Auto Dealer News & Information

Dealership Buy-Sell Update January – May 2014

By July 22, 2014April 24th, 2020No Comments

 Author’s Note:

Just as we were set to publish the report, we received word on Saturday June 15, that Lithia Motors was close to announcing the acquisition of the DCH Automotive Group.

 Our data in this report includes only the buy-sells that occurred from January to May. However, we have edited and rewrote sections in the report to address the DCH acquisition where applicable, mainly because of its size and the effect it likely will have on the market. The deal is expected to close in the fourth quarter of this year.

Click here to download an Excel file of January through May 2014:  TBR_Excel_Jan_May_Acquisition_Report

Click here to view the list as a web page: TBR_Buy_Sells_Jan_May20141

Brief Overview of January – May 2014

There have been 89 dealership acquisitions through the first five months of 2014 – up from 71 through the same period in 2013, according to data compiled by The Banks Report.

Even though the number was up through May, the pace for the year was relatively flat – although, still brisk. Last year, there were 202 total dealership acquisitions – including the 22 stores Group 1 Automotive bought in Brazil and Great Britain.

Through May, the industry was on pace to see 213 acquisitions in 2014 – only 11 more than last year.

(TBR counts the number of dealerships acquired. For example, when Lithia closes the deal with DCH, TBR will count that as 27 separate dealerships and 32 separate brands.)

The public dealer groups remained fairly quiet in through the first five months of 2014 acquiring 12 dealerships compared to 77 by private dealer groups.

Lithia Motors led the way with six dealership acquisitions (not including the DCH acquisition or the Cadillac and Buick GMC stores in Oregon they announced on Friday June 13) with Group 1 in second with four. The Penske Automotive Group and Asbury Automotive Group each acquired one store while AutoNation and the Sonic Automotive Group have stayed out of the market so far in 2014.

Several brokers – the firms that facilitate the buying and selling of dealerships – tell TBR the level of conversation along with the number of deals in the works is up this year. But those conversations haven’t generated that many more acquisitions at the moment.

Despite the increased chatter, June is off to a slow start with six buy-sells that we know of that have been completed. We also know of two others that are waiting on manufacturer approval and a third that should close sometime in July.

In 2012, the general industry concensus was that 2013 and 2014 would see explosive acquisition growth. Certainly, the number far exceeds what was happening from 2009 through 2012, but those were the recession years. The industry still has yet to reach pre-recession activity.

According to TBR’s estimates, the top 100 revenue generating dealer groups own approximately 3,000 of the existing new car 17,865 dealerships today, which indicates there is room for more consolidation.

The activity primarily consists of dealer groups buying one or two stores to add to their portfolios. There have been few deals that included as many as five or six stores in the last 17 months. The Larry Miller Group bought seven stores last year from the Avondale Auto Group. Group 1 acquired the five-store Jay Automotive Group in Georgia. Group 1 also acquired 22 stores in Brazil and Great Britain in two separate acquisitions.

This year, the Billy Walters Group acquired the six-store Glenn Group in Lexington, KY (yes, the same Billy Walters that has been tied to golfer Phil Michelson and billionaire investor Carl Icahn in an alleged insider trading investigation).

Until Lithia’s announcement last week, the monster – or headline grabbing – deals just haven’t happened at the rate the industry was expecting.

Why Acquisition Activity is Still “Moderate”

Price and the increasing complication of getting deals done are the culprits holding acquisitions back.

 The industry still is experiencing a disparity between what sellers want and what buyers are willing to pay. Although public dealer groups are flush with cash and are enjoying record liquidity levels, they still have to make deals that will provide a return on investment for their shareholders. Additionally, they have other avenues in which they can invest – such as stock buyback programs or investing back into the company with initiatives such as stand alone used car facilities, which is what Asbury and Sonic are doing, to create a return on investment for shareholders.

In short, public groups have the luxury of walking away from deals that don’t pencil for them.

Earl Hesterberg, Group 1’s chairman and CEO told analysts on the first quarter earnings call that franchise values may have peaked creating even more opportunities than what’s been available in the past. Yet, he says “pricing is more challenging” today. Because values potentially are at their peak, more dealers are interested in selling before the market starts descending.  More opportunities do not necessarily mean realistic opportunities.

Private groups tend to have more flexibility in what they spend on acquisitions because they don’t have shareholders to answer to.

