Dave Cantin on the Buy-Sell Market, Acquisitions, and Industry Consolidation

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On today’s show, we’re pleased to welcome 20-year automotive industry veteran Dave Cantin, CEO of Dave Cantin Group. As part of the Dave Cantin Group, DCG Acquisitions specializes in the automotive buy-sell market, and today, Dave gives us a pulse on how the market is doing, and some trends to watch out for.

Dave CantinVIDEO TRANSCRIPT:

Jim Fitzpatrick: Hi everyone. Thanks so much for joining me on another edition of CBT News. Today I’m happy to bring into our studio here Mr. Dave Cantin, who’s the CEO of Dave Cantin Group. Thanks so much for joining us today, Dave.

Dave Cantin: Thank you. I appreciate you having me.

Jim Fitzpatrick: Sure. Your company specializes in buy, sell, and working with dealer groups large and small in this area. Very popular area nowadays, I should say, right?

Dave Cantin: Absolutely. Yes. So we have a division within Dave Cantin Group, DCG Acquisitions, that specializes in buy-sell acquisitions.

Jim Fitzpatrick: Awesome. So let’s kind of jump right in here. How did the buy-sell market look for the first three quarters of 2019?

Dave Cantin: No surprise. It’s been busy. So 2018 finished pretty busy and rolled right into 2019 and it’s been pretty consistent. I would say 2019 is going to finish off as a great year and there’s a lot already getting ready for 2020.

Jim Fitzpatrick: Really? Okay. So what do evaluations look like in today’s market?

Dave Cantin: You know, it’s great that you asked. Thank you. So evaluations are a lot different than I think they’ve been for many years. And what I mean by that is evaluation is not based upon just the net profitability of a car dealership today. And you know, there’s so much more that goes into the quality of an acquisition. What I mean by that is obvious. Brand, location, the performance metrics of the dealership is something that we take seriously into consideration when we evaluate an acquisition. Service retention, units in operations, CSI, SSI, sales effectiveness. So there’s so many areas that fall into an evaluation and one that’s becoming, I think, more on the demand of our buyer today is the compliancy of the image of the dealership. Does it meet the newest image that the manufacturer is going to require when the buyer takes over that store?

Jim Fitzpatrick: Are there brands out there, and I don’t want to say Nissan, but I guess I just did, that the owner says, “Hey, I want to get rid of my Nissan store”, but you happen to know down the road that this store, or this brand I should say, really carries a lot of potential. Maybe because management changes. Maybe the direction of the company. Maybe there’s some things that maybe that the average dealer doesn’t know, that say, “No buy that Nissan store now because it’s going to be tomorrow’s Toyota or Lexus point.” Do you ever find that to be the case?

Dave Cantin: Look, you brought up Nissan, not me, but I’ll tell you this. As the largest global auto company in the world, Nissan, to me, is a great acquisition, especially now. You know, I think a lot of dealers obviously are hesitant to invest in Nissan. I believe, as years ago, it has proven to be a great manufacturer. It’s going to do it again. So I think it’s a great buy today.

Dave Cantin: Again, when we look at an evaluation, you know, it’s not just about the brand. It’s not, “Does it have a Lexus symbol or a Nissan symbol?” It’s where is it situated, how is it located? And again, in any evaluation, we go in a little bit more in-depth than many others might take that decision to do. What I mean by that is really looking at the internal structure, the infrastructure of the business. We represented Nissan dealerships that make a lot more money than a Lexus store, or a lot more money than a Mercedes store. Greater customer satisfaction. So, so much of it is driven by the operation, by the infrastructure and really by the dedication of that entire organization. When you have a dedicated automotive group that takes pride in each one of their stores, it’s not so much the brand or the location, it’s the operation.

Jim Fitzpatrick: How important is the legacy of the dealership when purchasing a store? If I’m going to buy Bob Johnson’s Cadillac and I hope there’s not a Bob Johnson Cadillac out there. There may be, but if I’m going to buy Bob Johnson’s Cadillac, that’s opened in 1901 and his kids run the store and his grandkids and what have you but it’s a very successful store, but I know all those Johnson’s are going to go bye bye at closing and we’re probably going to change the name, how big a factor is that?

