Mergers and Acquisitions

3 reasons why 2017 dealership buy/sell transactions topped 200 again

IRVINE, Calif. - 

Kerrigan Advisors identified a trio of reasons why the dealership buy/sell market surpassed 200 transactions for the fourth consecutive year in 2017.

According to the firm’s latest Blue Sky Report released on Monday, the factors driving market activity included dealership consolidation, profitability, and the growing number of sellers coming to market. Kerrigan Advisors determined many dealers reassessed succession plans in light of disruptive projections about the changing nature of auto retail, and the belief that only large groups will be able to successfully navigate the industry’s evolution. Sellers also cited concern over reliance on OEM incentives to support dealership profitability, as well as manufacturer facility requirements.  

“The economic benefits of consolidation continued to bring new buyers to market in 2017, and these new entrants included a growing number of international auto retailers,” said Erin Kerrigan, managing director of Kerrigan Advisors.

“These international buyers are primarily motivated by the tremendous consolidation opportunity in the US auto retail market, considered by many to be the most fragmented in the developed world,” Kerrigan continued. “High net worth individuals and family offices also sought investments in auto retail in 2017. All of these new entrants are highly attracted to the economies of scale available in US auto retail through meaningful consolidation.”

The Blue Sky Report, published by Kerrigan Advisors, includes analysis of all transaction activity in 2017 and lays out the high, average and low blue sky multiples for each franchise in the luxury and non-luxury segments for the quarter.

Blue Sky Report data and analysis from the 2017 full-year report also includes:

• 202 dealership buy/sell transactions were completed in 2017, according to Kerrigan Advisors’ research and The Banks Report, compared to 221 transactions in 2016.  After hitting a plateau in 2015 at 240 transactions, buy/sell activity declined slightly; Kerrigan Advisors expects an increase of activity in 2018 compared to 2017.

• Multi-dealership transactions declined slightly in 2017. The firm noted 51 multi-dealership transactions closed in 2017, resulting in an 11-percent decrease compared to the record year set in 2016. The size of some dealership groups is a motivating factor in the sale. Many are simply too large and too valuable to pass on to the next generation, particularly given predicted industry disruption.

• For 2017, domestics’ share of the buy/sell market remained steady at 43 percent; import luxury represented 20 percent of the buy/sell market in 2017, a disproportionate number considering that import luxury franchises represent just 9 percent of U.S. franchises.

• Public retailers’ acquisition spending increased 20 percent in 2017 compared to 2016, led by Lithia Motors.

• Private buyers, including new entrants to US auto retail, dominated the 2017 US dealership buy/sell market. Of the 343 franchises sold, 317 were acquired by private buyers.

Over 60 dealership groups now report over $1 billion in sales. That number is expected to grow considerably in the next five years, as the largest groups consolidate the industry.

The report also identified three key trends shaping this year buy/sell market, including:

• Tax reform benefits auto retail and results in increased buy/sell activity

• Dealers’ investment strategies shaped by auto retail’s expected evolution

• Dealership profit variability widens blue sky pricing ranges

“We expect 2018 to be a very active year for buy/sells with more private and public buyers eager to put their capital to work. These buyers believe growth is the answer to a changing auto retail environment and are eager to capitalize on economies of scale and scope,” added Ryan Kerrigan, managing director of Kerrigan Advisors. “We also expect more sellers coming to market in 2018, particularly given the drumbeat of change reverberating throughout the industry.”

Kerrigan Advisors is deeply involved in the buy/sell market having advised on the sale of 60 dealerships, including four of the Top 100 dealership groups (Sam Swope Auto Group, the Carbone Auto Group, the Tonkin Family of Dealerships, and Downtown LA Auto Group) since 2015. Kerrigan Advisors’ extensive experience representing the largest dealership groups in the country provides the firm with a unique perspective on the trends shaping the industry and today’s franchise values.

The Blue Sky Report, a Kerrigan Quarterly, is published four times a year and includes Kerrigan Advisors’ signature blue sky charts, multiples and analysis for each franchise in the luxury and non-luxury segments. To download The Blue Sky Report, .

