Acquisitions help dealership groups climb ranking
Fears about industry disruption and how it will affect automotive retail aren't spooking some big retailers from investing more of their profits in the traditional dealership model.
The resulting acquisitions helped several dealership groups boost new-vehicle sales last year and climb Automotive News' annual list of the top 150 dealership groups based in the U.S.
For dealer Brett Morgan, there's room for the disrupters to carve out a place in the market without usurping his business.
"We use the term 'disrupter' too loosely," said Morgan, CEO of Morgan Auto Group, of Tampa, Fla. Some recent entrants to auto retail — Carvana, for instance — "are not immune to the trials and tribulations of selling used cars" that traditional dealers face, such as margin compression and rising inventory prices.
Morgan Auto Group moved up 11 places on the top 150 list to No. 24 as its new-vehicle retail sales jumped 35 percent in 2018. That was the highest percentage increase for any retailer on the list. Morgan added eight dealerships last year and attributed his acquisitions to a particularly profitable 2018.
Even as dealers such as Morgan aren't dissuaded from buying more stores, disruption is playing a role in the minds of some sellers. But dealership buy-sell advisers say the noise of disruption from emerging technologies is not hurting the value of dealerships or deterring prospective investors from the market.
"More dealers have decided they want to retire, take chips off the table before a larger decline and/or have concerns about the future of the industry," adviser Alan Haig wrote in the 2018 Haig Report published by Haig Partners, a buy-sell company in Fort Lauderdale, Fla. "So far, none of the tech disruptors, such as ride sharing, electric vehicles, and autonomous vehicles, are hurting dealers in any meaningful way, and most buyers don't think they will have an impact for years to come."
Haig said disruption has been a reason some of his clients opted to sell, including in one particular recent transaction that he declined to identify. Those dealers were concerned about the potential impact changes in technology — though not specific — could someday have on their business, so they opted to sell, he said.
"They wanted to take the capital out of auto retail and deploy it" elsewhere, Haig said.
Some larger dealership groups are taking advantage. #1 Cochran Automotive, of Monroeville, Pa., climbed the most rungs on the list after increasing its store count by three in 2018. That vaulted the group 22 spots up the list to No. 71. The Pittsburgh-area retailer increased new-vehicle sales by 31 percent last year, or nearly 3,300 additional vehicles. It purchased two Nissan stores in April and a Toyota store in July."Our footprint in the market that is important to us — western Pennsylvania — is more mature now than 12 or 18 months ago," CEO Rob Cochran said. "I expect there will be more consolidation in the dealer ranks, but ultimately, the people who win are the ones that can best take care of the customers and win loyalty."
Consolidation activity has defined the buy-sell market for the past five years, and desirable economics drove a healthy number of deals last year, said Erin Kerrigan, managing director of Kerrigan Advisors in Irvine, Calif. According to Kerrigan, there were 216 dealership buy-sell transactions in 2018, up from 202 in 2017 but down from 221 in 2016.
"Many of the buyers that we talk to today really have a clear sense that they are going to make a tremendous amount of money by consolidating this industry," Kerrigan told Automotive News.
View original article at: https://www.autonews.com/dealers/check-out-top-150-us-dealership-groups
