Exit strategy on Buffett deal? Not so fast, says Larry Van Tuyl
Selling to a highly respected outside investor such as Warren Buffett may have been the ideal exit strategy for Van Tuyl Group -- and one of the few exit paths available to such a large automotive retailer these days, said some dealership buy-sell advisers.
But Larry Van Tuyl doesn’t see it that way.
The buy-sell advisers’ logic is straightforward. It probably would have been difficult for Van Tuyl, with its 78 stores selling 28 brands primarily in the popular Sun Belt states, to be acquired whole by another dealership group. There likely would be too much overlap of markets and franchises for such a deal to be readily approved by automakers, which put limits on store ownership through their framework agreements.
The only other alternative would have been a lengthy, piecemeal sale of the group, store by store.
‘You can always grow’
But that’s not the full story, said Van Tuyl, CEO of the dealership group. He will become chairman of the renamed Berkshire Hathaway Automotive after the sale closes.
“I understand what they’re saying, and I understand why people would say that,” he said. “But if you perform, you can always grow. And we’ve always performed, and so we can always continue to grow. I guess it depends on what you think big is.”
People who believe that the tie-up with Buffett was one of the few paths available for Van Tuyl “could never do anything like this,” he said with a laugh. “They’re not very big thinkers.”
Van Tuyl built the business with his father, Cecil, who bought his first new-car dealership in 1955 and died in 2012. Larry Van Tuyl, 64, said the group didn’t particularly need an exit strategy. The next generation of his family isn’t involved in the business, he admitted, “but we have great people, and I believe you can find great people, and we have great people with vested interest.”
‘How big is big?’
The dealership group’s strategy has been to offer an equity stake in each store to that store’s general manager to increase the entrepreneurial sense of ownership.
The deal made sense for Van Tuyl because Buffett “saw the same things that we see, which is ‘Hey, how big is big, really?’”
Van Tuyl will generate $9 billion in sales this year, he said. And, given the consolidation opportunities in the industry, who knows what that number could look like in 10 or 15 years?
“Mr. Buffett, Berkshire, has an incredible reputation, so it’s a good marriage of both,” Van Tuyl said. “We’re in great shape; we’ve got great relationships with the manufacturers we do business with. When you combine that with a powerhouse like Berkshire Hathaway, you go, wow, what is the potential? And so that’s why we did it. It just made sense.”
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