Kerrigan Advisors also releases a monthly index, The Kerrigan Index, composed of the seven publicly traded auto retail companies with operations focused on the U.S. market.  The Kerrigan Index is designed to track dealership valuation trends, while also providing key insights into factors influencing auto retail. To access The Kerrigan Index, .

After acquiring Clarity Services, Experian launches alternative-data-driven solution

COSTA MESA, Calif. - 

Editor's Note: Story and headline updated for clarity and to correct timing of Experian's purchase of Clarity Services. Experian has rolled out its first innovation stemming from its purchase of Clarity in October.  

This past fall, two of the traditional credit bureaus each acquired a different specialist in alternative consumer credit data.

And now one of those credit bureaus, Experian, has rolled out its first offering from that purchase: Clear Early Risk Score.

According to an announcement distributed on Monday morning, Experian — through its acquisition of Clarity back in October  — now has increased visibility on more than 62 million consumers who rely on small-dollar loans, point-of-sale financing and auto title loans.

Experian highlighted that auto finance companies and other lenders can gain a previously unavailable view of consumer loan and payment activity, spanning both mainstream and alternative financing, from one of the most comprehensive consumer credit databases in the industry, while providing financial access to more consumers.

Following the Experian acquisition of Clarity Services in October, TransUnion made a similar move within the space and acquired FactorTrust last November.

Delivering on its commitment to help finance companies reduce risk and be more inclusive to consumers, Experian highlighted it is bringing its Clear Early Risk Score to market. This new score is designed to clear a wider path for more types of alternative credit data to be leveraged in lending and provides a unique view of how accounts are performing in the early stages of credit relationships.

To understand more about the market need surrounding this development, Clarity’s upcoming 2018 Subprime Lending Trends Report shows that installment loan sizes have increased by 17 percent since 2016, and non-prime consumers have shown improved stability over the last four years.

These trends, along with the fact that approximately one-third of U.S. adults depend on alternative financing, underscore how important this segment is to our economy. Experian insisted it is invested in bringing new types of data into the risk evaluation process to help make a difference in our evolving society.

Officials highlighted Clear Early Risk Score is designed to do just that — bring a deeper level of alternative data into focus with an unprecedented lens. The score was created using one of the most comprehensive repositories of positive and negative alternative financial services information available today, which can give institutions a view of financial behavior across the full U.S. lending spectrum.

The score, which applies unique analytics leveraging both Experian’s national credit bureau and Clarity Services’ specialty credit bureau, can predict a consumer’s creditworthiness over a 12-month period. This expanded early risk insight for finance companies can translate into improved access to credit for responsible borrowers.

“Our clients are constantly innovating when it comes to better understanding consumer financial behaviors. It’s at the heart of their business growth and customer relationships,” said Andrew Sheehan, general manager of Clarity Services at Experian.

“This comprehensive score taps Experian’s proven credit bureau and analytical expertise, along with our newest alternative credit data, to deliver insights spanning both mainstream and nontraditional lending,” Sheehan continued. “Making this connection is a major step forward for Experian clients and consumers.”

Experian pointed out that approximately 25 percent of U.S. consumers are considered “thin file” because they have fewer than five items in their traditional credit histories. These consumers often face significant obstacles to obtaining credit and have limited credit options.

By adding the information from alternative credit data sources, Experian thinks these consumers may gain more access to credit. Being able to assess risk and extend contracts confidently to borrowers with either thin or thick files is a unique benefit that will empower lenders and provide a complete picture of the consumer.

Experian went on to stress that greater visibility and transparency around payment behaviors is a critical element in lending in a post-recession environment. The company added that making the right decisions benefits not only the lender, but also the applicant.

“It’s our number one goal to improve credit access for millions of consumers. An increasing number of consumers in this country are relying on alternative finance products, and these individuals should be visible and able to build or rebuild credit with the positive payments they make,” said Alex Lintner, president of Experian Consumer Information Services.

“This is another step forward in our strategy to expand reach and be more inclusive. We are committed to helping create a better path for these consumers to secure affordable credit and financial opportunities.”

To learn more about trends in alternative financial services and the increased consumer visibility alternative credit data offers to lenders, Experian is hosting a free, 60-minute webinar on Tuesday at 1 p.m. (EST). Registration for the session .

