Sheldon Sandler, CEO of Bel Air Partners, a buy-sell advisory firm in Hopewell, N.J., said the smaller deal is an easier and cheaper lift for newcomer LMP. Sandler said automaker preference to not have one dealership owner in contiguous markets is common across the industry. "Even Roger Penske, who's obviously one of the great stars of the industry, Penske has to agree those rules also," Sandler said.
Aldahan sees the geographic concentration issue with certain automakers as only a temporary hurdle, however.
Under terms of the revised deal, LMP will have the right to make a first offer to Atlantic to buy the remaining stores, Aldahan said. LMP wants to eventually buy a stake in all of Staluppi's stores, he said.
If the smaller deal closes, the Atlantic acquisition is expected to generate $655 million in revenue and $15 million in net income for LMP in 2021.
"We look forward to working with LMP and the manufacturers," Atlantic CFO Rob Dito said.
LMP expects to close this month on the purchase of another eight franchised dealerships in West Virginia, Florida and Tennessee, plus five used-vehicle stores in West Virginia. In December, LMP and the seller of Toyota Newnan of Georgia agreed to terminate a July purchase agreement that had called for LMP to acquire a 75 percent stake in the store for $27 million. LMP did not disclose why that deal was scrapped.
Mike Baker, managing director and consumer analyst with D.A. Davidson Cos., a financial services firm, doesn't cover LMP but is researching the company.
Baker said it's uncertain whether LMP will deliver on the earnings projections it has shared publicly. But finalizing some of its planned franchised dealership purchases will give confidence to shareholders, he said.
"Investors need to see some of these transactions close successfully," Baker said.