Warren Buffett now is officially a dealer, and according to the famous investor whose net worth tops $70 billion, “the fun has just started.”
Buffett’s famed company, Berkshire Hathaway, on Tuesday completed its acquisition of the Van Tuyl Group, the largest privately held dealership group in the United States. The company claimed this historic transaction, which first was announced in October, is the largest in the retail automotive industry's history.
The company has been renamed Berkshire Hathaway Automotive and is headquartered in Dallas.
Larry Van Tuyl will serve as chairman of the board of the new company. Jeffrey Rachor, formerly Van Tuyl Group's president, will be chief executive officer of the enterprise.
Buffett explained the cornerstone of the Van Tuyl business model is local entrepreneurial dealership managers with minority ownership stakes. He indicated every managing partner has enthusiastically committed to stay on with Berkshire Hathaway Automotive, and they will remain equity partners in their respective dealerships.
“This is the beginning of a journey that will have no end,” Buffett said. “Cecil and Larry have given us the ideal platform with which to build an auto dealership business that will be thriving and growing 50 and 100 years from now.”
Larry Van Tuyl shared some details about how this transaction unfolded.
“Mr. Buffett and I made this deal on a handshake and it is no surprise that completing the transaction went smoothly and according to plan,” Van Tuyl said. “Berkshire Hathaway’s acquisition of the Van Tuyl Group has been embraced by all internal and external stakeholders.
“I want to take this opportunity to thank our manufacturer partners for their universal support and approval of the transfer of their franchises,” he continued. “Warren Buffett and Berkshire Hathaway are the perfect owners of this business. My father Cecil, the original founder of the Van Tuyl Group, would be very proud today."
Now as Berkshire Hathaway Automotive CEO, Rachor added, "Our partners and 10,000 plus associates are extremely proud and excited about the bright future as Berkshire Hathaway Automotive. We are all grateful that Mr. Van Tuyl found the ideal buyer to preserve the Van Tuyl business model and our unique entrepreneurial culture.
“The organization will continue to execute our simple strategy of operational excellence and sensible growth through acquisitions,” Rachor went on to say.
This week, ALS Resolvion announced the completion of its operational and financial integration resulting from the merger of American Lending Solutions and Resolvion. The two companies formally merged last September, creating one of the largest repossession management and skip-tracing firms in the auto finance industry.
Officials highlighted the combined business currently employs more than 160 people and will handle in excess of 15,000 new assignments each month. The current client base also includes 23 of the top 50 auto finance companies in the nation.
"The completion of the integration allows us to service our clients seamlessly regardless of location or type of portfolio,” ALS Resolvion chief executive officer Michael Levison said.
“One of the main attractions of the merger from Resolvion’s perspective was ALS’ robust agent network. Incorporating the capabilities of this network coupled with Resolvion's deep skip skills is already having a positive impact on results,” Levison continued.
Additionally, the centerpiece of the union was the incorporation of ALS proprietary repossession management platform (WOMBAT) with the Masterqueue skip-tracing system used by Resolvion on deep skip business.
"The combination of these two powerful systems will help ensure that we stay at the top of client scorecards in both pre and post charge off portfolios,” ALS Reolvion president Jose Mendiola said.
Another key milestone accomplished is the consolidation of compliance programs. ALS Resolvion indicated the combined effort now provides an end to end program covering agent vetting/monitoring, agent site visits, representative training, call recording and a variety of quality control mechanisms.
Management mentioned the last step in the integration process will be to introduce call center redundancy systems to provide full data center redundancy but also full call center disaster recovery. The phase is expected to be completed by the end of month.
For more information about ALS Resolvion, contact Mendiola at (704) 935-5700, ext. 3111) or by email at [email protected].
Dealer groups are getting bigger. For example, just since the year began, AutoNation acquired stores in Nevada and Georgia, while Group 1 Automotive reached what it called an “amicable and mutually beneficial settlement agreement” to finalize a deal for a luxury dealership in Florida.
KeyBanc Capital Markets focused on three elements while explaining why mergers and acquisitions will continue and the industry will consolidate further. Analysts noted buyers are largely driven by their abundant liquidity positions, strong cash generation and low financing rates.
“Additionally, we believe supply of single franchises/stores and smaller groups for sale will continue to grow in coming years due largely to an increasingly difficult regulatory environment and a lack of succession plans,” KeyBanc said in a report highlighting its most recent dealer survey conducted in December.
