Automotive News Canada - August 2019 - 6

* AUGUST 2019

For dealers, time to
say their good buys?
Large groups continue
to buy smaller ones
while dealers ponder
valuations in the face
of slowing sales

Automotive Corp. bought three
stores in Texas and two in
North Dakota. Foundation owns
two dealerships in Western
Canada in addition to the five
U.S. stores, and it has plans to
buy more American dealerships
this year as part of an aggressive cross-border acquisition
By JOHN IRWIN
strategy.
TORONTO BUREAU
"Foundation looks forward
to owning a total of 26 stores
CROSS-BORDER SHOPPING,
by the end of 2019," CEO Kevin
and smaller dealership groups
Kutschinski said in a statement.
that are ripe for the picking,
"These future acquisitions will
are fueling buy-and-sell transacbe in the U.S."
tions as Canadian auto retailers
That market presents a "huge
look to exit the maropportunity" for
ket during a decline
dealers, Gerbrandt
in new-vehicle sales,
said.
experts say.
The United States
Erin Kerrigan,
has stronger franmanaging director
chise laws than
of California-based
Canada, Kerrigan
Kerrigan Advisors,
said, making dealsaid that about 30 per
erships there look
cent of transactions
even more attractive
in 2018 involved more
to Canadian buyers.
than one dealership, a
"From an investpercentage she expectment standpoint,
ed to rise slightly in
it does seem like
Small dealership
2019. Small groups
groups that are
a pretty logical
that are selling two to selling two to five
move for a successfive stores are "very
stores are "very
ful Canadian dealattractive" to buyers, attractive" to buyers, er to say, 'I think I'll
says Erin Kerrigan of deploy some of my
Kerrigan said.
"The capital that's Kerrigan Advisors.
capital down in the
coming in and looking F I L E P H O T O
U.S., where the multo grow in the industiples are lower and
try is attracted to the idea in
my franchise protection is highmany cases of getting large deals
er, so I'm getting more value.'"
done because it enables them to
SELL NOW OR WAIT?
grow in a more significant way,"
she said.
As concerns rise about the
The increasing number of
economy, the new-vehicle marstores owned by dealership
ket appeared poised to decline
groups, especially in major marfor a second straight year. Still,
kets, could eventually make it
new-vehicle sales will likely
more difficult for buyers to find
remain at historically high levthe stores they want, said Gordie
els in 2019, and the economy is
Gerbrandt, Canada director of
expected to remain relatively
the U.S.-based Tim Lamb Group,
strong.
which recently opened offices in
As a result, many dealers -
Edmonton and Toronto. Stores
especially those nearing retirethat are part of a large, complex
ment age who do not have a sucretail network might not be as
cession plan in place - are under
attractive as stores that are part
pressure to decide whether to
of a small group, he said.
sell their stores now or risk hav"It's getting a lot more difficult
ing to go through an entire ecofor the auto groups to find acquinomic cycle before seeing strong
sitions," Gerbrandt said.
As a result, he expects more
Canadian buyers to look at
expanding into the United States,
where more opportunities can be
found and where multiples are
generally lower.

BUYING BELOW THE BORDER

Several Canadian dealership groups recently expanded
into the United States, including AutoCanada Inc., which
acquired a dealership group in
Illinois in 2018. Ailed by poor
performance in the United
States, it said in August that it
was looking to sell four of its
dealerships there. Windsor,
Ont.-based Rafih Auto Group
bought three Ohio stores this
year.
In June, the Calgary-based
dealership group Foundation

Because "it's getting a lot more
difficult for the auto groups
to find acquisitions," Gordie
Gerbrandt of the Tim Lamb
Group expects more Canadian
buyers to look at expanding into
the United States.
PHOTO SUPPLIED BY
GORDIE GERBRANDT

TRENDING
STORIES
automotivenews.ca

ONGOING WEB COVERAGE

JOB
CUTS BY AUTOMAKERS
Ford Canada in July became the third automaker in less than a

year to announce cuts to production staff, saying it will eliminate
about 200 jobs at its Oakville, Ont., plant. Federal Finance Minister
Bill Morneau said he was working with the union (Unifor) to find a
solution. FCA plans in October to cut the third shift at its Windsor,
Ont., minivan plant, affecting 1,500 employees.