For example, David Wilson, who owns the David Wilson Automotive Group in southern California recently paid $75 million to acquire Fletcher Jones’ Toyota/Scion store in Las Vegas. He didn’t necessarily over pay for the store – it does generate $125 million a year in revenue. But he likely has other considerations beyond shareholder value that drove his decision.

He’ll also likely close on a $30 million deal to buy Villa Ford in Orange, CA soon.

Whether those two deals tend to push multiples higher remains to be seen. If they do, the acquisition pace will still be moderate the rest of the year.

The pricing disparity may be softening, though. Jonathan Ferrando, AutoNation’s executive vice president for Corporate Development and HR along with being its general counsel, told analysts in April that the “price bandwidth has narrowed.” If that is the case, the industry may see more real action instead of just talk.

Much of that may be determined how potential sellers react to the news of Wilson’s acquisition and the Lithia deal.

Deal Complexity

Also keeping a lid on acquisitions is the growing complexity at getting deals across the finish line. Manufacturer approval continues to be an issue as framework agreements limit the number of franchises a group can own.

(Lexus, which has been fairly stringent in the past, this month reportedly increased the number of Lexus stores a group can own from six – four rooftops with two satellites — to eight. But the requirements are fairly stringent according to Lexus dealers and brokers TBR has talked to).

Manufacturer use of Right of First Refusal, manufacturer-mandated facility upgrades, dealer performance issues, real estate, local zoning laws are all challenges that conspire against deals being completed.

Craig Monaghan, the President and CEO for Asbury Automotive, told investors during the company’s first quarter earnings call that the current “deal flow is tough. There are always the conversations, so there’s always people who want to talk, but actually, getting things done is a challenge.”

Sometimes, it can take a year or two to successfully complete a deal. Recently, one west coast luxury rooftop finally was sold after being on the market for more than two years.

And sometimes, sellers get cold feet and back out. News broke this week that Group 1 filed a lawsuit against Brett David and the trustee who owns Prestige Import’s Audi dealership in Miami. According to the suit, David backed out of a $72 million deal to sell the Audi dealership and adjacent real estate.

If the deal gets completed, it will be one of the biggest ever for a single point store.

The Rest of 2014

In part due to the DCH deal (if the acquisition isn’t derailed by manufacturers), the overall number of dealerships acquired this year could exceed 2013’s total by a significant margin. But that deal could skewer the final 2014 numbers if it’s the only big acquisition of the year.

It’s possible, one, or more, of the public groups – most likely AutoNation, Penske or Group 1 – could pull off a monster deal. But history is against that happening. Counting the DCH acquisition, only four deals exceeding $165 million have made it to the finish line since 1999.

AutoNation, as the largest public dealer group, is in an interesting position. It’s primary strategy in recent years has been stock buybacks. That can only continue for long. Even though there is room for consolidation the big deals that really drive growth are much harder for AutoNation to pull off today. It did make a realatively big acquisition (at least big by current standards) 18 months ago when it acquired the Texas-based Boardwalk stores. Other than that, there hasn’t been much appetite for acquisitions.

Don’t be surprised if the end game in Fort Lauderdale includes a play to take the company private in the near future with another IPO a couple of years later.

Possibly a group such as Asbury could go private again if a large private equity firm such as KKR or Carlyle is able to successfully close a deal. We’ve been talking about this scenario for Asbury for more than a decade and still, nothing has happened.

Private equity could also acquire one or more large private groups. We’re constantly hearing rumors – and have going back 10 years, but again, nothing has happened.

Keep an eye on groups such Van Tuyl, Mile One Automotive, AMSI or Hendrick Automotive. Any of the three are candidates for a potential IPO – nearly 70 or more rooftops and significant cash reserves.

For the above scenarios to happen, manufacturers will have to relax – or tweak – some of their thinking and guidelines. And private equity firms will need to find a way to stomach the fact manufacturers control much of what they do should they really get in the game.

A better play is to bet an investor as opposed to being outright owners.

Meanwhile, manufacturers want well-capitalized dealers who can build palatial facilities and be in position to handle large volumes of vehicles. On the other hand, they also want dealers who are nimble and flexible and that aren’t handcuffed by corporate policies emanating from a group’s headquarters.

Often, those can be divergent goals.

How Lithia’s acquisition of DCH proceeds could be an indication of whether manufacturers are changing their thinking.

A smooth approval process could mean that we’ll see similar deals in the future. If not, the industry’s acquisition activity probably will still continue along the same lines it has the last several years.

Nevertheless, the majority of acquisitions will be driven by private dealer groups – not the public groups.