The report went on to mention that the recent activity by companies such as AutoNation and Group 1 is just the beginning of what might develop down the road.
“Warren Buffet, who recently bought one of the 10 largest auto groups in the country, stated this was just an entry point, and he plans to build upon it. George Soros, another mega-size investor, is actively looking for an entry point into the dealership arena,” KeyBanc analysts said.
“The management of AutoNation, Penske Automotive, Group 1 Automotive, Asbury Automotive and Lithia continue to tell us they are actively looking for more stores to buy,” analysts went on to say.
And KeyBanc isn’t the only outlet that sees dealerships being bought and sold at a high rate. During his first conference call as Ally Financial’s chief executive officer, Jeffrey Brown touched on this industry segment when asked to survey the entire auto landscape.
“Dealer health is great right now. You continue to see a lot of M&A activity among those dealers that are out there, both large deals and small deals,” Brown said. “We would expect that to that consolidation trend to continue.”
Having that activity “bodes well for us,” Brown continued. The new Ally boss emphasized how connected the company wants to be in the floor-planning sector not only for dealerships to secure inventory, but also for principals to expand their footprint.
“We play in that space. We help dealers acquire other dealers so that positions us well,” Brown said. “We feel pretty bullish that the industry is going to continue to grow.”
And part of that growth appears to be germinating in the used department.
KeyBanc’s report showed 71 percent of dealers survey think their used sales will rise; a portion saying the climb will approach 10 percent. Another 86 percent indicated that they expected F&I gross profit to improve by less than $50.
However, 43 percent of told KeyBanc that they expect the ongoing challenge of softening gross profit on used sales to continue, dipping by close to $50, while another 43 percent think grosses on used-vehicle turns will stay flat.
Penske Automotive Group announced Monday its acquisition of a Land Rover dealership in what the company considers a key strategic market in the Northeast.
The dealership — located in Darien, Conn. — is expected to generate an estimated $50 million in annual revenue.
Robert Kurnick, Jr., president of Penske Automotive Group, believes the acquisition is a valuable addition to the company’s current lineup in the state.
“We are pleased to add the Land Rover brand to our existing automotive dealership operations in Connecticut,” Kurnick said. “For almost 30 years, this dealership has been serving customers in Darien, Greenwich, Westport and Stamford with a dedication to customer service.
"This brand complements our existing presence with Audi, BMW, Honda, Mercedes-Benz, and Porsche in the Connecticut market and connects our business from Fairfield, through Darien and into Greenwich, allowing us to continue scaling our operations," he went on to say.
The ServNet Auction Group announced the recent expansion of its family of auctions with its 32nd auction location, Brasher’s Fresno Auto Auction. The California location was recently purchased by the Brasher family and hosted its first Brasher’s sale on Friday, Jan. 16.
“It is with great pleasure that we welcome the newest member of the ServNet Auction Group,” said Patty Stanley, ServNet’s president. “Expansion from within is indicative of the strength and vitality of our member auctions, and we’re excited to extend our footprint into this thriving automotive market.”
Family business member and president of Brasher’s Sacramento, John Brasher, says he’s looking forward to expanding the business’s market presence to help dealers in the Fresno area, with the new addition retaining the leadership of its founder, Larry Champagne, who will remain at the location as the general manager.
“The Fresno auction is a great opportunity for us and we’re looking forward to working with Larry and the great team he has put together,” Brasher said. “With more than 40 years in the central California auto business, as both a wholesaler and used car dealer, Larry is a great asset to us and we know we’ll benefit from his experience and knowledge of the market. The auction is a great location, with a tremendous potential for growth, and we anticipate developing another great Brasher’s auction in Fresno, following the regional model we established with such success several years ago at Brasher’s San Jose Auto Auction.”
The auction will host its weekly sales every Friday at 10 a.m. PST while also hosting Brasher’s weekly UVA BookSheet Sale every Thursday at 12:30 p.m. PST. For more information about Brasher’s Fresno Auto Auction, visit its website.
Customer relationship management company DealerSocket announced that it has made a purchase that will expand offerings to its customers in the area of digital marketing.
DealerSocket said this week it has bought DealerFire, a provider of automotive websites and digital marketing.
