As dealership buy-sells heat up, large privately held dealership groups -- sitting on hefty profits and with ready access to financing -- are bidding aggressively against the large public groups, even for the largest deals.
"They have access to a lot of cash, and they're interested in growing through acquisition," says Alan Haig, head of automotive services for Presidio Group. "In the past, sellers of these businesses just assumed that if I want the cash, I have to go to one of the publics, but that is not the case."
The publics aren't backing down. They're still in the hunt. Indeed, through June, public auto-retail companies spent $133 million on U.S. dealership acquisitions, up 8 percent from the year-earlier period, according to a semiannual report from Presidio, a San Francisco financial services company that brokers dealership sales. Counting international deals, public companies' spending on acquisitions rose 17 percent in the first half to $381 million, the report says.
"If this pace continues, the public retailers are on track to return to 2007 spending levels, albeit with a much heavier weight toward international acquisitions," the report says.
Reliable pricing data for private dealership groups' acquisitions aren't available. But Presidio is working on a couple of deals with private buyers in the $50 million to $60 million range. Haig says he also has had conversations with at least 10 private dealers in the past month who are interested in spending $100 million or more, whether for a single store or a group of stores.
Ron Sompels, partner in charge of accounting firm Crowe Horwath's retail dealer group, says dealers and dealership groups have enjoyed very profitable years and are overwhelmingly positive that industry sales will continue to grow, providing good returns in the next few years.
"Many of these dealers have been able to amass some war chests" for buying stores, he says.
Sompels, who is based in Tampa, Fla., specializes in due diligence on deal transactions. The firm has about 600 dealer clients across the country, most of them large privately owned groups. His firm is the busiest it has been on deals "since before the recession," he says.
The number of big transactions also is increasing. Sompels is seeing purchases in the $100 million-plus range by private buyers, though that's not the typical transaction size.