Hitchcock Automotive sold its remaining three Toyota dealerships in February 2022 after the passing of its legendary founder, Frederick “Fritz” Hitchcock. Toyota of Santa Barbara and Northridge sold to Van Tuyl Companies and Puente Hills Toyota sold to Kaminsky Automotive. Kerrigan Advisors represented Hitchcock Automotive in the sale and had the opportunity to interview Ted Hitchcock, son of founder Fritz Hitchcock, and Howard Hakes, President of Hitchcock Automotive, after the sale.
Why did you decide to sell Hitchcock Automotive?
Howard Hakes: At the beginning of 2021, we had no intention of selling Hitchcock Automotive. Fritz, Ted, and I were enjoying the business and believed the next few years would be incredible for auto retail. But tragically Fritz passed away unexpectedly last August and that changed everything. His estate plan stated we should sell the stores in the event of his passing, so we proceeded down that road.
Ted Hitchcock: This was a very difficult decision for me and my family. The passing of my father, a legend in the car business and the founder and patriarch of Hitchcock Automotive, was devastating. I was born and raised in the car business, working alongside my dad. To suddenly sell the dealerships after his passing was one of the hardest things I have had to do in my career.
As a family-run business, what was the most challenging part of the sale?
Howard Hakes: I have loved being in this business for most of my career and working alongside Fritz. We consider all our employees like family. I think that was the hardest part about selling for me – having to say goodbye to hundreds of long-term employees who supported Hitchcock Automotive throughout the decades we have been in business. Our relationships with our longstanding employees, as well as our many industry friendships, will be what I miss most about the business.
Ted Hitchcock: There is no question the hardest part of selling the business is that it felt like an end of an era for our family. My dad loved two things: family and the car business. I grew up surrounded by everything automotive. He was so well connected in all aspects of the industry from his involvement in lobbying for OEMs like Toyota to his leadership of associations like the American International Automobile Dealers Association (AIADA) and the California New Car Dealers Association (CNCDA). Toyota designated an internship in his honor, AIADA has a grassroots award in his name and CNCDA’s Sacramento showroom is named after him. While the sale of Hitchcock Automotive was a diffi cult decision for us, we are happy to know my dad’s passion for the car business will live on with these industry recognitions.
Fritz Hitchcock was a visionary and a leader in our industry. In choosing a buyer for the Hitchcock dealerships, what factors did you consider?
Howard Hakes: Fritz was a car dealer’s car dealer – he did not just care about his own stores, he cared about the industry, and he gave back to the industry that he loved every day. His mission in life was to make the car business as good as it could be. He truly lived the motto that the customer comes fi rst, and he also believed passionately in treating employees well. As you can imagine, picking buyers that would continue Fritz’s legacy of exceptional customer and employee service was of the utmost importance to Ted and me.
Ted Hitchcock: While it would be hard to fi ll my dad’s shoes in the business, we were happy to see Larry Van Tuyl, another legendary car dealer, acquire our Santa Barbara and Northridge Toyota stores. My dad always admired Larry and his success in the car business, and we felt he would be an excellent steward of those stores. Also, we have known the Kaminsky family, who acquired our Puente Hills Toyota store, for decades. The late Bob Kaminsky was a close friend of my dad’s and I know he would be pleased to know that Bob’s sons, Greg and Gary Kaminsky, are now the owners of that store.
"Picking buyers who would continue Fritz’s legacy of exceptional customer and employee service was of the utmost importance to Ted and me." — Howard Hakes, President of Hitchcock Automotive
What surprised you about the sale process?
Howard Hakes: In addition to the speed with which Kerrigan Advisors managed the sale process, I was impressed by the strength of the Toyota brand in the marketplace and the excitement for our stores. We have always believed Toyota is the best franchise in the business and this sale process really confirmed that for me. The demand for Toyota franchises, even in a more difficult auto retail market like California, was incredible. I am grateful to the people at Toyota for all they do to ensure their dealers are successful. It really shows in the tremendous buyer demand for their franchises and the high valuations they receive.
Ted Hitchcock: I was surprised by how quickly the sale process went with Kerrigan Advisors. They really managed everything for us to make sure that we did not miss a detail, helping us every step of the way, including managing the entire due diligence process with the buyers. That was invaluable to us and made for a very effi cient closing.
How did the changes coming to auto retail (digital retailing and electrification) impact your decision to sell?
Howard Hakes: Today’s automotive retail environment is evolving seemingly daily with new announcements about electrification, connectivity, and digital retailing. While I am confident dealers will continue to find ways to succeed no matter what challenges the future holds, I do think the business will be quite different in the decades to come, especially in metro markets where technology is adopted more quickly. That was certainly something we discussed with Fritz a great deal and played into his estate plan for his dealerships.
Ted Hitchcock: I think the next decade is going to be interesting to watch as we see electric vehicles and new powertrains enter the market in a meaningful way. I am excited to see how dealers adjust as the industry and vehicles change so dramatically and online sales becomes a bigger part of the retailing model.
What do you think will be the biggest challenges for private, family-owned and operated dealership groups over the next decade?
Howard Hakes: With the big auto groups getting bigger, I think it will become a harder business for the single-point dealers in the future. I expect more families, like ours, will decide to sell rather than try to navigate the changes coming to the industry, especially if valuations stay so high.
Ted Hitchcock: As these businesses become more valuable, it is harder for family-owned groups to acquire them, particularly top franchises like Toyota. I think we will see more consolidation with larger groups owning a larger percentage of the market, particularly in major metro areas.
Why did you choose Kerrigan Advisors?
Howard Hakes: I have had a relationship with Erin and Ryan Kerrigan for the last 10 years. Fritz always admired their hard work and dedication to their clients, many of whom were friends of ours. The easiest decision we had to make in this whole process was choosing Kerrigan Advisors. They really do handle everything for their clients, from preparing the financials and finding the best buyers to managing the whole due diligence process and ensuring a smooth closing. We always knew they were good at what they did, but this sale experience proved to us they are the best.
Ted Hitchcock: Fritz always respected Kerrigan Advisors and the business Erin and Ryan built. Their team is exceptional at everything they do and, like us, they put their customers first. They were the only firm we considered.
Kerrigan Advisors is the premier sell-side advisor and thought partner to auto dealers nationwide. The firm advises the industry's leading dealership groups, enhancing value through the lifecycle of growing, operating and, when the time is right, selling their businesses. Kerrigan Advisors has represented some of auto retail's largest transactions and advised more of the largest dealership groups in the US than any other buy/sell firm in the industry. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, accounting, finance and real estate, the firm does not take listings, rather they develop a customized approach for each client to achieve their personal and financial goals. In addition to Kerrigan Advisors' sell-side advisory and capital raising services, the firm also provides a suite of consulting services including growth strategy, market valuation assessments, capital allocation, transactional due diligence, open point proposals, operational improvement and real estate due diligence.
Kerrigan Advisors monitors conditions in the buy/sell market and publishes an in-depth analysis each quarter in The Blue Sky Report®, which includes Kerrigan Advisors' signature blue sky charts, multiples, and analysis for each franchise in the luxury and non-luxury segments.—To download a preview of the report, click here.—The firm also releases monthly The Kerrigan Index™ composed of the seven publicly traded auto retail companies with operations focused on the US market. The Kerrigan Auto Retail Index is designed to track dealership valuation trends, while also providing key insights into factors influencing auto retail.—To access The Kerrigan Index™, click here.—To read the—2023 Kerrigan OEM Survey, click here.—Kerrigan Advisors also is the co-author of NADA's Guide to Buying and Selling a Dealership.