Group 1 acquires Mercedes-Benz, smart dealerships; appoints UK operations head


Group 1 Automotive recently announced Mercedes-Benz and Smart franchise acquisitions from U.K.-based Robinsons Motor Group. The dealer group has also appointed Darren Guiver to serve as its U.K. operations managing director, a move that was effective Thursday.

The company acquired three smart franchises and five Mercedes-Benz franchises.

During Group 1’s quarterly conference call on Feb. 8, the company discussed looking for new-car dealership “opportunities” in the U.S., U.K. and Brazil markets.

The company has increased its U.K. operations to 47 dealerships, which includes 12 existing brands.

“We are pleased to further expand our global relationship with Mercedes-Benz through the addition of these five dealerships to our growing UK platform,” Group 1 chief executive officer Earl Hesterberg explained in a new release.

Group 1 said that it expects to generate an approximate $260 million in annualized revenues from the acquisition.

The newly acquired dealerships are located northeast of London in Suffolk and East Anglia and neighbor several other existing Group 1 dealerships in the area.

Meanwhile, in his new role as head of U.K. operations, Guiver will report directly to Hesterberg.

Following the sale of his dealer group, Spire Automotive, Guiver joined Group 1 in February 2016.

“Darren is a highly experienced retail operator with a proven track record of success,” Hesterberg said. “My top management team and I have complete confidence that Darren is the right person for this role.  He and I have been working together almost daily for the past two years so we expect this transition to be seamless.”

Lithia keeps growing, adding 6 NJ stores

MEDFORD, Ore. - 

Lithia Motors continues to add more stores to the dealer group near locations already in the company’s portfolio.

Within days of announcing an acquisition near Pittsburgh, Lithia said on Thursday that it has acquired six marquee stores from Prestige Family of Fine Cars in Bergen County, N.J., including a BMW, Mini, Mercedes-Benz, Toyota and two Lexus stores.

The group is estimated to generate $900 million in steady state annual revenue.

“We are pleased to welcome the Prestige team to our family,” Lithia president and chief executive officer Bryan DeBoer said. “These stores are centrally located in Paramus and Ramsey, New Jersey near our existing DCH operations. These are high volume, luxury stores nicely matching one of the most affluent areas in the country.”

DeBoer maintained that the proximity to the company’s existing locations will allow Lithia to share best practices and realize synergies among the Prestige, DCH and Carbone stores.

He added Prestige will diversify the group’s brand mix in the Northeast, strengthening our luxury product offerings.

DeBoer also emphasized that Lithia seeks strong franchised stores in dominant market areas that have yet to realize their full potential.

Commenting on the acquisition activity, DeBoer stated,

“With this transformational acquisition, along with the previously announced Day Auto Group and Ray Laks transactions, we have added over $1.3 billion in steady state annual revenue in the first two months of 2018,” DeBoer said.

“As a result, we are increasing our annual outlook to a range of $12.0-12.5 billion in revenue and $10.60 in earnings per share,” he continued. Day and Prestige are contributing minimally to our 2018 earnings due to their relative underperformance and incremental debt costs, but can deliver earnings similar to our core operations in the future.”

Lithia broadens Pittsburgh footprint by acquiring Day Automotive Group

MEDFORD, Ore. - 

Lithia Motors obviously likes turning metal in the Steel City.

On Tuesday, Lithia announced it has acquired Day Automotive Group in Monroeville, Pa., a suburb of Pittsburgh. The Day group is estimated to generate $340 million in steady annual revenue.

Day joins Baierl Auto Group as the second acquisition in 10 months in the Pittsburgh metro area and creates a combined platform with nearly $1 billion in annual revenue.

“We are excited to add the Day team and their strong franchise mix to our operations in Pennsylvania,” Lithia president and chief executive officer Bryan DeBoer said in a news release.

“This acquisition rounds out our presence in Pittsburgh, adding stores in the desirable southeastern metro area to complement our locations in affluent Cranberry Township,” DeBoer continued. “We continue to see a robust acquisition environment and anticipate more acquisitions in the near term.”

Day’s brands include Audi, Chevrolet, Ford, Subaru and Volkswagen. The Baierl acquisition included Acura, Cadillac, Chevrolet, Ford, Honda, Kia, Subaru and Toyota franchises.

