Birmingham-based Bristol Street Motors, one of the country's oldest car dealerships, has been taken over in a #40 million deal.

It was bought on Tuesday as a launchpad acquisition by Vertu Motors, an Aim-listed acquisition company headed by former Reg Vardy managing director Robert Forrester.

Vertu is paying #31 million cash plus #9 million in shares for the Bristol Street Group, ranked as the country's 13th largest dealer in 2005.

It was founded in the early 1900s as a Ford dealership and now operates 32 new and used car and commercial vehicle outlets and three Motor Nation used car hypermarkets.

It made an operating profit of #5.1 million on sales of #576.7 million in 2006 and employs 1,700.

BSG's franchises include Ford, Vauxhall, Citroen, Hyundai, Iveco, Peugeot and Renault.

Chief executive Paul Williams, aged 60, who helped lead a management buyout from Britax, previously known as Bristol Street Group International, in 1997, will join Vertu as non-executive chairman.

At the time, the #72 million deal was one of the biggest MBOs in Birmingham.

Shropshire-born Mr Forrester, aged 32, left Vardy after rival Pendragon bought the company for #506 million last year.

He set up Vertu with former Vardy finance director Karen Anderson and non-executive director William Teasdale to get back into the retail motor trade through acquisitions.

The team, sitting on a cash pile of #25 million since its IPO three months ago, has had BSG in its sights for some time.

"It is one of the oldest dealership groups in Britain and is well known from Newcastle to Exeter," Mr Forrester said. "It is a cracking good business and one we have very much had our eyes on. It has strong manufacturer relationships and an excellent management team.

"This is an excellent platform acquisition, which we have delivered to shareholders within three months of IPO."

Vertu would maintain BSG's sites and future acquisitions will be rebranded Bristol Street outlets, he added.

Amanda Allen, corporate partner at the Birmingham office of law firm Hammonds, lead adviser to BSG, said: "I am confident the aquisition of Bristol Street Motors fits well with Vertu's strategy in business potential, its property porfolio and the platform for further acquisitions."

Vertu, assuming responsibility for #29 million of BSG debt, yesterday announced a new share placing aimed at raising between #10 million and #20 million.

Although the #40.3 billion-a-year car trade has consolidated at the top following Nottingham-based Pendragon's takeover of Vardy, there is scope for smaller operators like Vertu.

In 2005 there were more than 5,400 dealerships in the UK and the ten largest represented less than 19 per cent of the market.