Priority 1 Automotive was one of the largest private dealership groups in the Baltimore, Maryland market owned by Lou Cohen, Marc Cohen and Alison Cohen. In 2021, Kerrigan Advisors represented the Cohen family in the sale of their nine dealerships, including Porsche Towson, BMW of Rockville, BMW of Towson, BMW of Bel Air, MINI of Baltimore County, Jaguar Land Rover Hunt Valley, Audi Owings Mills, Acura of Hunt Valley and Frankel & Chesapeake Cadillac, and three collision centers located in Cockeysville/Hunt Valley, Rockville, and Towson, to AutoNation.
Why did you decide to sell Priority 1 in 2021?
Lou Cohen: At the suggestion of my son and because I turned 80 years old.
Marc Cohen: We attempted to acquire two different stores in 2020 and realized, based on the final purchase price of those transactions, prices were much higher than what we were willing to pay. Following a wild ride in 2020 with the uncertainty of COVID and the impact – both positive and negative – that it had on the business, we began to evaluate the long-term succession planning for our family. As the business got extremely good at the end of 2020 and the beginning of 2021, we decided to test the market and sell if we could achieve the number that we wanted.
Alison Cohen: Over the last few years, we grew our business quite a bit. It was great that we grew, but I was spending a good bit more time at corporate, and not getting to do what I loved – being in the stores, working with our employees and getting to know our clients.
As a family-run business, what was the hardest part about the decision?
Lou Cohen: Hanging up the day-to-day action.
Marc Cohen: It was a difficult decision because my dad had lived this business for 60 years and along with my sister, we all put so much of our lives into this business. Plus the fact that many of our employees were like family, having worked together for a long time.
Alison Cohen: The toughest part of the decision for me was letting go of the legacy our dad built and brought us into. The decision also was tough because so many of our employees had been with us for 10-plus years. They helped teach me the business and truly became like family over the years.
How did COVID-19 affect your business and impact your decision to sell?
Lou Cohen: Working at home for 13 months was a life-changer.
Marc Cohen: The beginning of COVID made me realize how much capital was tied up in the business and how quickly the market can change and how much of an impact it can have on a big operation. It also affected how quickly you need to pivot and handle employees’ COVID concerns and staffing issues – all of which played a role in rethinking our long-term game plan.
Alison Cohen: COVID definitely put a strain on the business as far as staffing. Between people calling in sick and us having trouble hiring, it made things very difficult.
"The toughest part of the decision for me was letting go of the legacy our dad built and brought us into." — Alison Cohen, Vice President of Priority 1 Automotive
How do you think electrification will impact dealership profitability in the future?
Lou Cohen: Electric vehicles will be good for volume and gross. The chip shortage has taught dealerships how to sell value and consumers how to buy at fair market value.
Marc Cohen: While the car business is an amazing and dynamic business, filled with resilient people who have made it great through both good and bad economies, there is no doubt there are headwinds that create a lot of uncertainty. Between the electric-car movement and what that might mean for the future of fixed operations and the entry of electric-only manufacturers that sell direct to consumers, it is hard to see how there will not be some negative impact on profitability. However, dealers are amazingly adaptive and will find ways to keep their businesses flourishing.
Alison Cohen: I think more manufacturers will try to become like Tesla and eliminate dealers. Electric vehicles also will greatly impact the service business as we know it. There will be a great deal of technical issues, but there won’t be basic maintenance like we’ve become accustomed to all these years.
What are your plans now that Priority 1 is sold?
Lou Cohen: My daughter is looking to acquire a dealership and I look forward to assisting her.
Marc Cohen: We plan to continue to operate our independent vehicle leasing business, as well as grow our real estate business. A used car lot also will likely be in our near future.
Alison Cohen: Ultimately, I would love to get my own BMW & MINI franchise that I could operate and be involved in all of the day-to-day operations, preferably in Florida.
What do you think the auto retail business will look like in 10 years?
Lou Cohen: I believe that the current chip shortage has made the dealers and the manufacturers realize less can be more – that they can sell the value without incentives and maintain realistic margins. It is a business of supply and demand and the manufacturers are seeing and reaping the benefits of this with their off-lease units, as well as with client trade-in values. The motor vehicle is not a depreciating asset today!
Marc Cohen: I believe the electrification movement will have a major impact on the way that the business looks, but I strongly believe that dealerships will remain a vital part of the process.
Alison Cohen: I think dealers will hold less inventory and clients will continue to order their new vehicles. That current business model seems to be working well for both dealers and the manufacturers.
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.