By Alysha Webb, Editor and Publisher
Tom Orysiuk, president of AutoCanada
On August 7th, AutoCanada, one of Canada’s largest dealership groups and the only one that is publicly-owned, confirmed its guidance to acquire an additional 8 to 10 dealerships by May 31, 2015. “Should the Company be able to acquire a larger group, this would increase the guidance,” said AutoCanada.
In a country with only around 3,300 dealerships those are big numbers. Succession issues are a driving force behind many of those acquisitions, said Tom Orysiuk, president of AutoCanada. He spoke with Automotive Buy Sell Report about AutoCanada’s growth spurt, why Ram truck franchises are hot in Canada, and what the group looks for in a dealership.
“A lot of the older dealers are looking to get out,” said Orysiuk, “[and] there are a limited amount of guys that can buy them.”
Already in 2014 AutoCanada has acquired 11 new stores. As of the end of August it had 44 dealerships. The group is financing some of its buying spree through a C$150 million publically-traded bond, followed by a C$200 million equity offering.
Recent acquisitions included two Chrysler Dodge Jeep Ram dealerships in Calgary, Alberta. Ram trucks are popular in Alberta because of rugged mountainous terrain and harsh winters. Buyers like those trucks to have four-wheel drive. The price for Chrysler Dodge Jeep Ram stores in Canada depends, of course, on the store’s location, volume, and management, said Orysiuk.
“You can pay a good multiple if it is a really good truck market,” he said.
Most of the group’s acquisitions have been referrals from dealers the group has purchased stores from and AutoCanada is very competitive in its pricing, added Orysiuk.
AutoCanada’s sales revenue should be healthy this year. In the first six months of 2014 it sold 15,228 new retail units, up 9.5 percent on-year.
The overall new car market in Canada is set to grow by around 4 percent this year to around 1.8 million units, according to Canadian Automobile Dealers Association chief economist, Michael Hatch.
Not afraid of upgrades
As a rule, AutoCanada likes to get a 20 percent return on earnings in an acquired store. If a facility will require an upgrade, AutoCanada naturally takes that into account, said Orysiuk, but it doesn’t scare the group away.
It considers one to two years the right amount of time to get a return on that upgrade, and that usually happens, he said, because “we can make a lot of positive changes very quickly by working with the existing employees and supporting the dealerships marketing and training efforts. ”
AutoCanada, based in Edmonton, represents all major brands except Toyota, Honda, and Ford. Its footprint is primarily in Western Canada, and in 2013 it sold approximately 36,000 vehicles. Trucks are its main focus, and “we do a lot of accessories,” said Orysiuk.
The usual considerations – right brand, right market – figure into AutoCanada’s acquisition strategy. So do the people running the store. One of AutoCanada’s “fundamental beliefs” is the high-quality of its people, said Orysiuk.
The group’s aim is to give those people the right information so they can do their job well, he said. When AutoCanada acquires a store, it focuses on giving that dealership access to information and the AutoCanada process to improve the store’s business.
But the flow isn’t uni-directional. It looks to learn from the stores it acquires as well. “Another huge focus is that the advantage of being a group is sharing best practices and sharing ideas,” said Orysiuk.
The group also relies on its reputation as a company that takes care of its employees to keep the acquisition pipeline flowing. And, the reputation of AutoCanada CEO Pat Priestner.
Said Orysiuk: “ When Pat says something, it happens. He doesn’t waste people’s time. He tell them right off the bat what we will pay them and how the transaction will work.”
