Automotive News Canada - September 2020 - 23

* S E P T E M B E R 2 020

Near is dear
for M&A deals
In a pandemic, 'It's more
enticing to buy in your
own neighbourhood
than... halfway
across the country'

By JOHN IRWIN and PERRY LEFKO
AUTOMOTIVE NEWS CANADA

demic, government shutdowns virtually froze the buy-and-sell market. Stayat-home orders sent sales plummeting.
That, in turn, prompted dealers to pare
expenses, cutting everything from staff
to vendor contracts.
Sales have rebounded, and some
dealers are again looking to expand.
In the current economic climate, they
appear to be drawn to stores in familiar
territory, Lewicki said.

FAMILIAR BRANDS ON FAMILIAR TURF
WHEN TORONTO-AREA DEALER
Sean Riley went shopping for a deal"The trend of the buyer would be to
ership, he chose to buy close to home.
refocus an alignment with their core
It's a strategy that allows him to better
brands or core geography. So, if a dealmanage his growing stable of
er is very, very familiar with a
stores, especially during the
particular brand already, that's
COVID-19 pandemic.
a bit more enticing for them to
"This close proximity [to
go out and acquire another one.
his three Ford outlets] allows
"Same thing with geograme to be active in the day-tophy. It's more enticing to buy in
day operations," said Riley,
your own neighbourhood than
who in July purchased a Fiat
one halfway across the counChrysler Automobiles store in
try."
Toronto from Alberta-based
Go Auto sold a second
Riley: Buying
Go Auto.
Toronto-area FCA store to
dealerships
"The ability to be available,
Windsor, Ont.-based Rafih Auto
close to one
whether it's for customers or
Group.
another "is a
employees, is a key contribuCEO Terry Rafih said one
key
contributor
tor toward organizational sucadvantage
of the purchase
toward
cess."
is that he can combine the
organizational
It's a trend spurred on by
resources of his dealership in
success."
the pandemic, said Michael
nearby Brampton with those of
FILE PHOTO
Lewicki, president of Lewicki
the FCA store.
Automotive Consulting Ltd. in
"We're a very process-oriented comToronto.
pany and we spend a lot of time on
"[Dealers] are much more interesttraining, coaching, motivating. And I
ed now in strategic growth rather than
think with that and our presence in that
buying for the sake of growing."
market, we'll be able to utilize our synDuring the early months of the panergies and so on and so forth.

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Rafih Auto bought a Toronto-area Fiat Chrysler Automobiles store from Go Auto
and intends to combine resources - such as accounting - with another Rafih
store in nearby Brampton, said CEO Terry Rafih. P H O T O : P E R R Y L E F K O

"We'll utilize the same accountant
team [from the Brampton store]. Some
of the management team will help."

ONTARIO ISN'T THE WILD WEST
Out-of-province dealers face a tougher regulatory climate in Ontario compared with other jurisdictions, said
Farid Ahmad, CEO of
Toronto-based Dealer
Solutions Mergers
and Acquisitions.
Ontario, for example, shut down showrooms and banned
test drives during the
early months of the
pandemic. Alberta,
meanwhile, kept deal- Gerbrandt:
Dealers
erships on the list of
looking to add
essential services.
stores might
"Go Auto came
have to wait,
into Ontario with
their business model," at least in the
short term.
Ahmad said. "They
are super-successful in F I L E P H O T O
Edmonton and various other markets,
but Ontario is far more restrictive for
dealer groups from out west to come into
this province. ...
"Out west they don't have an

OMVIC [Ontario Motor Vehicle
Industry Council]. They have the latitude to sell cars like they've always traditionally done. That gives them a freedom to be more profitable."
The business philosophy or processes used in Alberta might not always
transfer to the Greater Toronto Area,
Riley said.
Although the buyand-sell market is
picking up, dealers
on the hunt for new
acquisitions could be
out of luck, at least in
the short term, said Gordie Gerbrandt,
director of Canadian operations at the
Tim Lamb Group.
Many dealers who initially thought
they would have to sell their stores
during the pandemic might instead stay
in the business, he said.
"I think there's apprehension on
what this might look like 12 months
down the road. But for the most part,
[dealers] are looking at the big picture
saying, 'If I can run my operations like
this, efficiently and incredibly profitable, and weather this COVID storm,
I can pretty much get through everything.' " - ANC

