Kenningham: Large acquisitions “don’t come up every day.”
While Group 1 Automotive Inc. will likely make more acquisitions in 2023, CEO Daryl Kenningham said the transactions may not come at the same rate as over the previous 18 months.
Kenningham said during a keynote chat at the Automotive News Retail Forum: NADA on Thursday that it's hard to predict deal pace.
"Sometimes it's just opportunistic," Kenningham said. "We were able to buy a really big group 14 months ago in New England ... and those don't come up every day."
Group 1 purchased 28 dealerships in New England from Prime Automotive Group in late 2021. But acquisitions such as the Prime deal aren't easily done or planned, he said.
"If another one came up like that, we'd certainly love it," Kenningham said. "We don't have anything like that we're looking at today, but you never know when one will pop up."
When the public dealership giant, based in Houston, reported fourth- quarter earnings Wednesday, Kenningham noted in a call with analysts that Group 1 had acquired dealerships expected to produce more than $3 billion in annual revenue during the previous 15 months, with $1 billion alone coming in 2022. Kenningham was promoted to CEO on Jan. 1, replacing now-retired Earl Hesterberg, who was Group 1's longtime chief.
Dealership Buy-Sell: This Automotive News feature lists dealership acquisitions as reported by brokers, news media and official announcements. See our list of buy-sells and submit details of your deals here.One factor that could slow the pace of acquisitions is rising interest rates. Kenningham acknowledged that rate hikes have increased the cost of capital for making acquisitions.
"You have to be careful because your cost of money creates a different return model that you have to be cognizant of," he said. "We are seeing the valuation soften a little bit as a result, and I think some of the sellers realize that."
Kenningham told Automotive News after the forum that he envisions making acquisitions in both the U.S. and the United Kingdom, Group 1's current markets. But he added that U.S. deals will be a priority.
While Group 1 has no acquisition deals in the pipeline that Kenningham was willing to comment on, there is "always stuff floating around," he said.
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