Asbury-Miller merger increases stakes in automotive dealership consolidation

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Kerrigan Advisors estimates that dealership transactions, both single and multi-store, increased 27% to 144 in the first half of 2021.

Haig Partners, a buy-and-sell company in Fort Lauderdale, Florida, estimates that 219 dealerships were sold in the first half of 2021, nearly double the 110 sold in the first half of 2020.

In the first nine months of 2021, Automotive News in the initial counts followed 202 transactions and 347 dealers exchanging hands.

One of the catalysts for the increase in transactions is the activity of Lithia Motors Inc., which is over a long acquisition period. CEO Bryan DeBoer announced in July 2020 his ambition to bring Lithia to $ 50 billion in annual revenue in five years, largely through acquisitions.

“I think the CEOs of other public retailers have said, ‘Whoa, this strategy makes a lot of sense,’” said Alan Haig, president of Haig Partners.

High dealer valuations also guide sales decisions.

“I think the folks at Larry H. Miller realized that if they were to go out, today is the day,” Kerrigan said. “And the valuation they receive reflects the strength of the automotive retail market.”

September’s deal announcements by Asbury, Sonic and Group 1 strengthen the case for the power of scale in the industry.

“Even the largest private groups are seeing changes taking place in automotive retail and realizing that this is an industry where size is really going to dictate success,” Kerrigan said. “Even a company as large as Larry Miller decided it was better positioned to be successful as part of an organization larger than alone.”

Although the industry is still very fragmented, data from the National Automobile Dealers Association shows that dealers are increasingly owning stores.

In 2020, the share of industry owners with one to five dealers was 93.5%, up from 96.2 in 2011, according to NADA. The share of owners of six to ten dealerships was 4.3% in 2020, up from 2.7% in 2011. But only 0.1% of owners operated more than 50 dealerships, the same percentage this group had in 2011.

In addition, the share of American concessions held by the 150 main groups, as followed by Automotive News is up from 13% in 2010 to 21.1% in 2020, according to the Automotive News Research & Data Center. The 10 largest groups achieved 8.4% of new vehicle sales in the United States in 2020, while the top 150 achieved 23.1%.

Given this year’s acquisition pace, these stocks are positioned to rise higher for 2021 and beyond.

Larry H. Miller, at No. 8, is the highest-ranked group on the Automotive News list being absorbed. Prime is # 18; RFJ, No. 42; and Suburban was No. 21.


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