By DOUG FIRBY

CALGARY CORRESPONDENT

THE INCREASING RELIANCE
on artificial intelligence (AI) to
support automobile sales is putting small dealerships at a competitive disadvantage and might
further accelerate consolidation
in the industry, a Quebec-based
marketing consultant says.
The time commitment and
ongoing costs of maintaining a
full AI-supported online sales
system is an onerous burden
that many small dealerships
are unable to take on, said
Dominic Sigouin, president of
Noahvik Consultants.
"They don't have the time
and they don't have the information. It's hard for [small]
dealers. They have to manage a
car dealership.
"And it's an extra grand per
month [in lease fees for a typical AI-driven system] the deal-

er will have to pay."
The challenge of adopting
AI-assisted marketing tools
might be one of the key factors behind the acquisition
movement,
Sigouin said.
"I do agree
with this
statement,"
said Craig
Reaume, who,
with his sister, Jennifer,
managKässer:
es Reaume
Dealers and
Chevroletautomakers
Buick-GMC
often make
in LaSalle,
the mistake
Ont., near
of overlaying
Windsor. On
AI on their
June 2, the
existing sales
Reaumes
and marketing
formed a part- processes.
nership with
FILE PHOTO
the 10-dealership Lally Group based in nearby Chatham, Ont.
It was a tough decision for
the siblings, because their dealership had been family-owned
since 1931, Reaume said. But
they need the collaboration,
synergies and cost savings that
come with a bigger organization.

"This just made more sense
in the long run."

GROUP THERAPY
The trend to multiple-point
dealerships has accelerated
in recent years. By the end
of 2019, 70 per cent of dealerships were controlled by
groups that own two or more
stores. And 51 per cent of such
groups own five or more dealerships, according to statistics
from DesRosiers Automotive
Consultants.
In 2000, just 4.5 per cent of
groups owned five or more
stores.
"There are a lot of one-, twoor three-dealership guys who
won't make it," Sigouin said.
Providers of online retailing tools are responding by
offering cost-effective systems
that help level the playing field
for smaller dealerships, said
Andy Moss, CEO of U.S.-based
Roadster, which provides automotive online retailing tools.
"However, the requirements for AI-assisted tools are
a tad different.
"You need a breadth of data
to tune any AI, so in theory,
having a much broader data
set from a larger group will be

beneficial."
Anonymized industry data
helps small dealers get a sample size large enough to be useful, Moss said.
AI helps dealerships adapt
to evolving consumer buying
preferences while also cutting costs. A 2019 report by the
McKinsey & Co. global consulting firm outlines the potential.
Drawing on data from the
customer's entire journey, AI
enables companies "to personalize their sales efforts to
up- and cross-sell to customers with individualized offers,"
the McKinsey report said.
Predictive analytics crunches data to create predictions
about customer interest.
"AI in marketing and sales
is not just a competitive advantage but benefits the entire automotive industry ... in efficiency
of media budgets, tactical sales
budgets and margin improvements," the report said.

AI CAN BOOST IQ
Munich-based Matthias
Kässer, one of the report's
authors, told Automotive News
Canada that AI can turn the
customer experience around.
Instead of wasting time collect-

ow
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MERGERS AND ACQUI

SPECIAL REP

Technology disparity squeezes small retailers
Unlike single-point
stores, groups have
the resources
to take advantage
of new digital tools

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15Craig Reaume's Ontario
dealership had been family
owned since 1931 but needed
to partner with a group to
handle challenges such
as adopting AI-assisted
marketing technology.
PHOTO VIA CRAIG REAUME

ing information when a customer enters a dealership, AI
enables the dealership to have
a broad profile in hand, based
on demographics and socioeconomic data in the area where
the customer lives.
Manufacturers can also
manage discounts better
with such data, Kässer said,
for example, by discounting
an expensive feature on an
in-stock vehicle to motivate a
sale. They can even match consumers' colour preferences to
the region in which the dealer-

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Automotive News Canada - September 2020

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