Cliff Banks - The Banks Report

Dealership Buy-Sells Remain Steady, But Few Big Deals

May 7, 2015 — With all the chatter of private equity and names like Warren Buffett getting into the automotive retail space, there have been few large deals completed. Only two transactions for more than eight stores and only six that have been for five or more have been signed since January 2013, according to data compiled by The Banks Report.

The data shows the majority of deals are for one to two rooftops. Through the first week of May (going back to January 2013), there have been 418 different acquisitions accounting for 717 different dealerships changing hands.

The breakdown over the last 28 months (including the first week of May) is as follows:

2015 (January through first week of May. To see a list of this year’s Buy-Sells,Click: Dealership_Buy_Sell_May_15_TBR)

  • 70 Different Buyers
  • 191 Stores Changed Ownership
  • 85 Transactions

2014 (To see a list of Buy-Sells for 2014, Click: Dealership_Buy_Sell_14_TBR)

  • 171 Different Buyers
  • 324 Stores Changed Ownership
  • 217 Transactions

2013 (To see a list of Buy-Sells for 2013, click: Dealership_Buy_Sell_13_TBR)

  • 96 Different Buyers
  • 202 Stores (including 22 international changed ownership)
  • 116 Transactions​

The number of actual transactions for this year is fairly consistent with 2014’s numbers. However, the number of rooftops changing hands (191) is skewered by Berkshire Hathaway Automotive’s purchase of the 81-store Van Tuyl Group in March. This time last year, the number of actual dealerships sold was about 105, which is nearly identical to the 110 for this year when excluding the Van Tuyl deal. (The pace of deals seems to have picked up in the last few days with 12 being announced since May 1).

Since January 2013, only 14 privately held groups have added six or more stores. They are:

  • Berkshire Hathaway – 83
  • RFJ Auto Partners – 20
  • Larry Miller Dealerships — 10
  • Berglund Automotive – 9
  • Greenway Automotive – 9
  • Kendall Automotive – 9
  • Ken Garff Automotive – 9
  • Victory Automotive — 8
  • AMSI (Terry Taylor) – 6
  • BW Auto Ventures – 6
  • Jim Bozich – 6
  • Manny Kadre – 6
  • Jim Langway – 6
  • Suburban Automotive — 6

Meanwhile, the six public dealer groups have added a total of 123 rooftops since January 2013:

  • Group 1 Automotive — 48
  • Lithia Motors — 45 (Includes the 27 dealerships acquired as part of the DCH purchase last year)
  • AutoNation — 16
  • Asbury Automotive — 7
  • Penske Automotive — 5 (Much of Penske’s focus recently has been on acquiring heavy duty truck dealerships, which we do not include in our data)
  • Sonic Automotive — 4

Analysis of the data:

  1. For the most part, dealership buy-sell activity has been consistent and brisk the last 16 months.
  2. Much of the activity is coming from dealers in tier two and tier three markets who are buying out competitors in their markets.
  3. Regional powerhouses continue to expand into new markets. Some examples include Larry H. Miller; IndiGO; Hertrich; Victory; Greenway; Priority.
  4. Dealers are maintaining a disciplined approach with acquisitions and are careful not grow too fast. Not only are acquisitions complicated, so is the process of incorporating a new purchase into the group’s culture.
  5. The noise surrounding Warren Buffett’s entry into the market along with reports of George Soros’s private equity fund looking to invest or buy stores, has created a temporary bump in sellers’ expectations, which has kept several deals from being completed.
  6. Yet, prices are as high as they’ve ever been. But we believe the window is beginning to narrow for what has been a seller’s market. As car sales begin to plateau in the next year or so (as many analysts believe) buyers will be less willing to pay the higher prices for stores. Also, at some point next year, interest rates will likely start to increase (although, we’ve been saying that the last two years).
  7. Through the end of this year, there will be a steady flow of acquisitions being completed. And we may see two to three big transactions involving five or more stores get announced in  the next couple of months. Meanwhile, there are several bigger deals in the works that could close before the end of the year — think 10 to 20 rooftops per transaction.
  8. It’s a good time to be an Audi, BMW or Mercedes Benz dealer. Prices being paid for these franchises are extraordinarily high because demand is high. The prices we’re hearing are ranging from $20 million to nearly $80 million for single point franchises (that includes the real estate).
  9. The data shows the majority of deals are for one to two rooftops. Big deals are few and far between — only two transactions for more than eight stores and only six that have been for five or more have been signed since January 2013.




Sorry, comments are closed for this post.

Subscribe Now to The Banks Report