It was announced by company president Ben Lange on Monday that America’s Auto Auction has acquired Harrisburg Auto Auction, a move that brings its auction count up to 11.
“We are extremely pleased to welcome Harrisburg Auto Auction and its team led by industry veteran Lynn Weaver, to the America’s family of auto auctions,” Lange said.
Harrisburg AA, located in Mechanicsburg, Pa., adds to America’s Auto Auction’s existing locations in Atlanta; Chicago; Jacksonville, Fla; Pensacola, Fla.; Tulsa, Okla.; Pittsburgh; Greenville, S.C.; Dallas; North Houston, Texas; and Austin/San Antonio, Texas.
Stan Hoynitski founded Harrisburg AA in 1982, and the Hoynitski family has owned it ever since.
“Lynn Weaver and his team will fit perfectly with our company culture. By the same token, I know that auction leaders in our group will also benefit from his vision and many years of experience in the industry,” said Richard Gundy, chief executive officer of America’s Auto Auction.
“Going forward under the America’s Auto Auction flag, Lynn and his team will continue to provide the same level of excellent service to both dealer and institutional accounts, which is what has made Harrisburg such a strong auction over the years,” he continued.
Two blockbuster dealer group acquisitions this year — Berkshire Hathaway’s purchase of the Van Tuyl Group, along with Lithia Motors buying DCH Auto Group — are proving to be game-changers on the mergers and acquisitions side of the retail auto business.
As Erin Kerrigan, founder and managing director of Kerrigan Advisors, said in her firm’s latest look at dealership buy/sell activity: “These two mega deals have motivated a new wave of sellers to consider entering the market, while also pushing pricing expectations to peak — and likely unsustainable — levels.”
She continued: “In addition, they are inspiring a new class of capital — private equity and family offices — to acquire dealerships.”
A synopsis of the Q3 Kerrigan Quarterly Blue Sky Report indicates that price expectations in dealership acquisition are at “record peaks,” with the Berkshire Hathaway-Van Tuyl deal — the largest in auto history — playing a major role in that run-up.
Not long after that Berkshire deal was announced, an analysis from Sageworks, a financial information company (www.sageworks.com), examined the financial conditions of privately held auto dealers, in particular, and why some of their traits would entice an investor like Warren Buffett and Berkshire Hathaway. The analysis shares an interview quote from Buffett in which he describes well-run dealerships as “a very good business.”
In late October, Auto Remarketing talked with Sageworks analyst Libby Bierman about that notion and what attributes may lead someone like Buffett to have such an outlook on privately held dealers.
“Certainly, I’m sure Warren (Buffett) and other investors are looking at things outside of financial performance, whether that’s who the management is, business projections, plans for that business, etc. But when you’re looking at, particularly our financial information — so, the net profit margin and sales growth for these industries — they look like pretty sound industries.
“What you don’t see is negative sales growth since the recession. You continue to see above-average sales growth, so they’re bringing in more, as well as that stable net profit margin,” she said. “It’s not super high; they’re not the most profitable of industries. But the fact that it’s consistent, it’s more of a steady-Eddie type of investment than maybe some of the higher-risk investments these guys might be considering.”
Going back to the Kerrigan report, the firm — citing its own data and that of The Banks Report — said there were 148 completed dealership transactions year-to-date through Oct. 1. That’s nearly double the 78 transactions done through the same period of 2014.
Berkshire Hathaway’s purchase of Van Tuyl was announced on Oct. 2, and since then, “the number of dealers considering a sale has increased considerably,” the Kerrigan report says.
In fact, the firm is projecting buy/sell activity to remain elevated for the rest of the year and most of next year. The report also mentions that private buyers are leading the pack by a wide margin.
“It is not surprising that private capital is seeking financial exposure to auto retail. These investors see a profitable, fragmented industry with tremendous consolidation opportunities (the top 125 dealership groups represent only 25 percent of industry’s sales),” said Ryan Kerrigan, who will be leading the new private equity and family office advisory at Kerrigan Advisors.
