Mergers and Acquisitions

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

BROOKFIELD, Wisc., and NEW YORK - 

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

BLOOMFIELD HILLS, Mich. and HOUSTON - 

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

SAN ANTONIO - 

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

MEDFORD, Mass. and SAN FRANCISCO - 

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

DENVER - 

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.

MetroGistics acquires Metro Title Services to expand title, registration services

ST. LOUIS and LENEXA, Kan. - 

MetroGistics Holdings announced Tuesday the acquisition of greater Kansas City area-based Metro Title Services.

This latest development follows recent expansion efforts to merge with AmeriFleet, which the company acquired in January.

“We recognized best-in-class vehicle compliance services as a major market need, and understand that bringing in a world-class provider like Metro Title Services would bring value to our clients and partners,” MetroGistics Holdings chief executive officer William Billiter said in a news release announcing the new acquisition. “Our message to clients is that we will involve you as we move to leverage all our organizational capabilities, and we’ll always do what’s best for you.”

Having worked with roughly over 2,200 government licensing jurisdictions in the U.S. and Canada, Metro Title Services and its team of 60 employees process an average of 1,000 transactions daily, according to MetroGistics.

“We are very excited to be joining the MetroGistics/AmeriFleet family,” added Metro Title Services vice president Eric Kaseff.

“Our plan is to combine the best of our organizations’ compliance-services capabilities to optimize our combined strengths in processing capacity, production processes, market-leading technology, personnel, state relations, Canadian presence, and reputation in the OEM, dealer and aftermarket sectors,” Kaseff continued.

Public dealer groups paying a premium to expand footprints

FORT LAUDERDALE, Fla. - 

If publicly traded dealer groups wanted to buy another rooftop, they had to open their checkbooks or dig deeper into their credit availability based on the figures shared in the Q3 2017 edition of the Haig Report released on Wednesday by Haig Partners.

For the year-to-date numbers ending Sept. 30, Haig Partners calculated publicly traded retailers had spent $935 million on dealerships in the U.S., an increase of 62 percent from the $578 million deployed during the same period in 2016.

The report pointed out that Lithia Motors was the most active of the publicly traded companies and continues to target underperforming large platforms in different parts of the U.S.

“Despite all the noise regarding the potential negative impact on auto dealerships from ride sharing, electrification, autonomous vehicles and changes to the franchise system, the "smart money" is still buying dealerships,” Haig Partners said.

The report also shared that the number of dealerships that sold in the U.S. through the first nine months of the year declined by 18 percent compared to the same period in 2016.

Haig Partners also computed profits at privately owned dealerships for the 12 months ending Sept. 30 were 3.8 percent lower than year end 2016 due to rising costs.

Values of privately owned dealerships fell 3.2 percent during this period, according to the Haig Report. Haig Partners' franchised blue sky multiples were mostly unchanged in Q3, with increased valuations for Subaru and Volkswagen only.

Continuing the trend from 2016, the report showed demand for dealerships shifted from luxury brands to domestic brands that are heavier in trucks and SUVs. Luxury dealerships accounted for 14 percent of acquisitions through Q3, down from 17 percent through Q3 of last year, and purchases of domestic stores increased to 50 percent through Q3 from 46 percent through Q3 2016.

Other key findings from the Q3 2017 Haig Report include:

—Macroeconomic indicators such as GDP, interest rates, employment, number of miles driven and consumer sentiment remain highly favorable for dealers.

—Other trends such as used-vehicle pricing, incentive spending by the OEMs, and rising inventories are growing less favorable to dealers.

—Fleet sales have fallen by 8.3 percent through October, although retail sales are almost flat from the same period in 2016.

—Declines in new and used gross profits per vehicle are being offset by gains in F&I and fixed operations.

—Sales and gross profits continue to increase at dealerships, but expenses are rising faster leading to earnings declines at many public and private dealers.

—The average dealership pre-tax profit during the last 12 months was $1.41 million

—Average estimated blue sky value per dealership dipped 3.2 percent from the end of 2016 to $6.8 million.

