Key facts
- Startline and Blue Motor Finance may be put up for sale after a UK Supreme Court ruling.
- The ruling reduced the potential compensation burden on the motor finance sector.
- Industry compensation estimates have fallen to £9-18 billion from £30 billion.
- Cabot Square Capital is managing the sale of Blue Motor Finance.
- Startline is owned by US hedge fund The Baupost Group.
- Aldermore and Close Brothers are also seen as potential acquisition targets.
Motor finance providers Startline and Blue Motor Finance are likely candidates for sale following a UK Supreme Court ruling that significantly reduced the potential compensation liabilities facing the sector. Analysts and advisers told Reuters that larger lenders, including Aldermore and Close Brothers, may also attract buyer interest as market confidence returns.
The Supreme Court's August decision overturned a substantial portion of a lower court's ruling concerning car loan sales practices. Several advisers now estimate the total industry payout could be less than half of the initial £30 billion ($41 billion) projection.
"This is the real activity that will start now," Hyder Jumabhoy, a partner at White & Case, told Reuters. He added that owners now have "enough clarity to begin preparing [lenders] for sale," even as they await the final details of the redress scheme.
Cabot Square Capital has reportedly hired BNP Paribas to manage the sale of Blue Motor Finance, according to two people familiar with the matter. Blue Motor Finance reported an £8.5 million loss on £53 million in revenue in 2023. Startline, which is owned by US hedge fund The Baupost Group, also could be brought to market, with its latest accounts showing £100.3 million in income and a £4.25 million loss.
"There’s a series of highly attractive assets which have sat in private equity portfolios for longer than expected," said Elliot Reader, director at Houlihan Lokey, attributing the delayed exits to "regulatory or macro reasons."
The ruling has also fueled speculation about larger entities. Moody's analysts noted in June that specialist lenders like Aldermore (owned by South Africa’s FirstRand) and Close Brothers could become acquisition targets. Both firms were significantly involved in the legal challenge that led to the Supreme Court's August 1 decision. Close Brothers' shares have risen approximately 25% since the ruling.
However, some experts remain cautious. Antony Walsh, partner at Eversheds Sutherland, commented, "Does [the ruling] pave the way for future M&A activity in the motor finance space given recent inactivity? Yes, but I’d expect any meaningful movement to emerge throughout 2026." Benjamin Toms of RBC Capital Markets cautioned that banks might delay significant moves until the redress issue is fully resolved.
The Financial Conduct Authority is currently developing a compensation scheme for car loans that involved discretionary commission arrangements, with mid-range estimates now considered more realistic at £9-18 billion.
Despite these developments, the UK motor finance market remains robust. Approximately 80% of all new cars sold to consumers in the 12 months leading up to April were financed, with total outstanding point-of-sale contracts valued at around £86 billion as of June, according to the Finance & Leasing Association.