Mark Johnson, President
MD Johnson, Inc.
AutoNation Inc.’s plan to acquire Barrier Motors Auto Group, a luxury vehicle dealer group in Bellevue, Washington, will give the nation’s largest dealership group a larger presence in a one of the top luxury markets in the United States. Publicly-owned AutoNation already owns a BMW franchise in Bellevue along with several other dealerships.
Bellevue is on the east side of Lake Washington, across from Seattle. Microsoft and Boeing are just two of the multinational companies with headquarters in the area.
“The acquisition of the Barriers stores simply helps round out what is already a large footprint in the East side market,” said Mark Johnson, president of M.D. Johnson Inc. a dealership financial advisory firm based in Seattle.
The new acquisition includes Mercedes-Benz, Porsche, Volvo, and Audi stores. They have annual revenue of $355 million and unit sales of approximately 5,500 new and used vehicles. Johnson estimates the dealerships pre-tax earnings at $15 million to $17 million.
AutoNation now has 22 franchises in the State of Washington, including 13 in the Seattle-Bellevue area.
Skilled dealership operator
In deals of this size involving multiple franchises, each automaker must approve the deal. AutoNation said that the transaction is expected to close in the fourth quarter of 2014. But AutoNation does not enter into these kinds of agreements without assurances that they will obtain approval for all the transactions, said Johnson.
The deal is a testament to AutoNation’s skill as a dealership operator, he said. “To obtain approval for this mix of brands, AutoNation is clearly doing a great job representing these manufacturers,” said Johnson.
The sale of family-owned Barrier Motors to AutoNation also highlights an issue driving many buy sell deals these days, the lack of a family member willing — or perhaps qualified — to take over the family business. Few suitors likely existed for such a large deal because of the capital concentration in a single market, said Johnson.
“What is likely a $200 million transaction in a single market with sizeable real estate thins out the buyers quickly,” he said. “Most private capital investors would find this level of concentration tough to justify, even with the great earnings and great brands.”
His clients tend to shy away from such high capital concentration in one market and in so few stores, said Johnson. But “for a public company, it is not a drop in the bucket but might be only two or three drops.”
As for the sales price, Johnson said he could only speculate as the publics rarely leaked such information. But, “based on Barrier’s volume and the typical profitability for our like-sized clients, the good will was likely close to or more than $100 million. Great stores in great markets are expensive.”
The stores likely won’t change hands again for decades, he said. “You have to ask yourself what that is worth.”
MD Johnson, Inc. represents dealers in the purchase and sale of dealerships. Mark Johnson can be reached at 702 497 5480 or mark@mdjohnsoninc.com
