Sonic switches strategies, returns to acquisition mode
Sonic’s Smith: “There are deals out there.”
After more than four years on the sidelines, Sonic Automotive is ready to buy dealerships again.
The nation's third-largest auto dealership group aims to acquire stores this year that will add $200 million to $500 million in annual revenues, Sonic President Scott Smith told Automotive News. The strategy marks a shift from Sonic's previous position that it would focus on strengthening its balance sheet and adding technology to help store operations.
Sonic last made store acquisitions in 2007 and 2008, but deal-making was halted during the industry crisis and liquidity crunch.
"Now we feel we've gotten everything in order, and the company is in the best financial situation it's ever been in," Smith said. "Our aim would be to grow at a reasonable pace through some acquisitions and organically going forward."
Sonic is open to adding any of the brands that are among its most profitable to operate: Volkswagen, Audi, Mercedes-Benz, Porsche, BMW, Land Rover, Jaguar, Hyundai and "maybe Ford," executives said. Sonic also will consider new markets, in or out of the Sunbelt, and explore tuck-in acquisitions -- smaller purchases of one or two stores to round out the brand mix in a market.
Smith wants to get the word of Sonic's acquisition plans out to potential dealership sellers.
"There are deals out there, but we've been out of the market for a while," Smith said. "It's important for dealers to know there's another alternative out there in the market. One thing we have: We've never failed to close on a deal that we've had under contract."
Sonic's last deal was its 2008 purchase of a Mercedes store in Charlotte, N.C. Mercedes blocked the purchase, and Sonic sued, claiming Mercedes was trying to force unnecessary renovations at four of its nine Mercedes stores. North Carolina regulators ruled that Mercedes had wrongfully denied the purchase, and Sonic closed the deal. It later sold the Charlotte store amid continued legal wrangling with Mercedes. Sonic and Mercedes settled their dispute early last year.
"I can't overstress how good our relationship is with Mercedes right now," Smith said.
Although Sonic is looking to add stores, no deals are imminent, Smith said. After divesting five Oklahoma dealerships late last year, Sonic has 103 stores.
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