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‘Explosive profitability’ ignites buy-sells

Increased buying activity by publicly traded dealership groups is helping to drive the market.

The public groups spent around $1.7 billion on U.S. dealership acquisitions in the second quarter, according to the Kerrigan report. The biggest such deal during the period came in April when Lithia Motors Inc. bought Michigan’s Suburban Collection, a group of 34 stores and 56 franchises.

Lithia has remained on an acquisition tear since the Suburban deal. At the same time, Asbury Automotive Group Inc., Penske Automotive Group Inc., Group 1 Automotive Inc. and Sonic Automotive Inc. have all closed on their own deals. AutoNation Inc. struck a deal to acquire 11 stores in Georgia and South Carolina, but it has yet to close. And last week, Group 1 said it has agreed to acquire Prime Automotive Group in an $880 million purchase for 30 stores.

“Lithia’s high level of acquisition activity has pushed the other publicly traded companies to try to grow as well,” Haig said. “Part of what’s driving higher blue sky values is just the demand from them.”

As busy as the second quarter was, buy-sell experts expect an even busier end to the year.

“The desire to buy dealerships is extremely strong, and the competition to buy any dealership or dealership group is what really is creating the strong market,” said Sheldon Sandler, CEO of Bel Air Partners, a buy-sell advisory firm in Hopewell, N.J.

Haig noted that while his firm represented owners selling 10 dealerships in the second quarter, he expects to represent owners selling 22 additional stores by year end, which would give his firm a total of 41 dealerships for all of 2021, an increase of 32 percent over 2020’s total.

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