“They also see attractive exit opportunities in the public markets through a future IPO (auto retail’s stock market capitalization relative to market size is one of the smallest in our economy),” he continued. “Private investors also see opportunity in a changing industry in which online sales, no haggle pricing, and new forms of car ownership create attractive new business models that are less reliant on expensive human capital," he concluded.
Group 1 Automotive announced this week the expansion of its coverage in the United Kingdom with three new acquisitions. The dealer group has purchased Elms Bedford BMW/MINI, Elms Cambridge BMW/MINI and Elms Stansted BMW/MINI.
The three dealerships, which will continue to operate under the Elms name, are estimated to generate $225 million in annual revenues.
Earl Hesterberg, president and chief executive officer of Group 1, looks forward to furthering his groups influence across the pond.
“We are pleased to expand our relationship with BMW UK and further leverage our scale and excellent management team in the UK,” Hesterberg said.
With the addition of these three stores, bringing the tally up to 17, Group 1’s UK operations are expected to generated approximately $1.3 billion in estimated annual revenues. The company’s other brands in the region include Audi and Ford.
Flick Fusion has announced the immediate acquisition of Dealer Fusion, a fellow video marketing provider to more than 500 automotive dealerships.
Flick Fusion will migrate and adapt key features and applications from Dealer Fusion’s platform into its own to expand the overall offerings of its products, now made available to both companies’ clients and lot services providers.
“We are creating a hybrid of our video marketing platforms that will become the industry’s best-in-breed solution,” said Brian Cox, Flick Fusion’s president and chief executive officer. “The acquisition also made sense for us as we continue to expand our network of reseller partnerships.”
Dealer Fusion’s product distribution occurred mostly via partnerships with lot services companies, such as DiamondLot, Carbase.com, and AutoUpLinkUSA. Flick Fusion’s model is similar, selling inventory video and VSEO solutions via primarily a network of resellers and lot services providers. Flick Fusion assumes all billing and account services for Dealer Fusion’s clients.
Privately owned SoCal Penske Dealer Group announced this week is has acquired the assets of both Drew Ford and Drew Hyundai in La Mesa, Calif.
Roger S. Penske Jr., SoCal Penske’s president, is committed to maintaining the legacy the Drew family has established during their time as owners of the dealerships.
“We are thrilled to add the Drew Ford and Drew Hyundai dealerships to our group and to count their employees, guests, and neighbors among our friends and family,” Penske said. “We admire the Drew family’s strong community ties and plan to strengthen community relations by making additional investments in the city of La Mesa and the surrounding area.”
Bill Drew, of Drew Automotive, believes the dealerships will be left in good hands as the reigns are handed over to Penske.
“The Drew family is grateful to the people of San Diego County for the opportunity to be of service to them all these years,” Drew said. “We are very excited to have an organization like SoCal Penske continue that legacy here in La Mesa, and continue to maintain the high level of standards in vehicle sales and customer service.”
The two dealerships will be rebranded as Penske Ford and Penske Hyundai and will both receive upgrades to their facilities.
On Monday, the management team at Larry H. Miller Dealerships made its second acquisition in the Denver metro area this year and 10th acquisition in the last 18 months.
Now the group’s eighth store in Colorado is Lakewood Fordland in Lakewood, Colo.
Lakewood Fordland has been serving the Denver market since 1962, and recently celebrated 50 years in a new state-of-the-art facility consisting of 60,000 square feet. The store is located at 11595 W. 6th Ave. in Lakewood and has been renamed Larry H. Miller Ford Lakewood.
“We’ve been in a period of growth over the last two years as the auto industry is strong and the Denver market is thriving,” LHM Dealerships president Dean Fitzpatrick said.
“Colorado is one of our largest markets, and we’ve done business in the state since 1987 when we opened our first store,” Fitzpatrick continued. “This acquisition shows our continued commitment to the Denver metro area.”
The group’s history in Colorado is a long one.
Larry H. Miller began his career as a parts salesman in Denver in 1970. In 1987, he opened his first store in the state, Larry H. Miller Toyota Scion Boulder.
