Lithia Motors Inc.’s growth to Canada final week positions different U.S. dealership teams to comply with the quickly rising megadealer north.

The second-largest dealership group within the U.S. acquired Canadian retailer Pfaff Automotive Companions on Aug. 30, giving Lithia its first worldwide outposts, with shops in Toronto and Vancouver. Lithia CEO Bryan DeBoer had beforehand described Canada because the group’s “No.1 goal.”

And a few of Lithia’s U.S. rivals already look like wanting throughout the border.

Farid Ahmad, CEO of Seller Options Mergers and Acquisitions, a big dealership buy-sell advisory agency in Canada, stated different U.S.-based public retailers have made inquiries to his agency about dealership teams in Canada which may be that can be purchased.

“We’re working with three different publicly traded teams in the USA searching for alternatives for them in Canada,” stated Ahmad, declining to call the retailers.

Different Canadian auto retail specialists additionally anticipate extra curiosity out there from U.S. retailers.

“If, in reality, Lithia comes right here, that will probably be simply the beginning,” Michael Lewicki, president of buy-sell firm Lewicki Automotive Consulting in Toronto, instructed Automotive Information Canada earlier than the Lithia-Pfaff deal was introduced. “There will probably be a minimum of a handful of different American consolidators that come north of the border, whether or not or not it’s to Vancouver, Calgary, Toronto [or] Montreal.”

Colin Richardson, principal at Omni-Channel Automotive Options in Toronto, instructed Automotive Information Canada in late July that giant U.S. teams possible see Canada as a market with lots of upside. Digital retailing in Canada is considered as much less subtle and fewer complete than what’s provided by U.S. corporations, he stated. That will give U.S. gamers a bonus over Canadian rivals proper from the beginning, particularly given their simpler entry to capital.

Lithia’s Pfaff acquisition was for 11 franchised dealerships representing mass-market, luxurious and unique manufacturers starting from Mini and Subaru to BMW, Porsche and McLaren. The deal additionally included a used-only retailer in addition to a leasing enterprise working in Toronto, Vancouver and Calgary.

The house owners of the Canadian group are retaining an undisclosed fairness stake within the operation, although a Pfaff spokesman declined to reveal the share. Pfaff’s Mercedes-Benz and Harley-Davidson retailers weren’t included within the transaction.

Lithia stated the deal will add greater than $1 billion in annualized income to its enterprise. Lithia general forecasts that it’s going to add $5.9 billion in annualized income by way of acquisitions in 2021.

Lithia executives declined to remark final week. DeBoer in an announcement referred to as Pfaff “an ideal accomplice” and “the right hub for our future development in Canada.” The foothold Pfaff supplies “will probably be precious as we proceed to develop all through North America,” he stated.

Ryan Kerrigan, managing director for sell-side agency Kerrigan Advisors in Irvine, Calif., referred to as the Pfaff acquisition an enormous play for Lithia.

Lithia will “attempt to construct on this momentum and proceed to do offers in Canada,” Kerrigan stated. “And I actually do not see them taking their foot off the gasoline pedal right here within the U.S.”

Certainly, Lithia has made it clear that it’s going to proceed so as to add U.S. dealerships, concentrating on a aim of 500 shops, almost double its present rely of 263. DeBoer additionally has expressed curiosity in increasing to the UK and Australia.

“These are rather less related at right this moment’s date,” DeBoer stated in July. “These are in all probability two to 5 years out, form of the place Canada was a couple of years in the past.”

For U.S. dealership teams, Canada could current alternatives significantly in used-vehicle and digital gross sales.

Publicly traded used-car retailers resembling CarMax and Carvana, which have offered stiff competitors for U.S. dealership teams, do not function in Canada.

And the price of doing enterprise is perceived as usually decrease for a seller in Canada than within the U.S., Richardson stated.

Lithia and different U.S. teams will see advantages in buying underperforming teams, particularly these but to completely embrace digital retail, Richardson stated.

Bigger teams may take the underperformers and make them extra environment friendly and subsequently extra precious.

“There’s extra upside and alternative with these specific teams,” Richardson stated.