The latest move from Lithia Motors continues what has been an active few years on the acquisition side of the business.
The retailer has expanded its operations to Pennsylvania with the purchase of Baierl Auto Group in Pittsburgh.
Lithia announced the acquisition on Monday afternoon.
Baierl, which has Acura, Cadillac, Chevrolet, Ford, Honda, Kia, Subaru and Toyota franchises, pulls in about $500 million in estimated annual revenues, Lithia said.
“The combination of Baierl and Lithia continues our strategy of acquiring dominant franchises with entrepreneurial leadership ready to further unlock the potential of our new team and brand,” Lithia president and chief executive officer Bryan DeBoer said in a news release.
“Since 1954, Baierl has provided exceptional customer service to the Western Pennsylvania Community and we're pleased to partner with them to accelerate growth,” he said. “Entering the Pittsburgh market increases our involvement in cutting-edge technology around autonomous transportation and allows us to proactively adapt and learn from the consumer behaviors and trends associated with it.”
Lithia continues to grow and become more nimble, "strengthening our capital engine for growth," DeBoer said.
"Our strategy of acquiring businesses that have yet to realize their potential provides greenfield rates of return, while the stores we purchased over the past several years supply internal dry powder to deliver earnings growth independent from the new vehicle SAAR as they mature," DeBoer said. "Our entrepreneurial, people-powered culture allows us to purchase unrealized potential at extremely attractive prices with very low risk and outperform not only auto retail, but all retail."
That enterprising spirit was evident in comments made during the company's latest earnings call and through its M&A activity in recent years.
Lithia bought DCH Auto Group in the summer of 2014 and then the Carbone Auto Group last September.
In Lithia's quarterly conference call last month, DeBoer did more than hint that the company was far from done expanding its footprint.
“I think when we think about acquisitions at Lithia Motors, this is something that perpetuates in each and every leader in the organization, here in Medford or in the stores,” DeBoer said. “It’s a day-to-day process that each of us are looking for growth opportunities.
“If we look at the physical market, it is the most robust market that we've probably ever seen,” he continued. “We believe that pricing is starting to equalize where sellers are asking relative prices to what buyers can be expected or willing to pay, and I believe that the coming quarters and years will be a good acquisition climate.”
DeBoer pointed out during the call that the amount of cash Lithia generates annually — $200 million to $300 million — gives Lithia the flexibility to make the moves it chooses. Furthermore, he said Lithia is seeing synergies of blending together its portfolio of stores. However, the Lithia boss reiterated that it’s an ongoing process.
“We want to build market share, we want to build stability, and we want to build those margin improvements and those revenue growth over a period of time,” DeBoer said during the call. “To be fair, it can take two, three, four, five years to be able to build upon that foundation, which is what creates that organic dry powder which allows us to continue to grow our same store sales to reach potential within those new acquisitions. It just takes some time.”