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Acquisitions, sales shake up annual list

Most years, the annual Automotive News list of the top 150 dealership groups based in the U.S. sees a pair of the top dozen dealership groups swap places, and scattered ranking shifts in the middle and lower third of the list.
But last year was a record year for dealership buy-sell activity in the U.S., according to Kerrigan Advisors’ annual Blue Sky Report released this month. The result was not only a shake-up in the rankings, but the appearance and disappearance of some high-profile names.

The list ranks dealership groups by 2015 retail unit sales of new cars and light trucks. Adding or selling stores can have a major impact on the rankings. “The first half of the year was marked by the Van Tuyl transaction, the single largest acquisition in auto retail history,” wrote buy-sell adviser Erin Kerrigan, managing director of Kerrigan Advisors in Irvine, Calif., in the Blue Sky Report.

In March 2015, Warren Buffet’s Berkshire Hathaway bought Van Tuyl Group, No. 4 on the 2015 list, and renamed it Berkshire Hathaway Automotive. Berkshire Hathaway Automotive then declined to provide its data for this year’s list, so the group is not to be found in the rankings. In its absence, Larry H. Miller Dealerships, formerly known as the Larry H. Miller Group of Cos., joined the top 10 on this year’s list from No. 11 last year.

‘Iconic’ sales

That was not the only major change.

“As the year progressed, a number of iconic multi-dealership groups came to market and were acquired,” Kerrigan wrote.

The buyers included both established consolidators and new entrants in the dealership-acquisition field, such as McLarty Automotive, backed by Soros Fund Management and the family offices of La France and J.B. Hunt; Fremont Private Holdings, which is the family office of the Bechtel family; and ZT Motors Holdings, a group of high net-worth investors.

Or consider RFJ Auto Partners, backed by private equity firm Jordan Co. The Plano, Texas, group landed in the No. 49 Spot with retail sales of 19,135 new vehicles last year at its 27 dealerships.

RFJ acquired two of the highest-volume stores in the U.S. when it bought Dave Smith Auto Group, of Kellogg, Idaho, No. 111 on last year’s list, in April 2015. RFJ’s acquisition strategy for 2016 is to start shopping for luxury-brand stores.

Also gone from the list is Swope Automotive Group of Louisville, Ky., which was No. 89 on last year’s list.

In November, dealer Terry Taylor’s publicity-shy Automotive Management Services Inc., of West Palm Beach, Fla., bought the 11 stores from Swope, one of the nation’s best-known family-owned dealerships companies. The sale came less than a year after the group’s founder, Sam Swope, died. Automotive Management Services has consistently declined to provide Automotive News with data.

Movin’ on up

Among the public retailers, Lithia Motors Inc. made the biggest leap, from No. 8 on last year’s list, based on 2014 sales, to No. 5 this year, reflecting sales in 2015. Lithia retailed 137,486 new vehicles in 2015, up 51 percent from 91,192 in 2014.

That sales surge comes largely from Lithia’s purchase of DCH Auto Group in October 2015. Lithia bought DCH’s 27 stores in Southern California, New Jersey, and New York, bringing its total store count to 137 dealerships.
Previously, Lithia’s acquisition strategy had focused largely on smaller, rural markets in the Northwest. DCH put Lithia in urban markets in Southern California and the East Coast. That gave the Medford, Ore., group the ability to at least consider buying stores in both Lithia’s traditional markets and DCH’s urban ones, CEO Bryan DeBoer said.

“Our combination with DCH provided over 1,400 metropolitan store acquisition targets in addition to over 1,200 acquisition targets within Lithia markets,” DeBoer said.

AutoNation Inc. and Penske Automotive Group Inc. retained the top two spots. But they weren’t sitting idly by.

AutoNation, of Fort Lauderdale, Fla., was the most aggressive of the publics in 2015. acquiring 22 dealerships and bringing its total store count to 254. This year, AutoNation is expected to complete the previously announced purchase of the Allen Samuels Auto Group, with 12 dealerships in Texas. Early in 2015, AutoNation purchased 13 stores from Carl Gregory Enterprises Inc., of Columbus, Ga., which was No. 113 on last year’s list and dropped off the list this year.

Penske Automotive added 19 stores. Ganley Auto Group of Brecksville, Ohio, added 13 stores, bringing its total to 43 rooftops and rising to No. 29 from No. 31 a year earlier. Adding 12 stores were Ourisman Automotive Group, of Marlow Heights, Md., which climbed to No. 27 from No. 28, and Price Simms Auto Group of Larkspur, Calif., which nonetheless slipped to No. 79 from No. 77.

Caveats

The list comes with a couple of caveats.

First, for a few groups in the top 150, vehicle sales and revenues include operations outside the U.S. or affiliates beyond franchised new light-vehicle dealerships.

Second, some large dealership groups that Automotive News believes would qualify for the top 150 have declined to respond to our survey.

For example, Morrie’s Automotive Group in Minnesota has 11 stores but never has responded to our survey. Owner Morrie Wagener sold his stake in it last year to Fremont Private Holdings. Automotive News will try again next year to get data from the new owners.

Joe Machens Dealerships, of Columbia, Mo., had 14 stores when it was No. 82 on last year’s list. But after several sales, including the sale of eight rooftops to McLarty Automotive, Machens had just two stores by the endo of October 2015. It, too, dropped off the list. McLarty Automotive did not respond to our survey.

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