Before Warren Buffett bought Van Tuyl Group in October, the buy/sell sensation of the year was Lithia Motors' surprise acquisition of DCH in June. Lithia paid $340 million in cash and another $22.5 million in stock for the 27-store group.
But did Lithia over- or underpay for DCH?
Lithia CEO Bryan DeBoer offered some guidance on that question after the company released its third-quarter earnings. Overall, he says, the DCH deal stacked up well against the internal financial targets Lithia uses when it makes an acquisition, as shown in the table.
Still, it was on the "low end" of those targets when it comes to return on investment and revenue. DeBoer said the nation's eighth-largest dealership group will continue to seek acquisitions that clear its financial hurdles: for example, a return on investment of 75 to 100 percent within five years.
On the other hand, he says, the benefits of buying DCH go beyond immediate numbers. Lithia had focused largely on smaller, rural markets in the Northwest. DCH puts Lithia in urban markets in Southern California and the East Coast and gives it "the ability to grow in not only our exclusive markets, but in the urban areas."