"DealerFire has demonstrated wonderful innovation and high-integrity service to many of our dealers for a long time," said Jonathan Ord, chief executive officer of DealerSocket. "They know automotive, they are passionate in what they do for the industry, and they are a perfect addition to our 'We Are Automotive' platform. This acquisition is just one more step in demonstrating our ability to leverage the right tools and service offerings to make life easier and more profitable for dealerships around the world."
DealerFire, launched back in 1999, works to provide custom automotive website solutions from large automotive dealer groups to independent dealers, as well as supply dealerships with extensive automotive websites, mobile applications, content marketing and search engine marketing.
"We could not be more excited to join forces with DealerSocket," said Eric Hoopman, founder of DealerFire. "They have proven to be totally focused on their customers, and we think the same way. I am so excited for the future."
Asbury Automotive Group announced its second Ford dealership acquisition in as many weeks, revealing Wednesday that it has bought Texas Motors Ford. With the purchase of this Fort Worth dealership, the retailer now has seven stores in Texas.
The dealership, which has annual revenues of about $140 million, will be rebranded as David McDavid Ford Fort Worth.
“We are excited to announce our first acquisition in Fort Worth and are pleased to expand our suite of Ford stores,” said David Hult, Asbury’s executive vice president and chief operating officer.
“We are looking forward to carrying on the superior quality of service and sales the customers of Texas Motors Ford have come to expect. We welcome our new employees to the Asbury family and are excited about our opportunities in Fort Worth,” he added.
Just over a week ago, Asbury announced the purchase of Sandy Springs Ford. With that acquisition, Asbury now has 16 stores in Georgia. The dealership, which has been rebranded Nalley Ford Sandy Springs, brings in about $110 million in revenues annually.
Asbury had mentioned in its third-quarter earnings release that during the period, it had entered agreements — subject to OEM approval and customary closing conditions —- to buy two stores that had combined annual revenues of approximately $250 million.
Effective immediately, Chrysler Group LLC is now FCA US LLC
The U.S.-based automaker said in a press release that the new name aligns with the naming approach of Fiat Chrysler Automobiles N.V. (FCA), the parent company of the Auburn Hills, Mich., carmaker.
Officials emphasized in the statement that neither the location of company headquarters (Auburn Hills) nor the company’s holdings, management, board or brands are impacted by the name change announced Tuesday morning.
The global parent company shifted to its new moniker once it was listed on the New York Stock Exchange in October.
“FCA US, together with parent FCA, continues to work toward the business plan presented on Investor Day in May 2014. Additionally, the Company remains proud of its joint heritage. FCA US continues to build upon the solid foundations first established by Walter P. Chrysler in 1925 as well as a rich Fiat heritage that dates from 1899,” the company said in the statement.
Stay tuned to Auto Remarekting for more on this developing story.
In the dealership buy-sell market, it’s still the private buyers who are making the biggest waves, but that’s not to say all is quiet on the public retailer front, according to Kerrigan Advisors.
The Kerrigan Quarterly Blue Sky Report for Q3 acknowledges that public dealer groups have continued to “focus on non-auto dealership and international investing,” while the private retailers “continue to represesent the largest share of dealership acquirers," citing data from The Banks Report.
But the report also points out that U.S. acquisition spending by the public dealer groups is expected to surpass $1 billion this year, which would be a 10-year high.
“With the completion of AutoNation’s acquisition of Barrier Motors in November, 2014 will likely be one of the highest spending years since the publics were formed,” the report notes.
Year-to-date through Oct. 1, the publics have spent $851 million on U.S. acquisitions (excluding Penske commercial truck acquistions), an increase of 163 percent, according to the report. Most of that increase (68 percent), Kerrigan Advisors indicated, was concentrated in one deal: the $362 million purchase of DCH Auto Group by Lithia Motors.
That purchase closed on Oct. 1, and during Lithia’s conference call later that month to discuss third-quarter results, president and chief executive officer Bryan DeBoer said the DCH stores are estimated to generate approximately $2.3 billion in annualized revenue.
“The transition on Oct. 1 was very smooth. We spent really the last 120 days preparing for that transition,” DeBoer said during the October call. “It’s a combination of two organizations. However, we really believe that our opportunity is to build upon their success and continue to expand their market share and their offerings to their consumers. So all in all, very smooth transition.”