In 1988, LHM Dealerships opened Larry H. Miller Liberty Toyota Colorado Springs. Larry H. Miller Toyota Colorado Springs opened in 1992, and Larry H. Miller Kia Lakewood and Larry H. Miller Volkswagen Lakewood both opened in 2001.
A Nissan store was added to the group in 2006, with the addition of Larry H. Miller Nissan Highlands Ranch. In May, LHM Dealerships opened Larry H. Miller Chrysler Dodge Jeep Ram 104th in Thornton.
“I’ve done business with the Larry H. Miller Group for nearly 20 years through their company that provides vehicle service contracts,” said seller Robert Liedel.
“I know they take good care of their customers and employees and actively give back to the community,” Liedel continued. “It also brings me comfort to know that they’re retaining my current team of employees and welcoming them into the LHM family.”
LHM Dealerships strongly supports giving back in the communities where it conducts business. Through Larry H. Miller Charities, the dealerships give back to communities by focusing their united service and corporate giving on women’s and children’s issues, with an emphasis on health and education.
Since 1996, more than $225,000 has been donated to nearly 70 qualified nonprofit organizations throughout Colorado.
Cox Automotive — the parent of Manheim, AutoTrader.com, vAuto and Kelley Blue Book, among others — announced this afternoon it has purchased Xtime, a retention solution provider for the retail automotive industry.
This latest acquisition focuses on fixed operations, and Cox management explained the move will serve to expand its suite of solutions dealers need to run their businesses — “from the front-end to the back-end.”
Xtime is now part of the Cox Automotive software division but will retain its current leadership and brand.
Keith Jezek, software division president at Cox Automotive, said of the news, “We at Cox Automotive understand dealers’ need to retain and conquest service, maintenance and repair business, making the addition of a fixed operations solution a terrific value-add to the products and services we already bring to the table.
“With Xtime, we are now positioned to provide the modern dealership all of the tools needed to build and maintain long-term relationships with their customers,” he added.
Xtime — based in Silicon Valley — provides vehicle service and repair software solutions for dealers and automakers.
The company’s products work to help dealers better manage their service operations through integrated service scheduling, marketing and check-in, the company shared.
Xtime processes more than 2.5 million service appointments each month for its 6,000 dealer customers.
“Becoming a part of the Cox Automotive family of companies is an incredible opportunity and one that will greatly benefit our current and future customers,” said Neal East, co-founder and president of Xtime. “The additional value that we can create for our customers by connecting the front- and back-end of dealership operations is an exciting prospect, and I look forward to working across the organization to realize that potential.”
There has been a lot of talk, as new automotive sales continue to increase, about what the overall sales number will be for this year. TrueCar forecasts total sales for the year will reach 16.4 million units — the best since 2007 — and could possibly reach toward 17 million units in 2015 if economic conditions continue to improve.
And as some predict that the demand for automotive products has nearly reached its peak, John Krafcik, TrueCar’s president, believes all manufacturers still have quite a bit of room for improvement. Presenting at the Automotive Press Association last week in Detroit, Krafcik outlined four key areas, coined as “super segments,” which cover four specific revenue streams associated with four product categories.
The four segments – mass-market cars, mass-market utilities, pickup trucks and premium brand vehicles (all types) – are what Krafcik believes manufacturers should be focusing on, because, according to him, no one is dominant in all four areas.
“For individual automakers the revenue mix across the four super segments varies considerably,” Krafcik said. “Some are overly reliant on mass-market cars – notably Volkswagen Group and Hyundai-Kia – while others are significantly over-weighted in pickup and utility segments, such as Fiat Chrysler. Remarkably, no automaker has a revenue mix even close to the consumer-driven industry mix.”
Krafcik recommends that those evaluating the industry should, instead of just looking at units sold, focus on the revenue streams. The market, based on TrueCar’s data, is forecasted to generate $521.5 billion in revenue by the end of the year, compared to $292 billion in 2009. Here are several other key observations, according to the company:
- From 2009 to 2014, total U.S. auto industry revenue growth of at least 79 percent is outpacing the 58 percent unit growth forecast for the same period.
