Lithia buys Carbone Auto Group, boosts Northeast presence

Lithia Motors Inc. has bought Carbone Auto Group, moving the Medford, Ore., publicly traded dealership group into Vermont while adding to Lithia’s existing stores in New York.

The deal is estimated to add more than $600 million in annual revenue, a Lithia statement said today. Terms of the deal were not disclosed.

The acquisition is adding nine dealerships to Lithia’s roster: two stores each of Honda, Subaru and Ford, and one store each of Toyota, Chevrolet, GMC-Buick-Cadillac, Chrysler-Jeep-Dodge-Ram, Nissan, Hyundai and BMW.

“We’re excited to welcome Enessa and Alex Carbone and the entire Carbone team to our family and look forward to sharing best practices to inspire continuous improvement,” said Bryan DeBoer, Lithia’s CEO, in a statement.

Carbone Auto Group provides a foundation for Lithia to expand its exclusive market strategy throughout the Northeast, DeBoer said.

The stores are all in small markets where they are the only franchise, buy-sell advisor Erin Kerrigan said.

“In each case, these are really single point markets where you don’t have a lot of like-brand competition,” Kerrigan, managing director of Kerrigan Advisors in Irvine, Calif., told Automotive News.

Management

Kerrigan represented the Carbone family in the deal. Kerrigan said the family decided to sell due to the lack of a succession plan.

“The third generation felt that selling the business to Lithia would enable them to continue the legacy of the Carbone family,” Kerrigan said.

The stores will retain the Carbone name. Enessa Carbone, who was CEO of Carbone Auto Group, will remain with Lithia as a vice president to lead growth in the Northeast.

Likewise, Alex Carbone, Enessa Carbon’s cousin, will continue to oversee the group’s variable operations, Kerrigan said.

Joe Carbone, Enessa Carbon’s brother, will not be involved in the management of the group. But he will own two of the group’s Harley dealerships, Kerrigan said.

Kerrigan characterized this deal as, “One of the biggest acquisitions of the year in terms of number of franchises, in terms of revenue acquired. I can’t speak towards the transaction terms, other than to say it is a very large transaction.”

Indeed, Carbone ranks No. 94 on Automotive News’ list of the top 150 dealership groups based in the U.S., with retail sales of 10,936 new vehicles in 2015. Lithia ranks No. 5 with retail sales of 137,486 new vehicles last year.

150 stores

“I expect over the next six months we will see more large transactions like this, just from my experience in the market place,” Kerrigan said.

She said prices remain strong for non-luxury franchises.

Lithia will own 150 dealerships in 16 states after this acquisition. Its most recent large acquisition was that of DCH Auto Group’s 27 stores in October 2014. 

Combined with DCH Auto Group’s metropolitan market strategy, the acquisition of Carbone further expands Lithia’s growth potential across the U.S., DeBoer said.

Last quarter, DeBoer told Automotive News that Lithia had completed three acquisitions through July. But, he added, “Our pipeline is jam-packed and we’re pretty sure the second half of the year will be robust.”

That’s in part because prices are coming down to more reasonable levels to close deals, he said at the time. “We’re anticipating that we should be able to complete the purchase of a dealership group as well as complete many single-point acquisitions by the end of the year,” said DeBoer.

The 85-year-old Carbone Auto Group has positioned itself for “future growth,” DeBoer said in a statement, which “adds to our growing pool of entrepreneurial and dynamic store leaders that accelerates our ability to find strong and stable businesses at a pace and return that is typically reserved for green-fielding.”