TRADE
& TARIFFS
Canada and the United States still haven't ratified the new U.S.-

FILE PHOTO

I think people feel that the
economy is turning, and the
ones that were hanging on have
now decided to [say] now is
the time to sell before prices
drop too low.
FARID AHMAD

CEO, Dealer Solutions
Mergers and Acquisitions
returns again.
That pressure could further
spur dealer consolidation in
Canada as larger buyers look
to buy independent stores or
small dealership groups. More
than half of new-vehicle sales
in Canada today take place at
dealerships owned by large
groups, according to DesRosiers
Automotive Consultants. That
number is expected to grow.

'BIG TRANSACTIONS GOING ON'

Farid Ahmad, CEO of Ontariobased Dealer Solutions Mergers
and Acquisitions, said his company had its strongest first quarter
on record based on the number
of acquisitions it worked on, and
he expected the second quarter of
2019 to be even stronger.
"Traditionally, it has been the
mom-and-pop businesses, but
now it's even groups that are taking a look at disposing of certain
assets maybe or completely disposing of their assets," Ahmad
said. "We've got some very big
transactions going on right now."
Economic headwinds are driving many Canadian dealers to
sell their stores while the market remains relatively strong, he
said.
"They held on for a long time
because they thought, 'Why sell
now when I'm making money
here?' But now that the market
is changing a lot, those dealers
are now coming to recognize that
maybe the party's over," Ahmad
said.
"I think people feel that the
economy is turning, and the ones
that were hanging on have now
decided to [say] now is the time
to sell before prices drop too
low." - ANC

Mexico-Canada Agreement. While politicians in Washington debate
the merits of labour and environmental provisions, Canada says
it won't sign the deal until its U.S. counterparts do. Lawmakers on
both sides of the border are on summer break, and elections in both
countries loom.

EV PICKUP CAN HAUL THE FREIGHT

FORD MOTOR CO., IN JULY RELEASED A VIDEO OF AN
electric F-150 prototype towing 10 double-decker rail cars loaded
with 42 F-150s. That's about 544,000
kilograms. Linda Zhang, F-150 chief
engineer, said the video
is legitimate.
"We even invited five of our customers to come and witness it. So,
no smoke and mirrors," she told sib- PHOTO: FORD
ling publication Automotive News in
Detroit. Shang said an F-150 hybrid will be available in 2020,
and the fully electric F-150 will arrive in a few years.

IN VANCOUVER, UBER WON'T BE ALONE

KATER TECHNOLOGIES INC. SAYS IT WILL APPLY TO TAKE
part in traditional riding-hailing in British Columbia as soon as
provincial regulations take effect this fall.
The company currently offers what
it says is a hybrid service in Metro
Vancouver, combining a ride-hailing app
with a fleet of vehicles and drivers that
carry taxi licences. That service will continue, but Kater intends to add traditional PHOTO: FACEBOOK
ride-hailing across the region by fall and
said it will launch the service throughout the province's major cities by the end of the year.

NISSAN TO SLASH JOBS; CANADA SPARED?

WHAT HAPPENS AFTER A 99-PER-CENT PLUNGE IN
operating profit in the last quarter? Nissan Motor Co. will slash
12,500 jobs worldwide as part of a new
plan to revive the company. Sales fell
in every major market except China.
Canadian operations, however, might be
spared the axe.
Nissan has office staff as well as
employees at a few parts-distribution centres across the country.
"Nissan has already taken steps
PHOTO: GREG LAYSON
to right size its North America region,
although Canada in particular was not impacted by those
actions," Nissan Canada spokeswoman Jennifer McCarthy said
in an email to Automotive News Canada. "We ... have no plans
for workforce reductions at this time."

F-250, F-350 FIRST TO GET NEW V-8

FORD MOTOR CO.'S NEWEST ENGINE OFFERING FOR ITS
Super Duty pickups - a 7.3-litre gasoline engine - will produce 430 horsepower and 475 pound-feet of torque. The V-8 will
debut in the F-250 and F-350.
"The 7.3-litre is designed for maximum durability in the harshest environments given that our customers live and work in
these conditions every day," Joel Beltramo, Ford's manager for
gasoline V-8 engines, said in a statement. The engine, built at
Ford's engine plant in Windsor, Ont., has the largest displacement in its class and will be mated to a new 10-speed transmission that's based on the gearbox used in the F-150 but upgraded
for the larger trucks. The F-650 and F-750 will continue to use a
six-speed transmission.

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Automotive News Canada - August 2019

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