- That trend should continue into 2015 as economic growth continues and the price of fuel remains relatively stable.
- Looking solely at industry volumes, without factoring in the richer margins and revenue generated by three of the four vehicle segments, masks how truly robust the industry is.
- During the 2009 to 2014 period, pickups and mass-market utilities, which deliver higher transaction prices and margins than mass-market cars, increased their share of industry revenue to 50 percent from 44 percent.
- Industry trends point to stabilization in revenue mix, though not unit mix, comprised of 30 percent mass-market car (“three-box'' vehicles); 30 percent utility (“two-box'' vehicles); 20 percent pickup; and 20 percent premium vehicle.
What do all the numbers suggest? According to Krafcik, there is a significant economic opportunity for each of the major players in the automotive industry to broaden their portfolios and potentially realign themselves with other manufacturers, whether it be through mergers, acquisitions, partnerships, etc. to create more “revenue-balanced OEM groups.”
Under a definitive agreement announced Wednesday, Contact At Once will be acquired by digital engagement solutions provider LivePerson in a deal worth at least $65 million.
Here’s how the merger agreement shakes out: LivePerson is set to acquire all of Contact At Once’s outstanding equity interests. The aforementioned price tag would include about $43 million in cash plus $22 million in common stock.
Additionally, Contact At Once could receive as much as $5 million in contingent consideration, based on achieving certain financial, strategic and integration targets.
“We welcome CEO John Hanger and EVP Strategy Marc Hayes, their successful team of 170 employees and the company’s impressive roster of customers,” said LivePerson chief executive officer Robert LoCascio. “CAO’s technology is unique because it enables for the routing and tracking of the chat from multiple websites directly to an individual business through a single user interface.
“Their technology and vision align strongly to our core strategy of enabling a greater number of consumers to engage businesses in real-time from any digital channel, across any device,” he added. “With our combined customer bases and platform capabilities, we see a lot of opportunity for growth into new and existing verticals.”
Hanger, Contact At Once’s CEO, added: “We are excited about joining forces with LivePerson, a company that consistently demonstrates technology leadership in the arena of proactive consumer engagement, driven by a patented behavioral targeting engine.
“Our customers will benefit from LivePerson’s financial strength and commitment to innovation. We also look forward to leveraging the synergies of our combined customer bases and capitalizing on the Company’s international infrastructure to expand overseas,” Hanger added.
Edmunds.com has made the first acquisition in company history, announcing this morning it has purchased a mobile startup known as CarCodeSM that lets dealers and car shoppers conduct one-on-one text messaging with each other.
Edmunds plans to launch this technology across its dealership network, providing CarCode for free to both dealers and consumers.
“Car shoppers are clamoring for mobile solutions, and we saw an opportunity to provide an on-demand mobile experience through the CarCode platform,” said Seth Berkowitz, president of Edmunds.com.
“We are laser-focused on streamlining the car shopping experience, and this acquisition is just one example of the investment we are making in mobile technology to achieve our goal,” he continued. “We think CarCode provides a very relevant service that ties directly to the growing trend in mobile showrooming and shopping.”
Explaining more about CarCode, Edmunds said in its announcement that the cloud-based SMS texting platform was designed to allow dealership to be able to text back-and-forth with consumers straight from their mobile devices. Edmunds is also providing text-message leads to participating dealers and giving them the option to place a “Text Us” button on their websites.
There is also an interface giving dealers the ability to manage conversations by displaying unanswered messages and average response time.
CarCode was discovered when it won Edmunds’ second annual Hackomotive challenge last February. The technology then went through further development via Edmunds’ three-month Fastlane Accelerator program.
Nick Gorton, who co-founded CarCodeSMS with Steve Schwartz and Prabode Weebadde, grew up in the dealership world and joins Edmunds as executive director of product management.
“We developed CarCodeSMS after realizing customers weren’t able to communicate with dealerships the way a growing number of them actually preferred, via text messaging,” Gorton said.