Monthly Acquisition Breakdown


The year started strong with 26 dealership acquisitions in January following 31 deals in December 2013.

Notable acquisitions include Asbury’s only purchase of the year to date – Land Rover of Greenville, SC. Group 1, meanwhile, continued its buying spree from 2013 acquiring two dealerships – Ford and Hyundai in Escondido, CA.

AMSI expanded into Texas buying a Toyota Scion store and a Honda dealership in Denton.

Al Monjazeb added to his luxury portfolio acquiring Audi of Fresno and Porsche of Fresno from the Michael Automotive Center. Last year, he purchased Weber BMW in Fresno. Monjazeb also has several high-end luxury stores in Washington.

Billy Walters’ BW Auto Ventures acquired the Glenn Automotive Group in Kentucky adding six dealerships to his holdings in California and Georgia.


The pace slowed in February with 17 deals completed. Lithia began its hot pace buying Island Honda in Hawaii from Ray Kitagwa and Hammerlane Volkswagen in Stockton, CA.

Hawaii proved to be a hot state in February as Fletcher Jones sold its Jaguar Land Rover store in Hawaii while Servco Pacific bought a Subaru store from Kitagwa.

The Haley Group with Doug Pridgen acquired three stores from the Capital Automotive Group in Richmond, VA.

The Kendall Automotive Group quietly is becoming a powerhouse in the Northwest with 28 dealerships across four states following its acquisition of  VW, Porsche, BMW and Audi stores in Bend, OR owned by the Carerra Group.


March maintained February’s pace with 16 deals. Lithia continued its Hawaiian assault buying three dealerships in the state bringing its total to four for the year.

The Penske Automotive Group made its only acquisition of the year picking up a jewel in BMW of Greenwich from the DCH Automotive Group. The deal with DCH essentially was a trade with DCH — a BMW store for two Honda dealerships, with DCH picking up Honda of Nanuet and Honda of Mission Valley CA later in the year.


Kuni got April started buying another Audi dealership – this one in Palo Alto, CA. Meanwhile, Lithia added to its number picking up Access Ford Lincoln in Texas. Group 1 also acquired Alex Rodriguez’s Mercedes store in the Houston area.

One interesting deal was Howard Keyes’ purchase of the Kia dealership in Valencia, CA. He acquired it from the California Superstores group which is rumored to be close to being acquired by the Potamkin Group.

The group was backed by the hedge fund firm York Capital Management and had embarked on an aggressive purchase strategy – mainly of Chrysler-related stores three years ago. Chrysler Realty bought the real estate to help faciliate bringing dealerships back to areas where Chrysler had lost stores during the downturn.

Apparently, the strategy was short-lived. California Superstore’s CEO from 2010 through 2012, Carlos Hidalgo, now is the president and owner of the Fifth Wave Automotive Group and appears to be quietly investing in dealerships in the California area.

Another interesting deal is the acquisition of Mercedes Benz of Encino by the Trophy Automotive Dealer Group, a new player in the acquisition game. Trophy is backed by Nasser Watar, the CEO of GapCorp, a firm that provides F&I related services to dealerships in Africa and the Middle East.

Watar also is the CEO of Nissan Gulf FZCO, Nissan’s distributor in the Middle East. It appears that Watar is looking to expand in the U.S. and that the Mercedes deal may be the first of several.

April’s pace was consistent with March and February with 16 deals completed.


Acquisitions slowed in May with only 14 deals, a couple of which closed at the end of the month but were announced in June.

The big deal was David Wilson’s $75 million acquisition of the Fletcher Jones Toyota Scion store in Las Vegas. The question is whether Jones is looking to exit some of his stores, having sold the Jaguar Land Rover store in Hawaii earlier in the year.

Keep an eye on that one.

Lithia finally unloaded its Wilsonville Mercedes store – word on the street is that it took almost two years to sell. The buyer is Jeff Swickard, a venture capitalist from Texas.


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Cliff Banks

About The Banks Report:

Designed for top automotive executives, dealers, industry analysts and investors who want to cut through the noise and get an accurate picture of what’s going on in the Automotive Retail space, the Banks Report is an online source that provides subscribers with daily insight into the top news stories of the day.

The Banks Report was created by Cliff Banks, an award-winning journalist with more than 20 years in the automotive retail space. As an editor of two automotive-related media companies, he built a vast network of sources ranging from CEOs to service technicians at the dealership. There’s no one better at connecting the dots and putting the news into perspective.