Private equity likes the F&I space

Jim Henry is a special correspondent for Automotive News

Investor interest shows that F&I is an attractive business to be in.

The acquisition of F&I administrator Safe-Guard Products International in December by yet another private-equity firm, this time an affiliate of Goldman Sachs, shows the ongoing trend of private-equity firms to invest in auto finance and related business.

Private-equity firms have been snapping up subprime auto lenders of late. In 2011, for example, New York's Blackstone Group bought Exeter Finance Corp., and funds affiliated with Warburg Pincus, Kohlberg Kravis Roberts & Co. and Centerbridge Partners bought 25 percent of Santander Consumer USA of Dallas for $1 billion. In September 2012, a company controlled by Aquiline Capital Partners bought First Investors Financial Services.

Private equity has been interested in the F&I products space, too. There was a wave of investor acquisitions in 2006 and '07, before the latest recession, including deals for service contract providers Life of the South, Warrantech Corp., Interstate National Dealer Services and Safe-Guard, which was acquired by H.I.G. Capital in 2007.

Now H.I.G. has sold Safe-Guard to Goldman Sachs. Safe-Guard, of Atlanta, develops, markets and administers extended-service contracts, GAP and other F&I products.

Safe-Guard President Dave Duncan said this week that this is Goldman's first investment deal in F&I products.

For dealerships, sharper competition for their business could mean better bargaining power.

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