircase of selling
package. However, according to the management expectations, the revenue of retailing solutions
has fallen from search engine optimisation and pay-per-click products along with the re-
platforming of the purchasing portal and website templates. By delivering enhanced value to the
customers, the organisation has been able to execute successfully its annual pricing event in the
initial quarter of the financial year. The increased value of additional consumers and increased
engagement has been complemented through a rise in physical stock on site, since the average
number of cars has increased from 437,000 in 2016 to 450,000 in 2017. With the gains made on
the products both outside and within the core classified packages, ARPR has increased by £162
to £1,546 in 2017.
Based on the above evaluation, it has been decided that BC Partners would invest a sum
of £12 million in the organisation with six annual instalments of £2 million each for six years.

12ECONOMICS RESEARCH REPORT
6. Conclusion:
From the above discussion, it has been found that BC Partners is planning to invest in
Auto Trader Group Plc, which is involved in new and second hand automotive sales including
cars sold on the part of the private sellers and trade dealers. As BC Partners is planning to invest
in Auto Trader Group Plc, it needs to make survey of the automobile industry. This method is
approximate, as it depends on intentions, beliefs and future government budgeting. Some of the
organisations in the automobile industry of UK have transferred their manufacturing bases to
nations, in which the wage-related norms are lenient. The organisations are required to manage
their costs and the political factors could play significant role in this area.
The increased value of additional consumers and increased engagement has been
complemented through a rise in physical stock on site, since the average number of cars has
increased from 437,000 in 2016 to 450,000 in 2017. With the gains made on the products both
outside and within the core classified packages, ARPR has increased by £162 to £1,546 in 2017.
Based on the above evaluation, it has been decided that BC Partners would invest a sum of £12
million in the organisation with six annual instalments of £2 million each for six years.

13ECONOMICS RESEARCH REPORT
References:
Anderson, D.R., Sweeney, D.J., Williams, T.A., Camm, J.D. and Cochran, J.J., 2014. Statistics
for business & economics, revised. Cengage Learning.
Autotrader.co.uk. (2017). [online] Available at:
http://about-us.autotrader.co.uk/wp-content/uploads/Auto-Trader-Group-plc-Full-year-results-8-
June-20171.pdf [Accessed 25 Nov. 2017]
Bartoloni, E. and Baussola, M., 2014. Financial performance in manufacturing firms: a
comparison between parametric and non-parametric approaches. Business Economics, 49(1),
pp.32-45.
Biondi, Y. and Zambon, S. eds., 2013. Accounting and business economics: Insights from
national traditions. Routledge.
Bottazzi, G., Secchi, A. and Tamagni, F., 2014. Financial constraints and firm dynamics. Small
Business Economics, 42(1), pp.99-116.
Buckley, P.J., 2016. International business: economics and anthropology, theory and method.
Springer.
Clark, R., Lusardi, A. and Mitchell, O.S., 2017. Financial knowledge and 401 (k) investment
performance: a case study. Journal of Pension Economics & Finance, 16(3), pp.324-347.
Cowling, M., 2016. You can lead a firm to R&D but can you make it innovate? UK evidence
from SMEs. Small Business Economics, 46(4), pp.565-577.

14ECONOMICS RESEARCH REPORT
Cucculelli, M. and Bettinelli, C., 2015. Business models, intangibles and firm performance:
evidence on corporate entrepreneurship from Italian manufacturing SMEs. Small Business
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Disch, L., 2016. Representation. In The Oxford Handbook of Feminist Theory.
Dostál, P., 2013. The use of soft computing for optimization in business, economics, and
finance. Meta-heuristics optimization algorithms in engineering, business, economics, and
finance, pp.41-86.
Fischer, S., 2016. Reflections on Macroeconomics Then and Now. Business Economics, 51(3),
pp.133-141.
Fricke, H., Grogger, J. and Steinmayr, A., 2015. Does Exposure to Economics Bring New Majors
to the Field? Evidence from a natural Experiment (No. w21130). National Bureau of Economic
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Gillespie, A., 2013. Business economics. Oxford University Press.
Granger, C.W.J., 2014. Forecasting in business and economics. Academic Press.
Horn, H. and Tangerås, T., 2016. Economics and Politics of International Investment
Agreements.
Lung, T.Y., 2014. The Influence Study of Investment Optimization Timing Toward Debt
Financing Under Interest Rate Uncertainty by Data Probability Analysis. Journal of Information
and Optimization Sciences, 35(4), pp.379-385.

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Miller, D., 2015. A downside to the entrepreneurial personality?. Entrepreneurship Theory and
Practice, 39(1), pp.1-8.
Stiglitz, J.E. and Rosengard, J.K., 2015. Economics of the Public Sector: Fourth International
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Stiglitz, J.E., 2017. The overselling of globalization. Business Economics, 52(3), pp.129-137.
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