Dealership M&A activity reaching feverish pace in third quarter

For all of 2021, dealership sales, group mergers, and acquisitions have been occurring at a pace that defies convention. These profit centers have the ability to continue generating for the foreseeable future, yet more dealership sales are being reported in recent weeks than ever before.

Group 1 Automotive has acquired Capital City Honda in Sacramento, California to bring their total store tally up to 192 across markets in the US, Brazil, and the UK. The large Honda store is expected to increase the group’s annual revenue by $85 million, and it marks a total of $655 million in acquired revenue through the year thus far. Group 1’s acquisition of Prime Automotive Group is expected to close next month, which would bring their total global store count to 221 and their American presence to 150 locations.

Another Honda dealership with three stores has sold in the Sacramento area as well. Mel Rapton Honda has new ownership this week that’s been attributed to an opportunity to retire and spend more time with family, although co-owner Kaina Rapton acknowledges that challenges from the COVID-19 pandemic also played a part.

Sonic Automotive also added to their total store count. On Oct 19, Sonic announced that they’ve acquired Bobby Ford Chrysler Dodge Jeep RAM out of Sealy, Texas, making it their 88^th dealership location. It’s the third transaction that has been completed for Sonic this year with others pending, and it will be operated as Momentum Chrysler Dodge Jeep RAM of Sealy, according to the press release.

And in news with large dealer groups, Asbury Automotive Group acquired Larry H. Miller dealerships for around $3.1 billion that should represent around $5.7 billion in annualized revenue. The deal is comprised of 54 franchised dealerships, seven pre-owned stores, and 11 collision centers.

Another dealership with a long history has completed their sale as well. Robberson Ford in Central Oregon has been sold to Kendall Automotive Group out of Boise, Idaho. The 64-year-old dealership has been added to Kendall’s 40-plus stores in five states.

And in Salida, CO, the Faricy Boys dealer group out of Colorado Springs has acquired Town & Country Salida. The small group has added brands including Buick, Chevrolet, GMC, Dodge, and Ram to their portfolio.

Why transactions are at an all-time high

Reasons for selling are varied, from retirement or inequity in the market and more. But for most dealers who are selling today, it boils down to dollars and cents. Auto retail dealership valuations are at an all-time high as demand from large groups sees higher prices being commanded. However, the prices aren’t so high as to cool down the market, leaving room for a tidy profit on both ends of the deal.

Publicly held dealership groups have access to huge amounts of credit or liquid assets to fuel these transactions, and it’s providing opportunities for smaller dealerships to get out of the industry while it’s at one of the highest points ever, and before it dips to a valley.

According to Haig Partners out of Fort Lauderdale, FL, it’s estimated that around 120 stores changed hands in the second quarter of 2021, which nearly triples the number sold in the same period the year before. And with consumer demand running high and profit margins on sales staying inflated, there’s no reason to expect that the M&A market will cool before next summer.

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