“We seek strong franchised stores in dominant market areas that have yet to realize their potential. We continue to expand our omni-channel retail strategy to innovate and serve customers throughout the United States,” Lithia said.

Another $395M from private equity flows into auto fintech space


Private equity firms continue to see auto financing as an excellent option to leverage.

In recent weeks, Bain Capital Ventures injected $55 million into defi SOLUTIONS, and Fair secured a round of strategic equity funding that is led by Siemens-backed next47 global venture fund and also includes BMW, CreditEase FinTech Investment Fund, Millennium Technology Value Partners, 137 Ventures, G Squared and Upfront Ventures.

Then last week, Fiserv, a global provider of financial services technology solutions, announced it has entered into a definitive agreement with Warburg Pincus, a global private equity firm focused on growth investing, pursuant to which funds affiliated with Warburg Pincus will acquire a 55 percent share of the Lending Solutions business of Fiserv.

Fiserv said it will receive approximately $395 million in net after-tax proceeds and retain a 45 percent equity interest in the business.

The transaction, which is subject to customary closing conditions, is targeted to close in the first quarter.

The companies highlighted the joint venture will include all of the automotive loan origination and servicing products and related operations of Fiserv, as well as its LoanServ mortgage and consumer loan servicing platform. Fiserv will retain its Secure Lending product for e-contracting and its UniFi mortgage origination solution.

Executives continued that the new venture is also expected to create value for current and future Fiserv clients by partnering closely with Fiserv for seamless delivery of account processing, integrated billing and payments and LoanComplete solutions, and through Warburg Pincus’ demonstrated expertise and track record in growing financial technology businesses of scale.

The business will continue to be led by Bret Leech, current president of Fiserv Lending Solutions, and focus on delivering a market-leading lending experience through innovative, borrower-centric technology and processing solutions.

“Fiserv is committed to delivering value for clients, and we expect this partnership with Warburg Pincus to further enhance service and innovation across the lending marketplace,” said Jeffery Yabuki, president and chief executive officer of Fiserv.

“In addition, we will continue to provide integration advantages to ensure that our collective clients get the best of both organizations to provide differentiated value for our clients, associates and shareholders,” Yabuki continued.

The Fiserv Lending Solutions business is a participant in automotive lending origination technology, automotive lending servicing technology and process solutions, as well as comprehensive mortgage and consumer loan servicing solutions.

“We are pleased to partner with Fiserv and the Lending Solutions leadership team on this new joint venture, which brings together two leading businesses that provide mission-critical solutions to a growing and attractive client base,” said Jim Neary, managing director at Warburg Pincus.

“We see meaningful opportunity to further build this business into a leading platform in automotive and mortgage lending technology,” Neary went on to say.

Warburg Pincus brings more than four decades of growth focused investing in financial services and deep experience in advancing technology products and platforms that serve a diverse range of consumer lending needs across multiple business channels.

Leech added, “We look forward to collaborating with Warburg Pincus to build on our combined vision of lending technology excellence to better serve the evolving needs of our clients and their customers.”

Group 1 boasts 2 new El Paso stores; Penske announces cash dividend increase


Group 1 Automotive announced this week it has expanded its business presence in El Paso, Texas with the acquisition of new Audi and Subaru stores.

And in other news to stem from top dealer groups, Penske Automotive Group’s board of directors has also reported it approved an increase in the cash dividend to $0.34 per share for the fourth quarter of 2017. 

Group 1 said Monday that its new Audi El Paso and Subaru El Paso dealerships are expected to produce an estimated $65 million in annualized revenues.

“We are pleased to expand our dealership footprint in the fast-growing El Paso market and increase our existing partnership with Audi and Subaru,” Group 1 president and chief executive officer Earl Hesterberg said in a news release announcing the company’s recent acquisitions.

Group 1's El Paso market footprint has grown to seven franchises: Audi, BMW, Buick, Ford, GMC, MINI and Subaru.

Meanwhile, the cash dividend per share increase approved by the board of directors at Penske is payable on March 1, to shareholders of record on Feb. 12, according to the company.

