Alysha Webb, Editor and Publisher
It has been an interesting year in the buy sell world, one marked by several big deals and driven by healthy demand in most parts of the U.S. With light vehicle sales forecast to approach 17 million units in 2015, dealerships look to remain an attractive investment option next year, as well. That’s a boring way of saying the buy sell world is going to continue to rock.
Lithia’s announcement in June that it would acquire privately-owned DCH was the first real milestone in 2014. The size of the deal – the DCH stores add $2.3 billion in additional revenue – was impressive. It had pundits predicting more big deals.
Boy, were they right. In October, Warren Buffett’s Berkshire Hathaway announced it would acquire Van Tuyl, the largest privately-owned dealership group in the U.S. This was a deal of a whole different caliber. Sure, Van Tuyl is big. But the real significance of the deal is the entry of a man who is seen as one of the world’s most astute investors into the automotive retail sector.
Buffett has said he is shopping for more dealerships, and he certainly isn’t going to be buying single-point stores or small family-owned groups. What this means for valuations is unclear, however. Buffett didn’t become who he is by paying too much for acquisitions. It will certainly create more competition for the large groups, however.
There were other interesting investors in the market in 2014, as well. Family offices, which invest the funds of a single family, are becoming more active in the automotive retail sector. They seem to be ideal investors for dealerships because of their long-term outlook. The downside is that they often have little experience with the automotive retail business or the complexities of the dealer/manufacturer relationship. Of course the same could be said of Warren Buffett.
Finally, there is a lot of talk about private equity coming into the buy sell world. While there is no doubt PE is eyeing the sector, I am not convinced it will play a major role in buy sells in 2015. The short-term outlook of many private equity investors doesn’t suit the dealership business for a variety of reasons. PE investors will likely have trouble being approved by manufacturers for those reasons.
Another interesting deal in 2014 was the Brookfield Property Partners acquisition of Capital Automotive (CARS), which buys and leases back dealership real estate. Brookfield is another newcomer to the dealership buy sell world. Its entry also shows faith that the dealership business will remain strong.
Next year will be an exciting year for Automotive Buy Sell Report. We’re re-designing our website; the new look will be in place early in 2015. As always, we welcome contributions that educate our readers about various aspects of the buy sell world.
I look forward to working with all of you in 2015.
Happy Holidays!
