Britain’s two fastest-growing online used-car marketplaces are racing to raise staggering sums of capital as they seek to reshape an industry boasting €400bn (£343bn) in annual sales across Europe.
Sky News can reveal that Cinch, which is part of the private equity-backed Constellation Automotive Group, is in talks with a syndicate of global blue-chip institutions to raise approximately £500m of new funding.
The discussions, which are said to be at an advanced stage, could value Cinch on a standalone basis at more than £5bn, according to analysts and bankers.
That would be a stellar result for a business which launched just five months ago, but which has shown what insiders describe as “exponential growth” to turn it into a leader in the market.
Constellation, which was then called BCA Marketplace, was taken private from the stock market by the private equity firm TDR Capital in June 2019 in a deal valuing the entire group at £1.9bn.
Cinch boasts the biggest supply of cars of any of the UK’s online marketplaces, and has seen sales rise by 200% so far this year.
Sources close to the company said the platform was already seeing a run-rate of 30 million unique annual visitors.
Cinch’s capital-raising comes as Alex Chesterman, one of the UK’s most prominent technology entrepreneurs, closes in on a deal to take rival operator Cazoo public through a merger with a New York-listed ‘blank cheque’ company.
Insiders said that Cazoo’s combination with Ajax I, a vehicle created by leading figures on Wall Street and in the US tech sector, was likely to be announced next week.
The merger, which could come as soon as Monday, will value Cazoo at about $7bn (£5bn) – slightly below previous expectations, but still a stunning price-tag for a company in operation for barely a year.
It is also expected to raise roughly $800m (£580m) through a so-called PIPE, referring to guaranteed commitments from institutions for private investments in public equity.
The Cazoo and Cinch deals underline how rapidly the market for selling used cars is being reshaped by the increasingly sophisticated online management of customers’ experience.
Industry data suggests that just 1% of used-car sales are digital today, with strong growth anticipated across the world’s biggest markets.
Both Cazoo and Cinch have built their brands aggressively through tie-ups with major sporting names.
Mr Chesterman’s company sponsors Aston Villa and Everton, the Premier League football clubs, as well as the England and Wales Cricket Board’s new Hundred format.
Cinch’s name, meanwhile, adorns the shirt sleeves of the England cricket team and Tottenham Hotspur players such as Harry Kane, while it has also struck a deal to replace Fever Tree as the title sponsor of the annual pre-Wimbledon tennis tournament at Queen’s Club.
Cazoo claims to have built a market-leading position in the UK, with more than 20,000 vehicles sold to date, although Cinch argues that it is already as big as its rival.
“The pandemic has made consumers more comfortable buying everything online for home delivery, so the growth potential for fully digital players in the used-car sector is enormous,” one observer said.
Cazoo’s merger with Ajax I will see it join forces with figures including Daniel Och, co-founder of the hedge fund previously known as Och Ziff Capital Management, and Glenn Fuhrman, a former Goldman Sachs executive who helped create the vehicle which manages the wealth of the computing billionaire Michael Dell.
Cinch sponsors various sports team. Pic: Cinch
The star-studded Ajax I board includes Kevin Systrom, who co-founded Instagram; Anne Wojcicki, co-founder and chief executive of the genetic testing group 23andme; and Jim McKelvey, co-founder of the payments group Square.
Sources cautioned that until a definitive deal was agreed between Mr Chesterman and Ajax I, the talks could still fall apart.
If completed, the merger would be one of the most prominent SPAC deals so far involving a British-based business.
Mr Chesterman, who also founded LoveFilm and Zoopla, the property portal, is being advised by Credit Suisse, Goldman Sachs and Numis on the deal.
Cazoo recently acquired Cluno, Germany’s leading car subscription service, while Auto1, a German-based online used-car dealer, saw its shares surge following its €8bn Frankfurt stock market debut earlier this year.
Cazoo has previously raised £450m from an array of blue-chip investors – a staggering sum for a British start-up founded just two years ago – such as D1 Capital Partners, Fidelity and General Catalyst.
Mr Chesterman himself would see his roughly 30% holding in the company worth about £1.5bn from any transaction valuing it at £5bn.
The publisher of the Daily Mail would also hold a 20% stake worth about £1bn.
Cinch has also raised significant sums of capital to date, securing £300m from unnamed blue-chip investors last year.
In addition to Cinch, Constellation’s business-to-consumer division, the group operates the consumer-to-business platform Webuyanycar.com and the business-to-business service BCA Marketplace.
Insiders say the group as a whole could now justify a valuation of close to £10bn.
Bankers at Citi and Jefferies are advising Cinch on the capital-raising, which is expected to conclude in the coming weeks.
A TDR Capital spokesman declined to comment this weekend, while Cazoo did not respond to a series of requests for comment.