“I am pleased to announce that our board of directors has increased the dividend for PAG's shareholders for the 27th consecutive quarter,” added Penske president Robert Kurnick, Jr. in a news release Tuesday. “The increase in the dividend reflects our commitment to increasing returns for shareholders and reinforces the continued confidence we have in the strength of the company's business model and cash flow."

Copart acquires San Antonio facility with over 1 million abandoned tires


Copart announced in that it has purchased San Antonio’s former Safe Tire Disposal Corp. facility at 11150 Applewhite Road with plans to clear the 36-acre property of over one million abandoned tires.

It was found that the site housed over one million tires following a 2014 state investigation by the Texas Commission on Environmental Quality, which received complaints from San Antonio residents that mosquitoes are coming from the property.

Copart said despite enforcement actions, the tire site has remained a problem over the years.

“Our new San Antonio property acquisition is a win-win for Copart and for the state of Texas,” Copart chief executive officer Jay Adair said in a news release. “Copart is pleased to be part of the solution to the tire disposal site. This is not just good business for Copart, it’s also good environmental stewardship. It’s the right thing to do.”

At the neighboring facility on 11130 Applewhite Road, Copart currently operates its San Antonio auction location.
Copart said after the remaining tires are cleared from the newly acquired property, it will expand its vehicle storage and auction operations onto the site.

“The Texas Commission on Environmental Quality looks forward to partnering with Copart to remediate the tires at the former Safe Tire site in San Antonio,” added Richard Hyde, executive director of the Texas Commission on Environmental Quality. “The TCEQ, elected officials and local residents have worked to find solutions to the problem and welcome Copart as a good steward of our environment.”ind solutions to the problem and welcome Copart as a good steward of our environment.”

Agero acquires Swoop to strengthen driver assistance services


Agero announced Tuesday that it has acquired San Francisco-based SwoopMe (Swoop), which provides web-based dispatch solutions for roadside assistance providers via its end-to-end dispatch management platform designed to help users optimize operational efficiencies.

While Swoop’s employees have joined Agero, it will remain an independently managed dispatch solution and maintain its current San Francisco presence.

“We are excited to bolster our service provider relationships by joining forces with the Swoop team, as we believe they’ve created the industry’s most innovative and comprehensive service provider platform,” Agero chief executive officer and president Dave Ferrick said in a news release. “The responsiveness and quality of the roadside service provider is central to customer experience and loyalty, and Agero remains committed to investing in and partnering with a multitude of dispatch platforms to ensure we deliver that premium roadside connection.”

In addition to its dispatch partner integrations, Agero said offerings from Swoop will complement the company’s existing roadside provider assets such as its RoadsideConnect app.

The Swoop acquisition also follows Agero’s recent launch of its proactive service response model and leading omni-channel experience.

“Joining Agero allows us to double down on our already powerful service provider offering. We will continue to work hand in hand with our service provider community to further develop a compelling solution for their operational and business needs,” added Swoop co-founder and chief executive officer Sameer Bhalla.  “We could not be more excited about coupling our unique platform with the resources, experience, and operational excellence of Agero’s team and business. We believe it represents a truly unique partnership in the industry that positions us well in the ever-changing automotive and insurance environment."

LHM Nissan store purchase expands Colorado footprint to 14 locations


Larry H. Miller Dealerships recently acquired a Nissan store in Centennial, Colo., growing its footprint in the Denver Metro area to 12 stores.

The store has been renamed Larry H. Miller Nissan Arapahoe and is located at 10030 East Arapahoe Road.

“Nissan has been a standout brand for us, and this location on Arapahoe Road is very conducive to selling cars,” LHM president Dean Fitzpatrick said in a news release. “We look forward to continuing to operate with integrity and provide an outstanding level of service to our customers as we grow in the Denver market.”

LHM now operates a total of 14 dealerships in Colorado and employs over 1,200 people across the state, according to the group.

Larry H. Miller Nissan 104th opened just last year. Larry H. Miller Dodge Ram Havana, Larry H. Miller Colorado Chrysler Jeep, Larry H. Miller Fiat Denver and Larry H. Miller Nissan Southwest opened in 2016.

Additionally, LHM’s first Nissan store, Larry H. Miller Nissan Highlands Ranch, opened in 2006.

The group’s portfolio includes 64 dealership locations in seven western states.

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