Several Canadian dealership groups have recently reached across the border to expand or build U.S. footprints as part of what one industry buy/sell expert calls a trend driven by “sun-seeking” and better growth prospects.
Calgary-based Foundation Automotive has twice added to its U.S. network in 2022, firming up two deals for six rooftops in Texas. In February, the East Coast-based Steele Auto Group disclosed the purchase of a pair of dealerships, also in Texas.
And as 2021 drew to a close, western Canada’s Knight Automotive Group stepped into the United States with the purchase of two California dealerships.
Erin Kerrigan, managing director of Nevada-based Kerrigan Advisors, said the weather isn’t the only factor luring Canadian dealership groups south. Population growth, better acquisition prices and greater stability are also influencing the moves.
“As the industry prepares for a lot of change as related to electrification and digital retailing,” Kerrigan said, “there is more risk to the retail model in Canada than there is in the U.S., where we have more robust franchise protections embedded in our individual state franchise laws.”
‘PRETTY RICH’ PRICES
Along with concerns about the encroachment of the direct-to-consumer sales model, Kerrigan said, the “pretty rich” prices for dealerships in Canada are among the top reasons that Canadian groups are broadening their horizons. At the end of March, she said, she was working on three major deals involving Canadian dealership groups headed to the United States.
“With the understanding that there is more protection in the investment, it’s highly appealing in the U.S. because you have more opportunity to increase return on investment in the U.S. than you can in Canada,” Kerrigan said.