Asbury-Miller tie-up raises stakes in retail consolidation

Kerrigan Advisors estimates that dealership transactions, both single- and multiple-store deals, rose 27 percent to 144 in the first half of 2021.

Haig Partners, a buy-sell firm in Fort Lauderdale, Fla., estimates 219 dealerships sold during the first half of 2021, nearly double the 110 sold in the first half of 2020.

Through the first nine months of 2021, Automotive News in initial counts has tracked 202 transactions and 347 dealerships trading hands.

One catalyst for the increased deal-making is the activity of Lithia Motors Inc., which has been on a long-standing acquisition tear. CEO Bryan DeBoer in July 2020 announced ambitions to grow Lithia to $50 billion in annual revenue in five years, largely through acquisitions.

“I think the CEOs of other public retailers said, ‘Whoa, that strategy makes a lot of sense,’ ” said Alan Haig, president of Haig Partners.

High dealership valuations also are driving decisions to sell.

“I think that the Larry H. Miller folks realized that if they are going to exit, today was the day,” Kerrigan said. “And the valuation that they’re receiving is reflective of the strength of the auto retail market.”

September’s deal announcements by Asbury, Sonic and Group 1 further the case for the power of scale in the industry.

“Even the largest private groups see changes afoot in auto retail and realize that this is an industry where size is really going to dictate success,” Kerrigan said. “Even a company as large as Larry Miller decided that they are better positioned to succeed as part of a larger organization than on their own.”

Though the industry is still highly fragmented, data from the National Automobile Dealers Association shows that dealers increasingly own more stores.

In 2020, the industry’s share of owners with one to five dealerships was 93.5 percent, down from 96.2 in 2011, according to NADA. The share of owners with six to 10 dealerships was 4.3 percent in 2020, up from 2.7 percent in 2011. But just 0.1 percent of owners operated more than 50 dealerships, the same percentage that group had in 2011.

Also, the share of U.S. dealerships owned by the top 150 groups as tracked by Automotive News is on the rise, from 13 percent in 2010 to 21.1 percent in 2020, according to the Automotive News Research & Data Center. The 10 largest groups made 8.4 percent of U.S. new-vehicle sales in 2020, while the top 150 delivered 23.1 percent.

Given this year’s acquisition pace, those shares are positioned to rise higher for 2021 and beyond.

Larry H. Miller, at No. 8, is the highest-ranked group on the Automotive News list being absorbed. Prime is No. 18; RFJ, No. 42; and Suburban was No. 21.

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