Dave Cantin: Sure. Especially when you’re in a community. I think it’s a pretty big factor. That’s something I believe we’re going to get into more in depth in this interview, but when you’re purchasing an asset, you’re purchasing a business, you’re purchasing more than the business, right? You’re purchasing a community that goes along with that business. You’re purchasing … part of the asset and the goodwill is the customer base, is the client base. People that have been purchasing there cars for decades, people that have been retaining service and coming back in month after month or year after year servicing your vehicles.

Dave Cantin: So when you purchase a dealership, you don’t want to start from scratch. You’re purchasing that customer base. The reputation of an automotive dealership is extremely important of creating the quality of a solid acquisition, and when we represent a seller, that is something that we really take serious of understanding the entire history of that business and how that benefits the buyer moving forward.

Jim Fitzpatrick: Sure. I’m sure you find your team probably comes up, too, with those dealerships that are out there that are the worst run dealerships on the planet and have a terrible reputation and you know that through the acquisition, the first thing that you can do to enhance that dealership in that marketplace is to change the name and to let everybody know this is in fact under new ownership. Do you find that a few times?

Dave Cantin: That is correct. Well, I think that’s one of the oldest tactics utilized in a buy sell when they’re buying something that they know is not operating properly. It’s letting the community know it’s no longer operating under that management and or ownership. It’s important that … any business thrives off its community, right? It needs support from the clients, especially when you have an asset that you’re selling, a product that you’re selling. We say this all the time, there are three key factors of operating any business, right? It’s the location, the facility, and obviously the people, and the people are one of the greatest assets in business today and that’s something that we also dive in and pull back the curtain on, on understanding the staff that goes along with that business. Of course, if it’s an underperforming dealership, the first thing we look at obviously is the staff. If it’s a performing business, again, most of the time you can point that to a great leader and operator and great staff beneath them.

Jim Fitzpatrick: Yeah, for sure. Talk to us a little bit about the consolidation and some of the publics that are out there. They seem to be a little bit quiet in 2019. Is that the case or is that just my imagination?

Dave Cantin: You know, I think the public’s have taken a more strategic conservative approach on what they’re going to buy. Look, they bought extremely heavy from 2012 all the way to 2015 at three consecutive years of outstanding purchasing out there in the automotive industry. I think the last few years have really been working on infrastructure for many large publics and privates, really understanding what they’re strategically working with internally, making sure that there’s management programs, making sure that they’re focusing on customer satisfaction, which is most important in any business, which drives obvious profitability. But I think they kind of took a step back to analyze, and now I believe every public is out there looking at acquisitions. I know they’re thirsty. We see acquisitions happening every day, especially in the third and fourth quarter with the public companies, and I think 2020 is going to be a great year for the public companies and acquisitions.

Jim Fitzpatrick: Sure. The SAR, it looks like it’s going to be … well, it depends on who you ask actually, but it looks like it’s coming in under 17 million. We’ve all been spoiled over the last four or five years that it’s been 17 million new vehicles sold in our industry, which is phenomenal news. But it looks like this year it might come in at 16.6 or 16.7 or somewhere in that neighborhood. When we see a drop in the SAR, how much of an impact does that have in the sales figures of a dealership in the sale price of a dealership or the potential that it might carry?

Dave Cantin: Sure. Great question. So here’s what we see. You know, when the SAR is projected to be down and we’re not as spoiled as we’re used to at hitting these 17,000 figures, you know, it’s really the importance of every dealer operator focus internally on their processes. Obviously to make sure they’re taking care of their customers, which is first and foremost, giving them an incredible experience. You can’t afford to allow a customer to leave your dealership to go to another dealership and buy the same brand. If you’re doing that, you’re not doing your job. So I believe dealers are doing a fantastic job today of focusing on their internal processes and on their infrastructure.

Dave Cantin: When you talk about profitability within a dealership, so if we’re going to sell less cars, we need to make sure we’re maintaining that customer’s retention and service, making sure that we’re getting them back in during the scheduled services. But I got to say, a lot of our clients are doing a great job of doing so. So even though the SAR might be down, I don’t see dealer profitability dropping so much because dealers are doing a great job of retaining their clients and creating loyal customers for years to follow.