Lithia and Group 1 Automotive, by far and away, have led the public groups’ acquisition spending this year, with the pair having shelled a grand total of $713 million year-to-date through Oct. 1, the Kerrigan report indicated.
Put differently, 84 percent of the U.S. acquisition spending from public groups has come from those two.
“That said, Group 1 also divested eight franchises during the first three quarters of 2014 for a total consideration of $139 million,” the Kerrigan report stated.
“In Kerrigan Advisors’ view, Group 1’s divestitures are an indication of their management discipline,” it added. “Clearly, their executive team is executing on a strategic plan focused exclusively on high-growth, business-friendly markets. They are divesting stores that don’t fit that plan and are timing those divestures to capitalize on today’s attractive blue sky values. In the long run, this plan will likely result in a more cohesive and higher valued group.”
Group 1 president and CEO Earl Hesterberg touched on this during his company’s third-quarter conference call, as well.
In Q3, Group 1 divested its BMW, Mini, Mercedes-Benz and Sprinter franchises and associated dealership real estate on Long Island in New York. The company also disposed of a Honda franchise in Freehold, N.J., and divested a Volkswagen franchise in Holiday, Fla.
“In the case of exiting the Long Island market, it was just very high-cost place to do business,” Hesterberg said. “We had some major capital expenditures required that was only going to make that worse. And we just didn’t have a consistent track record of generating the profits that we needed for a good return for our shareholders.
“So we had opportunities to invest in places like Texas, where we are highly confident that we have scale, leverage and know what we will get out of an investment,” he continued. “It was really kind of a shareholder-driven thought process.
“Each market is so different and the dynamics are so different. We’re constantly evaluating that, and it’s kind of hard for me to prognosticate much beyond that,” Hesterberg added about what Group 1 might do next.
However, Hesterberg did discuss how Group 1 is performing regionally, reiterating the company’s strength in the Lone Star state.
“Texas remains very strong and so does Boston and New Hampshire,” Hesterberg said. “The weaker area for us has been New Jersey and New York. We exited New York, and New Jersey is still a challenge for us.
“We have dealerships in Atlantic City, and you've probably read about the casinos and some of the issues in that part of the world so that’s still a weak area,” he continued. “Also on the Gulf Coast, in particular, New Orleans, in fact all of Louisiana, the new-car market is down significantly this year.”
And with Lithia gaining a presence in the Northeast following its acquisition of DCH, naturally that was a topic that came up during Lithia’s call, as well.
One Wall Street observer asked Lithia leadership of its concerns about entering the Northeast after Group 1 discussed the high costs of doing business in that region and its subsequent disposal of a couple of stores.
“I don't believe there is any intent to dispose of any stores,” DeBoer said. “I think when you look at the New Jersey market or southern New York market, it's obviously highly competitive. We're very fortunate that the DCH brand that they built in New Jersey, New York has high customer belief and adhesion to the dealerships, the products that they sell, Honda being the No. 1 product in the Tri-State area
“Their stores are top stores within that area and their personnel have been there a long time,” he continued. “I think it's also important to restate that in the DCH transaction, their real estate and their locations, being in good locations, solid locations, typically on interstates or expressways and are 75 percent-plus of their facilities are owned, much like what Lithia is, which adds for stability of location without having to be transient to some extent in those locations.”
This week, Asbury Automotive Group acquired Sandy Springs Ford, a franchised dealership that generates approximately $110 million in revenues annually.
Asbury rebranded the dealership as Nalley Ford Sandy Springs, bringing the number of group stores in Georgia to 16.
The newly acquired store is located at 7555 Roswell Rd in Sandy Springs, a northern suburb of Atlanta. For 30 years, company officials highlighted, this Ford store has served customers from all over Georgia.
In 2011, the Ford store won the President's Award for Superior Customer Service and Sales Excellence which is the highest honor from Ford.
Asbury president and chief executive officer Craig Monaghan said the company is dedicated to continuing this tradition of excellence.
"The acquisition of this Ford store provides a great addition and diversity to our suite of stores in Georgia,” Monaghan said. “We’re looking forward to carrying on the superior quality of service and sales the customers of Sandy Spring Ford have come to expect.
“We welcome these fine employees to the Asbury family and are excited about our future in Sandy Springs,” he went on to say.