—Potential threats from autonomous cars, ride sharing, electrification and changes to franchise laws are so far having minimal to no impact on dealership values.

—Public auto retailers are spending more of their capital on acquiring auto dealerships in the U.S. than last year.

—Private equity firms and family offices continue to make substantial investments in auto retail.

“As we expected, the sharp drop in the first quarter of the year has been offset by strong second and third quarters and we are expecting robust conditions for the rest of the year,” Haig Partners president Alan Haig said. “There are many buyers and sellers in the market and deal financing remains readily available. These are good conditions for buy-sells, so long as sellers understand that their leverage is more limited than in the past.

“Buyers have many options and are increasingly concerned about future profits. They are less likely to chase deals or pay big premiums. If dealers want to sell their dealerships they will likely need to accept today’s offer since tomorrow’s offer could be lower,” Haig continued.

Haig Partners is seeing these conditions in its current engagements that include domestic, import and luxury dealerships that range from Florida to New York to California. The firm has closed dealership transactions with a value of more than $3.6 billion during the past 20 years.

The Haig Report is published each quarter and includes comprehensive data, analyses and opinions about the auto retail industry. Also included in each edition are Haig Partners' blue sky multiples that can serve as a gauge for franchise values.

To download the report, go to this website.

3 primary factors pushing most active buy/sell dealership market ever

IRVINE, Calif. - 

Kerrigan Advisors determined dealerships not only are moving metal this year, but they’re also turning their entire operations at quite a clip, too.

The firm’s Blue Sky Report for Q3 2017 indicated the dealership buy/sell market is poised for its most active year ever with more than 200 transaction closings projected for 2017.

The report described a trio of factors driving market activity, including strong financial markets, well-funded investors and rising real estate values. The firm explained the pressures of a more challenging auto retail market, dropping margins and rising concerns about the impact of disruptive automotive technology on the traditional dealership business model are also having a major impact.

And, while blue sky values are slightly lower than their 2015 peak, and the overall industry is showing some stagnation, Kerrigan Advisors determined 2017 remains on track to be the third most profitable ever, driving more sellers to market and transaction values to record levels when including dealership real estate.

“Historic mega deals with complex ownership structures and multiple franchises are on the rise. These transactions are supported by a financial market that is willing and able to invest hundreds of millions of dollars in auto retail, despite some of the doomsday headlines about slowing sales,” said Erin Kerrigan, managing director of Kerrigan Advisors.

“Investors and financial institutions see an opportunity to participate in a decades-long auto retail consolidation game – one that they expect will produce winners and losers, particularly as technological innovations potentially change the dealership business model as we know it,” Kerrigan continued.

Other key data and analysis from the Q3 2017 Blue Sky Report includes:

—The Kerrigan Index is up 4.24 percent year to date and 608 percent from its 2009 recession lows.

—One hundred and fourty nine dealership buy/sell transactions were completed in the first nine months of 2017, according to Kerrigan Advisors’ research and The Banks Report, compared to 172 transactions in the first nine months of 2016. After hitting a plateau in 2015, buy/sell activity declined slightly in the first nine months of 2017, but is still tracking to be one of the most active years on record.

—Multi-dealership transactions represented one quarter of the completed sales in the first nine months of 2017. Kerrigan Advisors expects at least 51 multi-dealership transactions will close this year.

—Year to date, domestics’ share of the buy/sell market increased to 49 percent, up 18 percent from 2015.

—Non-luxury and luxury import franchises’ buy/sell market share declined.

—Public retailers’ U.S. acquisition spending increased 61 percent in the first nine months of 2017, compared to the first nine months of 2016.

—Private dealership groups represent the largest share of dealership acquirers. Of the estimated 236 franchises that changed hands in the first nine months of the year, only 23 were acquired by public companies.

—Real estate, for most dealers, is the most valuable asset, far exceeding franchise value. Kerrigan Advisors estimated dealership real estate prices rose 3 percent in the first nine months of the year.

The report identified three key trends shaping 2018’s buy/sell market and the remainder of 2017. Those trends included:

—The evolution of the dealership business model drives more sellers to market.

