Kerrigan Advisors spoke to Lou Cohen, President, Marc Cohen, Vice President, and Alison Cohen, Vice President, on their recent sale of Priority 1 Automotive to AutoNation.
Q: 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 will-ing 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.
Q: As a family-run business, what was the hardest part about the decision?
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.
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.
Lou Cohen: Hanging up the day-to-day action.
Q: How did COVID-19 affect your business and impact your decision to sell?
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.
Lou Cohen: Working at home for 13 months was a life-changer.
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.
Q: How do you think electrification will impact dealership profit-ability 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."Kerrigan Advisors was the only advisor I considered when my family decided the time was right for a sale."
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.
Q: What are your plans now that Priority 1 is sold?
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.
Lou Cohen: My daughter is looking to acquire a dealership and I look forward to assisting her.
Q: 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!
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.
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.
Kerrigan Advisors has the honor of advising the industry’s leading dealers nationwide through the lifecycle of growing, operating and monetizing their businesses. In the last five years, we have represented on auto retail’s largest transactions, including more top 150 dealership groups than any other firm in the industry.
If you would like to learn more about the firm, please contact Erin Kerrigan or Ryan Kerrigan at (775) 993-3600 or visit KerriganAdvisors.com.
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