Who is getting on the M&A expressway, and who’s looking for the exit?

110114 IL Who's Getting On M-A Expressway_RoyalDealership mergers and acquisitions seem to be getting headlines even in mainstream media these days.

Lithia Motors was among the first dealership groups to get national attention for dealership M&A activity when it announced in June that the company would be purchasing DCH Auto Group’s 27 stores.

Lithia also purchased Clovis Nissan in Clovis, CA, in late October, shortly after Hendrick Automotive Group added Sandy Springs Toyota-Scion in Atlanta, GA, to its roster. AutoNation purchased all five Barrier Motor stores in September to expand its footprint and reach in the luxury segment.

However, it was the purchase of Van Tuyl Group by Berkshire Hathaway Inc., the Warren Buffett-run company that owns Dairy Queen, Geico Insurance and BNSF railroad that seemed to signal to the industry that the car business was no longer an insider’s game.

It’s no mystery why dealers are in a mood to sell.

“Profits per dealership are at an all-time high,” says Alan Haig, president f automobile brokerage firm Haig Partners.

And buyers with cash are willing to pay strong prices to get a piece of the action.

It’s no longer the case that dealers looking to sell will be older folks looking to head for the links. Instead, they’re saying, according to Haig, “I’m going to take advantage of market conditions and sell, and lock in my gain.”

Another factor that could play into dealers’ fading enthusiasm is increased scrutiny of the Consumer Financial Protection Bureau. While large organizations might be able to absorb costs associated with meeting the requirements of new regulations, the strain on small operations in a business that is growing in complexity can make some dealers call it quits.

On the one hand, it’s a good time to cash out, according to experts such as Haig. But most projections see profits per dealership on the upswing, which might make it harder to say yes.

For more on this story, see Greenlight Remarketing magazine, available at some auctions, or the online PDF at the Inside Lane blog.

– Larissa Padden

Posted in Economics, News

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