Dealership acquisition market not losing steam in 2022

After decades in auto retailing, Wally Darwish bought his first franchised dealership this spring as 100 percent owner. And he didn't start with just one store.

Darwish went from "zero to 19 franchises" in April, he said, after buying 10 franchised dealerships and two locations where dealerships closed, all in New York state, from Billy Fuccillo Jr. and Fuccillo Automotive Group.

And Darwish aims to keep buying stores for his Wally's Auto Group.

"In the next five to seven years I want to own 90-plus stores," said Darwish, previously a 25 percent partner in an Audi dealership and a former platform manager for Napleton Automotive Group. "That's my dream and I'm chasing it."

The deal is the largest buy-sell transaction documented by Automotive News so far this year in terms of the number of dealerships sold. And Automotive News' tracking shows that dealership acquisitions, coming off a record 2021, remain in high gear.

For the first quarter of 2022, Automotive News so far has counted 71 transactions involving the sale of 102 dealerships. For the second quarter of this year, Automotive News has thus far counted 28 deals involving 39 dealerships. Those numbers will continue to grow as information on additional deals is collected.

In the first quarter of 2021, Automotive News tracked 69 acquisition deals involving 106 dealerships.

Buy-sell experts such as Alan Haig, president of Haig Partners, a buy-sell firm in Fort Lauderdale, Fla., project that the rapid pace of dealership acquisitions will continue in 2022 because buyers are flush from cash as dealerships earn record profits.

"It's going to remain elevated," Haig said.
Brady Schmidt, president of buy-sell firm National Business Brokers in Irvine, Calif., said the volume of stores coming to market is "a little slower than last year."

While representatives of Schmidt's firm are having conversations with potential sellers nationally, some of those dealers are stalling on putting stores up for sale while their profits are at all-time highs, he said.

"There's a reluctance on the part of these potential sellers because they're making so much money," Schmidt said. "They're just not in a rush."
So far in 2022, deals tracked by Automotive News have been a mix of single-store transactions and several multi-store deals. After the Darwish-Fuccillo deal, the deal with the second-largest dealership count occurred in February, Automotive News found, when Jeff Wyler Automotive Family bought seven Ohio stores from Superior Automotive Group.

Schmidt said he's seeing an uptick in owners of small dealership groups looking to grow.

"There's just a real big spike in dealers that own one, two, three, four, five stores that are really interested in expanding in a local geographical basis," he said. "And they're willing to pay for the stores knowing they're competing against larger groups and publics."

Both Schmidt and Haig expect to see more large deals this year, too.

"You're going to continue to see families that have 10, 15, 20, 30 stores say, 'Yeah, I like the valuations right now. I'm not sure about the future, so I'm going to exit while things are good,' " Haig said.

Most of the public dealership groups have been active in buy-sell transactions already this year.

Lithia Motors Inc., which has been on a prolonged acquisition tear, purchased six dealerships in two U.S. deals — picking up three stores in Las Vegas and three in Northern California. And in May, Lithia bought a Honda dealership in Ontario.

And Lithia remains in acquisition mode. In April, Lithia disclosed it had dealership purchases worth $1.9 billion in annual revenue under contract and also said it planned to sell some stores.

Lithia sold a California store representing Stellantis brands in the first quarter, sold a Honda dealership in Texas in April and sold a Subaru dealership in Montana in May.

Other public retailers buying are Penske Automotive Group Inc., which bought a BMW-Mini dealership in Southern California in April and a Hyundai-Genesis store near Indianapolis this month.

Sonic Automotive Inc. in January bought a Chevrolet dealership in New York.

Group 1 Automotive Inc. in April bought a Toyota dealership in Albuquerque, N.M., from Asbury Automotive Group Inc., and in March acquired a Toyota store in Austin, Texas. Group 1 in February sold Toyota and Honda stores in Massachusetts.

Asbury, which closed on the acquisitions of Larry H. Miller Dealerships and Stevinson Automotive in December, sold seven dealerships in five transactions this year to conform with Lexus and Toyota rules following those big deals. Asbury made $327 million on the divestitures.

While Asbury has set ambitious goals to keep growing, including adding 75 or so more stores, Asbury CEO David Hult said the company's near-term focus is on integrating the dozens of dealerships it recently acquired.

"We continue to have conversations with a lot of groups that we're interested in and for the future," Hult told Automotive News in April.

He credited getting those opportunities because of how Asbury integrated its 2020 acquisition of Park Place Dealerships in Texas.

"Everyone seems to be all of a sudden aggressive on acquisitions in the last few months. And the market is not slowing down at all," Hult said.

"There's new dynamics with inflation, the Ukraine war. To me, it's a great time to kind of just sit back and see how the next few months play out and strategize what's next for us."