So, what’s the message when dealer groups choose to expand when their per-store performance is declining? What does that say about how they are operating their stores if they are shrinking in a period of growth? What’s going on with their operations? Why would they buy more stores if their current stores are underperforming?

These are all fair questions. For the most part it’s because someone’s job is on the line if revenues decline and growth is not sustained.

Typically, considerations for acquisition are strikingly similar for a single-point dealer, a small regional multi-brand dealer or an independent mega-dealer with stores in multiple markets.

It seems these considerations do not entirely apply to a public dealership group or private equity group, where year-over-year sales growth is imperative to appeal to stock holders and investors.

Over the course of last year, store prices skyrocketed, and have exceeded the pricing levels we saw 10 years ago. The latest feverish dealership merger & acquisition market was aided by a healthy economy, record vehicle sales and Warren Buffet endorsing the industry by buying the Van Tyl megadealer group.

In the current environment, it may be best to either hold or sell, and to buy only as a result of strategically rational considerations.

True money is made when a store is acquired properly and in a way that makes sense.

Phil Villegas is a principal at Axiom Advisors, a boutique automotive dealership consulting firm specializing in mergers and acquisitions, enterprise management, and litigation support. He has worked with many of the largest dealership groups in the country.  He can be reached at PV@AXIOM-AUTO.COM or 786-472-2800.