The private equity firms that took Spanish testing and certification company Applus+ private last year are now exploring a sale of its vehicle inspection business, a unit that could fetch around €1 billion, according to a Reuters report.
TDR Capital and I Squared Capital, which acquired Madrid-based Applus+ in a €2.6 billion deal in 2024, are working with RBC Capital Markets and Morgan Stanley to weigh options for the division, the report said. The unit runs vehicle inspection programs on behalf of public authorities in 13 countries, a business model that typically relies on multi-year contracts and generates more predictable revenue than project-by-project industrial work.
The talks are still at an early stage, and a formal auction could be months away, Reuters noted. But the very fact that the owners are exploring a carve-out rather than a full sale of the company highlights a broader trend in private equity: with large, whole-company exits becoming harder to pull off, more firms are turning to partial sales and divestitures to generate returns.
Why sell just the inspection unit?
For TDR and I Squared, selling the vehicle inspection business would be a way to pull cash out of Applus+ without giving up control of the entire company. The firms only took Applus+ private in 2024, so a full exit so soon would be unusual. A unit sale, by contrast, lets them monetize a valuable asset while retaining the rest of the business.
The inspection unit's appeal lies in its revenue stability. Government-backed inspection programs are often mandated by law, meaning demand is not tied to the economic cycle in the same way as, say, industrial testing services. That makes the cash flows look more like those of an infrastructure asset than a cyclical industrial services firm.
That distinction matters for deal pricing. Buyers and lenders are generally more comfortable financing acquisitions when future cash flows are easier to forecast. Predictable revenue can support higher leverage, which in turn can justify a stronger valuation even when the broader mergers-and-acquisitions market is sluggish.
This is part of a wider pattern in private equity, where firms are increasingly opting for carve-outs and partial sales instead of waiting for a full exit. The logic is simple: smaller, cleaner assets are often easier to finance and price than large, complex conglomerates.
What it means for investors
For everyday investors, the Applus+ story is a reminder that "boring" businesses can be quite valuable. Vehicle inspection may not be glamorous, but it is a steady, contract-based revenue stream that investors are willing to pay up for.
The potential €1 billion price tag also underscores the ongoing demand for cash-generative assets, even in a market where big-ticket deals have become harder to close. If the sale proceeds, it would reinforce the idea that mid-sized, predictable businesses remain attractive to buyers, while larger and more complex whole-company sales face tougher financing conditions.
For those who own shares in publicly traded companies that operate similar inspection or certification businesses, the news could serve as a valuation signal. When private equity buyers are willing to pay a premium for stable cash flows, it can lift the perceived worth of comparable listed companies.
That said, the deal is far from done. Talks are early, and there is no guarantee a sale will happen at all. If it does, the final price could differ from the €1 billion figure being floated. Investors should watch for further announcements, but they should not expect a quick resolution.
In the meantime, the Applus+ situation is a useful case study in how private equity firms manage their portfolios. Rather than waiting for the perfect moment to sell an entire company, they are increasingly finding ways to unlock value piece by piece. That approach can be good for the firms and their investors, but it also means more complexity for anyone trying to track the value of the underlying businesses.
For now, the market will be watching to see whether the inspection unit attracts serious interest and at what price. A successful sale would be another sign that even in a tough M&A environment, there is still money to be made from steady, government-backed cash flows.
