Hassel Auto Group's Michael Dellaquila: Sale "was an exit strategy for my father."
The nation's fourth-largest dealership group won't say what it paid last year for the Hassel stores, which the Dellaquila family had operated since the late 1960s. Group 1 estimates the stores will generate revenues of $150 million a year.
Michael Dellaquila, who remained president of Hassel after the sale to Group 1, says he's pleased with the transition.
"The change is transparent to our customers," he says.
Dealership sales to public companies such as Group 1 can provide quick cash - and lots of it - for private owners. And industry experts say such sales can resolve issues of estate planning and succession for family businesses.
But they also can create problems. Entrepreneurs who built a business may find it hard to let go or work for someone else. Children and grandchildren who might have expected to inherit the business can express their displeasure.
Dellaquila owned Hassel with his father, Frank. He says estate planning concerns entered into their decision to sell to Group 1.
"And it was an exit strategy for my father," he says.
Frank Dellaquila now works as a consultant to the Hassel group, his son adds.
B.B. Hollingsworth Jr., who retired in April as CEO of Group 1, says the Houston dealership group buys both "platform" and "tuck-in" dealerships.
A platform is a multifranchise private dealership group, Hollingsworth explains. A tuck-in is a single dealership that rounds out Group 1's business.
"We have dealers call us all the time," Hollingsworth says.
Group 1 says it spent $1.2 billion to acquire dealerships last year. It pays for dealerships with cash and company stock.
Former owners often stay on as managers or consultants. Some dealers, like the Dellaquilas, retain ownership of the stores' buildings and land, and lease them to Group 1.
When Group 1 buys a dealership, it provides employee training in selling finance and insurance products, Hollingsworth says. It assumes responsibility for health insurance, retirement programs and hiring. Group 1 also provides money for capital improvements and specialized legal help.
Group 1 has a penchant for import franchises. Import-brand vehicles account for about 58 percent of the company's new-vehicle unit sales, Hollingsworth says. Toyota and Lexus have been its best performers, he adds.
Joe Lescota, chairman of the automotive marketing department at Northwood University in Midland, Mich., says a sale of a privately owned dealership to a public group often pays off big for both parties.
"The retail franchise is a cash-hungry machine," Lescota says. "When you consider that a typical dealer might only average a net profit on sales of approximately 1.9 percent, it doesn't leave much room for operating error.
"A sellout to a publicly held group might be the solution to getting a good dealership to the next level."
Dennis Puskaris, a dealer consultant and trainer in Delray Beach, Fla., says family-owned dealerships must address key questions about succession when they consider selling to a public company.
Among those questions, Puskaris says, are: "What is my next step? Does my family like the business? Who are my most loyal employees? How do I feel about my general manager?"
Kim Schatzel was president of an automotive supplier in a Detroit suburb before she sold her metal components business to a larger company. Schatzel, who now teaches business at the University of Michigan-Dearborn, notes that many dealerships were founded decades ago.
"That makes the issues of retirement and estate planning very important to many owners," Schatzel says. "The opportunity to convert their holdings from illiquid to liquid is highly attractive."
At the same time, she says, many dealers find it hard to turn over their businesses to a public company. The unfulfilled expectations of children and grandchildren about the business can make the process even harder.
Consultants and law firms that specialize in such transactions can help families work through the emotional and economic issues, Schatzel adds.
In other cases, says Northwood's Lescota, family members are happy to surrender the burdens of owning a dealership.
"The buyout allows the dealer to remain in the business without the type of pressure that comes from ownership," he says. "It may give (owners) the opportunity to enjoy the fruits of their labors."
At the same time, consultant Puskaris warns, a former owner who becomes a dealership manager after a sale may be less committed to the success of the business.
Dellaquila says the shift in ownership at his dealerships hasn't led to any changes that the public would notice.
"Our signs are unchanged," he says. "No staff were terminated."