AA and RAC at Strategic Crossroads as Private Equity Considers Five Billion Pound Moves in London

Private equity owners are weighing significant changes for two of the United Kingdom’s best-known motoring organisations, the AA and the RAC, with each valued at approximately £5 billion. The AA’s current backers have appointed JP Morgan and Rothschild to explore options for a sale or stock market flotation, while the owners of the RAC are considering a London listing as early as next year. Both moves highlight renewed interest and strategic activity in the country’s mobility and roadside assistance sector.

The AA, owned by Warburg Pincus, TowerBrook Capital Partners, and Stonepeak, is reviewing its future just five years after leaving public markets. These deliberations come after the organisation’s turbulent experiences as a listed entity, spanning from demutualisation in 1999 to a challenging period of high debt and disappointing share performance. Shares floated at 250 pence in 2014 before peaking at 416 pence the following year, only to be acquired in 2021 for 35 pence each.

Operationally, the AA continues to show signs of recovery and growth. It now serves seventeen million customers and reported £621 million in revenue over the six months to the end of July, representing a six percent rise on the previous year. Pre-tax profit for the period reached £60 million, up from £39 million. The company’s leverage has fallen to 4.1 times earnings, down from 7.6 prior to privatisation, with management targeting a ratio below 4.

Jakob Pfaudler, group chief executive, describes the current period as a new phase of “acceleration” following a long programme of transformation. The company’s trajectory in reducing debt and improving profitability is seen as pivotal to any sale or listing decision. Both JP Morgan and Rothschild, along with the backers, have chosen not to comment on the ongoing process.

Simultaneously, the RAC—backed by CVC Capital Partners, GIC, and Silver Lake Partners—is assessing options that include a potential London float. The RAC, founded in 1897 and based in Walsall, has fifteen million customers and recorded £411 million in revenue over the first half of the year, an eight percent increase on the previous period. Pre-tax profit was reported at £62 million, a rise from £57 million. Debt has also reduced, standing at a multiple of 4.6 times adjusted earnings at the end of June, compared with 5.4 a year prior.

The possibility of an RAC listing arrives at a time when the London market has experienced few new offerings and a wave of takeovers, underscoring the potential positive impact on the exchange. Since its acquisition by Carlyle from Aviva in 2011 for £1 billion, the RAC has operated as one of the world’s leading roadside assistance businesses. The companies and their respective advisers have declined to provide further details on strategic deliberations.

If realised, these potential moves by the AA and RAC could reshape ownership and capital structures in a sector that continues to play a crucial role in British transport and consumer services.