Miller deal shows domestics’ stores are hot
Larry H. Miller Group Dealerships’ purchase of seven stores in Arizona, mostly selling Chrysler Group brands, signals two major developments in the increasingly active market for dealership acquisitions.
The Sandy, Utah, group’s purchase is further proof of the growing interest in domestic brands, which were omega watches largely shunned prior to and during the worst of the recession.
The deal’s size showed that large privately held dealership groups can compete with publicly traded groups in buying a substantial dealership group intact, without having to break it into smaller portions.
Indeed, the privately held Larry H. Miller Group has an aggressive acquisition strategy, led by Steve Starks, who called the Arizona purchases “the largest dealership acquisition in our company’s history.”
Larry H. Miller Group of Cos. ranks No. 10 on the Automotive News list of the top 125 dealership groups in the United States with retail sales of 39,596 new units in 2012.
Domestic brand stores have been part of major buy sells lately, even as the scale of those deals ballooned. Starks said his company is “bullish” on Chrysler Group brands.
In December, AutoNation Inc., the nation’s largest auto retailer, purchased three Volkswagen stores in metro Dallas from Boardwalk Auto Group, and Spring Chrysler Jeep Dodge Ram in the Houston market from Alfred Flores and Bruce Glascock.
It was AutoNation’s first purchase of a Chrysler Jeep Dodge Ram store in at least a dozen years. in a decade.”
That was followed by Asbury Automotive Group, the nation’s seventh largest auto retailer, buying VW and Bentley stores with $60 million in annual revenues from Gossett Motor Cars of suburban Atlanta.
Buy sells are on the rise because of the improving economy and some longtime dealers’ desire to leave the business, say consultants at dealer advisory firms. “There were no buyers for three or four years.”
Alan Haig, head of automotive services for Presidio Group of San Francisco, says it is generally the preference of owners of multiple dealerships to sell all the stores at once. When employees learn that a dealership within a group is for sale, many will bail, he says.
But a single transaction is not always possible. “Our experience is, the bigger you get, the harder it is to find a buyer omega watches to pay fair market value,” says Haig. “Often the best way to maximize value is to sell it in more than one transaction and sometimes over more than one year.”
Dealerships cost so much sometimes as much as $20 million when real estate is included that only the public groups and the large privately held groups can afford a multiple store group.
But even those deep pocketed groups can’t buy a group of stores in some cases because framework agreements with manufacturers limit the number of dealerships of a specific brand that a group may own, Haig says.
Some large groups shy away from multistore acquisitions. That’s when it acquired two groups totaling “25 or 26″ stores in northern California, Kansas and Missouri.
Blocker says it took years to assimilate the dealerships and their staffs into the company’s culture.
Another reason for passing up on a large dealership group, he says, is that the bundle may include both “cats and dogs” good stores and undesirable ones.
Limiting acquisitions to one or two stores makes it easier to help them “assimilate and come into our culture,” Blocker says. “That said, we’ve looked at some groups, and I would never say we wouldn’t acquire a group of deals if they are good stores in the right geography and made a lot of sense.”
Four years ago, Starks was put in charge of acquisitions for Larry H. Miller Group.
CEO Greg Miller told him to make the group “the best in the country at automotive acquisitions,” Starks, now 34, recalls.
When Starks took charge of acquisitions in 200 omega watches 9, the group had just over 40 stores. Since then it has sold five. But a Starks led acquisition spreee has pushed the group’s dealership count to 55.
Starks met company founder Larry H. Miller in 2004, when Starks was working for then governor Jon Huntsman on a project for which the governor’s office sought input from private businesses.
Starks was contemplating going to business school when in 2007 the company’s founder offered him on the job training. “He said I would gain a great education working with him,” recalls Starks.
He didn’t have a title upon joining the group, but in 2009 became executive vice president in charge of the management corporation omega watches ‘s insurance company, which sells finance and insurance products, and its advertising agency. He added dealership acquisitions to his responsibilities later that year.
The group is still very much interested in growing its portfolio. It is doing so by cultivating relationships with dealers who are looking for exit strategies, he said.