A private off-road vehicle

It’s not so much a saga as a tale of modern corporate romance. Aboard a coach heading down the motorway, there was a successful brand for the grey pound that had been owned by private equity since its last efforts to float on the stock market in 2004.

It had been looking at another attempt but was getting nervous about ‘toppy’ stock markets.

In a lay-by, it came across a veteran helping out a motorist in return for an annual subscription.

This corporate vehicle had been esconced with private equity for the same period of time, but had become such a cause célèbre for the anti-private equity lobby that disposing of it on the public markets was going to be hugely controversial.

The solution was obvious: a sudden romance and ultra-quick marriage. The private equity parents could all extract sizeable dowries by financially re-engineering the debt of both operations.

And the union could be sold to the media on the back of a claim of industry consolidation. But which industry?

According to the merger hype, both the AA and Saga Group are really insurers.

Indeed one national newspaper recently proclaimed that if you take the pensioners’ holidays out of Saga and emergency breakdown rescue out of the AA, you get two insurers targeting similar customers.

lf you take the football out of Manchester United and the music out of U2, they’d probably be a bit samey too, but that doesn’t mean that pairing Cristiano Ronaldo with Bono will necessarily produce anything worthwhile.

And actually that claim about the similarity of Saga and the AA is more promise than reality.

It has long been known that Saga makes the vast majority of its profits from its financial services and insurance operations, rather than from coach trips to the Algarve.

“Whether this tie-up will add real value is all about how many of the fliers for insurance services that come in the same envelope as car breakdown renewals end up in customer bins

The most that can be said about the AA’s insurance offering is that it is very much the same as its other activities.

But the figures that speak volumes here are those that relate to membership.

Saga has 2.5 million customers, while the AA has 15 million members. So why can't this deal unload all the hype and simply be seen as yet another cross-selling customer acquisition attempt?

Of course the answer lies in the track records of such efforts in the past.

From bancassurance deals to the exertions of utilities like Centrica to turn themselves into one-stop-shop services brands, this bandwagon has been driving along a decidedly bumpy road.

With the AA, it goes well beyond the joke of whether drivers are going to be offered coach holidays while their flat batteries are being charged up by the roadside.

Whether this tie-up will add real value is all about how many of the fliers for insurance services that come in the same envelope as car breakdown renewals end up in customer bins.

Either way, the private equity kingpins have moved on their investments within their targeted three-year model and taken out a load of dividends to boot.

And if the combination doesn’t live up to its cross-selling, it can be broken up just as quickly as it has been bolted together. IT