Texas U.S. leader in dealership acquisitions

Texas topped all states in the country last year when it came to dealership acquisition volume.

Texas led both in the number of buy-sell transactions completed and the number of individual dealerships in the state sold in 2021, according to an Automotive News analysis of merger and acquisition data.

Of 382 transactions tracked by Automotive News last year, 34 were in Texas and involved the sale of 63 dealerships. Texas had about a 9 percent share of both transactions completed and dealerships sold in the country last year.

California, New York, Colorado and Florida rounded out the top five states for the highest number of dealership transactions, with each respectively producing 33, 30, 23 and 21.

When ranked by the number of dealerships sold, the next four states after Texas were Michigan with 62 stores, California with 47, New York with 45 and Colorado with 44. Michigan popped into the top five for dealership volume because of Lithia Motors' April 2021 purchase of the 34-store Suburban Collection based in the Detroit area.

Dealership buyers frequently seek stores in Texas and Florida because of their favorable tax environments and warm climates, buy-sell consultants say. But demand for deals is high in other states, too.

"States with high population growth and those with business-friendly environments, meaning lower tax rates, less regulation, are in the highest demand," Erin Kerrigan, managing director of Kerrigan Advisors, a sell-side firm in Incline Village, Nev., told Automotive News. "In addition to Texas and Florida, you see demand for Idaho, you see demand for Nevada, you see demand for Arizona, Colorado, these states that have tremendous population growth. And certainly also states like Tennessee, Georgia, where you also see a lot of growth."

Automotive News' tracking of 2021 deals found transactions in all but two states: Delaware and Nebraska. Certain large transactions involved dealerships located in multiple states.

Most states in Automotive News' top five for 2021 as ranked by transaction count also have large populations and, in turn, high vehicle sales.

Several also have a lot of franchised dealerships. Texas, for example, has 1,413 franchised dealerships and sells about 1.5 million new vehicles a year, according to the Texas Automobile Dealers Association. New York has 956 new-vehicle dealerships and Florida, an estimated 894, according to their state dealer associations.

California is home to 1,442 new-car dealerships that sold 1.86 million new vehicles last year, according to the California New Car Dealers Association. The average franchised store in the state sold 1,300 new vehicles and 1,100 used vehicles, and revenue for each dealership averaged more than $101 million in 2021, according to the association.

Brian Maas, president of the California association, called buy-sell activity in his state "robust" for the past few years and said buy-sell advisers have told him they expect that will continue. Buyers are attracted by good operators in the state and large average store sizes, Maas said.

"We have the best car market in the country, and in a typical year we'll sell between 1.9 and 2 million vehicles," he said. "That's several hundred thousand more than the next closest state."

In Colorado, which is growing in population, the deal-making surge — 44 dealerships sold in 23 transactions last year — was led by the acquisitions of Larry H. Miller Dealerships, with several stores in the state, and Stevinson Automotive by publicly traded Asbury Automotive Group. Those deals and others resulted in one of every six franchised dealerships in Colorado trading hands in 2021.

Tim Lamb, president of Tim Lamb Group, a buy-sell advisory firm in Columbus, Ohio, noted that some dealers are broadening their geographic preferences for acquisitions.

"You're seeing dealers from the South, who for the first time ever, are coming up into the Midwest," Lamb said. "That hadn't happened before."

Jack Walsworth contributed to this report