—Dealers are choosing to sell their real estate with their franchise.

—Captive finance companies play a critical role in acquisition financing.

“Our clients increasingly cite the risk factors associated with changes in auto retail as their single biggest reason for selling, with many believing auto retail will consolidate out of necessity, as only the largest, best-capitalized players will have the balance sheet to navigate auto retail’s evolution,” Kerrigan said.

“This is contributing to a very competitive buy/sell market, particularly for top franchises and attractive platforms and the growing population of well-funded buyers in the market,” she continued. “This creates a healthy market equilibrium — one where buyers and sellers agree on price and complete win/win transactions.

“Kerrigan Advisors believes this equilibrium will continue for the next several years and result in a highly active buy/sell market,” Kerrigan went on to say.

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 in the U.S. Most recently, Kerrigan advised on the sale of Puente Hills Chevrolet, in its recent sale to Pendragon PLC.

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, go to this website.

CDK acquires program partner, dealer data analytics solution provider

HOFFMAN ESTATES, Ill. - 

CDK Global announced last week it has purchased partner program participant and full-service enterprise reporting company Dashboard Dealership Enterprises (DDE).

DDE has provided its business analytic reporting suite, Executive Eye, to some of the largest dealership groups in the U.S. and increased its customer base to 600 dealership locations within the last 15 years, according to CDK.

As part of the acquisition, DDE chief executive officer Josh Blick and chief operating officer William Page III will join CDK to help lead further development of Executive Eye.

The acquisition of DDE allows CDK to deliver a more robust reporting solution for dealers, the company said.

“We are excited to bring the capabilities of Dashboard Dealership Enterprises to our customers,” CDK president and chief executive Brian MacDonald said in a news release.

“By adding industry-leading dashboard and reporting capabilities, we will immediately help CDK customers effectively measure the success of their businesses. The company’s experience with many of the nation’s largest dealers also gives us great confidence in taking Executive Eye to our customer base,” he explained.

Additionally, Executive Eye will play a vital role in the company’s efforts to enable end-to-end automotive commerce and help dealers improve efficiency and profitability via metric reporting solutions, according to the company.

“We are very pleased to be able to join CDK and continue improving on the foundation we’ve built with Executive Eye,” added Blick. “The broad capabilities of CDK will help ensure we’re delivering even more value to customers.”

Capstone takes majority stake in Prime Motor Group

NEW YORK - 

GPB Capital affiliate Capstone Automotive Group said Monday it now has a majority equity stake in Prime Motor Group.

With the stake in Prime — which has more than 25 businesses throughout Massachusetts, Vermont, New Hampshire and Maine — this marks Capstone’s first foray into New England.

The acquisition also adds the Acura, Honda, Mercedes-Benz, Toyota and Volvo brands to Capstone’s portfolio.

“As the automotive retail industry continues to adapt to advancements in technology and shifting consumer preferences, the combination of Prime’s visionary management team and Capstone's support can help Prime prosper and expand as a leading provider of vehicles, parts, and service in New England,” GPB Capital founder and chief executive David Gentile said in a news release.

We look forward to leveraging Prime's proven ability to optimize dealership performance and operations in order to benefit customers in all the markets served by our dealerships,” he said.

The deal was finalized this month, and terms were not disclosed.

Prime dealerships sold roughly 35,000 vehicles last year and generated over $1.4 billion in top-line revenue.

Capstone is aiming to buy more New England dealerships under the Prime umbrella in coming months, including a move into Rhode Island. Capstone has a five-year target of $4.5 billion in annual revenue for Prime, and aims to increase Prime personnel from 1,800 to more than 3,000 by 2020.

Prime plans to work with Capstone on building proprietary software aimed at operational and efficiency improvements. The group also will work with Capstone to open its own body shops.

Prime founder David Rosenberg is staying on as CEO.  There will be no changes to daily operations.

“We have always been a family business committed first and foremost to our customers, employees and communities,” said Rosenberg. ”Our partnership with Capstone will enable us to adapt and grow without sacrificing the customer service and employee dedication that define our culture.”