Jim Fitzpatrick: As a seller, do I always want to keep my facility and try to rent it back to the new owner?

Dave Cantin: No, absolutely not. So you know, again, it’s about creating the acquisition. So if you’re not willing to participate as a seller in giving the buyer the greatest opportunity, and that’s what that will be … I think when sellers try, and you hear this a lot five, ten, fifteen years ago if not greater, sellers looking to hold onto their facilities and lease them to a new buyer. I believe it takes away value. So if you’re willing to consider that it’s going deduct value from the asset value, from the goodwill, okay, then fine. But if you want the greatest opportunity and you want to create the greatest acquisition then all real estate has to be included. A lot of our clients that we represent will not buy an acquisition unless it includes the real estate.

Jim Fitzpatrick: So who are some of the winners and losers at the moment out there? What are some of the brands that seem to be red hot and the ones that not so much.

Dave Cantin: It’s not so much which brand is better. Look, we know the great brands, okay. It’s great that a Lexus emblem out front of your dealership. It’s great to have Toyota. It’s great to have Mercedes-Benz. Audi is on fire right now, right? There’s a lot of great brands out there. But again, we’ve had tier three brands that operate with great operators, that are extremely profitable, that are next door to some of these tier one dealerships that are more profitable. So you know, obviously, look, you still have Toyota, you still have Lexus, you still have Mercedes, you still have Audi. Porsche is doing incredible. There’s Porsche dealerships in the United States for sale at this moment right now, and if there are, it’s one or two.

Jim Fitzpatrick: Does your firm represent both buyers and sellers? So if somebody wants to hire you as a an agent to acquire stores versus selling … so you play kind of both sides depending on what your client needs, I would imagine.

Dave Cantin: Absolutely. So, you know, we work within succession planning. As I told you before, succession planning is extremely important for us. Creating legacies for our sellers and really allowing them to benefit off their years of hard work. But absolutely, we’re hired by buyers every day to go out there and find them their next best store to add into their portfolio. We do it every day.

Jim Fitzpatrick: Yeah, for sure. And what do you think of the upcoming, you know, we’re in election mode right now. We will be for the next 12 months. Clearly it’s, it’s crazy up there in DC. What impact does that have for dealers that are out there thinking, “Man, should I wait till after the election to sell my store? Or maybe I should sell it before the election?” Has that got any impact on things?

Dave Cantin: We hear that a little bit more now than we ever have, and I’ll tell you what. It’s going to be a major relief once this election is over. Regardless of the winner or loser, I just think the level of uncertainty within the world, within the economy, just being done and being gone is going to be better for everybody. But at this point, like I said to you before, 2019 has definitely been a great year in the acquisition business and we’re seeing already, from what we’re building, 2020 is going to be really strong.

Jim Fitzpatrick: For dealers that are listening to you right now, they can pick up the phone and give you a call and say, “Hey, can we just have kind of a confidential interview or a talk, I should say, about some of the things that you mentioned on today’s show.”

Dave Cantin: Absolutely. So we have five offices coast to coast between New York, Florida, Chicago, Dallas and California. We have teams throughout the entire country of M and A specialists. We’re a lot more than than just a brokerage firm and that’s what our clients understand after meeting with us. We’re not just there to list a dealership or to sell a dealership. There is so much more that our team does from beginning to end and post-closing that both our buyers and sellers get the benefit from. And again, the most important piece of any acquisition for us is happy clients. And that’s the key to success in any business.

Jim Fitzpatrick: That’s exactly right. I think many dealers would agree with that statement. So, Dave Cantin, CEO of Dave Cantin Group. I know that you know that name. They’ve done a phenomenal job and in your marketing, you’re kind of all over the industry and everyone knows your name. So thanks again, Dave, for joining us on CBT News. We very much appreciate it.

Dave Cantin: Thank you so much for having me. I hope you have a great day.

Jim Fitzpatrick: Thank you.

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