Regardless of excessive valuations, buy-sell consultants and dealership group executives see no finish to the development towards dealership consolidation in Canada in 2023, with most predicting the rampant shopping for received’t finally finish till solely giant dealership teams dominate the market.

“Lots of us come from a time when everyone had a single automotive dealership again within the ‘70s and ‘80s,” mentioned Peter Heasty, president of Baker Tilly WM Seller Acquisitions Inc.

“You recognize the previous saying: ‘the one factor fixed in life is change.’”

Heasty was amongst 5 consultants to share their view on how the buy-sell enterprise in Canada would form up in 2023 and past on the 2023 Automotive Information Canada Congress in Toronto Feb. 16.

None predicted a slowdown in dealership acquisitions.

Landon Robertson, director of operations and company technique at Templeton Marsh mentioned the previous three years have been extremely worthwhile ones for sellers, however with larger uncertainty forward, in addition to the looming risk of a recession, extra sellers are contemplating the exit.

“A number of sellers don’t wish to need to undergo that one other time since [the] ’08 [recession].”

NO SLOWDOWN

John Chisholm, vice-president of gross sales for Canada at Seller Options Mergers and Acquisitions, mentioned dealership valuations are “beginning to taper off” from their lofty ranges in 2022, however the demand stays unchanged.

“We’re not seeing a slowdown within the curiosity of acquisitions, or within the curiosity of divesting.”

Amongst different traits, Chisholm mentioned, many getting older sellers with a single or a small variety of shops want to “write that final chapter of their success story” by cashing out.

Ted Lancaster, govt vice-president of mergers, acquisitions and enterprise improvement for the 401 Group of Firms, an Ontario-based dealership group in acquisition mode, mentioned he encounters many such potential sellers.

Significantly amongst sellers 55-years-old and up, he mentioned, the pandemic has prompted a rethink of priorities. They’ll say: “I’ve constructed this firm into a very good entity, however I’ve bought grandkids now, and life is fleeting.”

The 401 Group, recent off the acquisition of seven shops final fall, is much from the one group seeing the prospect to develop.

Christopher Pfaff, CEO of Pfaff Automotive Companions, mentioned the dealership group continues to seek out “a number of alternatives.”

The Toronto-based group was itself acquired in 2021 by Lithia Motors Inc. Now working because the U.S.-based group’s Canadian arm, Pfaff Automotive continues to pursue additional acquisitions “just about wherever in Canada,” Pfaff mentioned.

As teams similar to Pfaff and 401 Group bulk up on dealerships, many others are heading in the other way.

PLENTY OF REASONS TO SELL

Together with an getting older physique of sellers, Heasty mentioned the auto retail enterprise can be getting extra subtle, with new expertise and advertising and marketing instruments turning into a necessity. That is encouraging many small and mid-size sellers to choose out, he added.

“For those who’re somebody with three or 4 shops, both you’re trying to broaden, otherwise you’re saying, ‘Look, I’ll simply take a cheque.’”

And there’s no finish in sight for the development towards consolidation.

Over the long-term, Heasty, Robertson and Chisholm predict most of Canada’s greater than 3,000 new-car dealerships will fall below the management of enormous teams.

What number of dealership teams can be left post-consolidation is “but to be decided,” Chisholm mentioned, whereas Heasty speculated about 25 teams may come to dominate roughly 80 per cent of the market. Native gamers that management smaller markets may comprise the opposite 20 per cent, he forecasted.

Lancaster mentioned a lot the identical.

“I feel you’re going to have numerous giant teams, however I feel you’re all the time going to have some which are considerably impartial — smaller, two [or] three shops [in] native markets.”

Precisely how consolidation will play out “depends upon the OEMs,” Robertson mentioned.

“They’ve a set quantity that they permit sure sellers to personal in a sure market. So, if they begin loosening that,” it is going to open the door to a number of giant gamers controlling the market.