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Publicly traded firms zero in on dealerships

January 4, 2016
U.S. car dealerships changed hands at an accelerated pace in 2015, boosted by robust new-car demand, strong dealer profits and an increased focus on the business following Warren Buffett’s 2014 purchase of a Phoenix-based chain. 
A total of 456 dealerships had been acquired by mid-December, a 40 percent increase over 2014, according to The Banks Report, which tracks merger and acquisitions in car retailing. The gains came as industry analysts expected U.S. vehicle sales to reach 17.5 million in 2015 and expand again this year. 
Total dealerships in the U.S. has increased modestly to about 18,000 since the financial crisis that saw Chrysler and General Motors file for bankruptcy protection in 2009, and steady volume gains have stirred new interest in the business. 
About 10 percent of the 2015 acquisitions were generated by large publicly-traded dealer groups such as AutoNation. The Fort Lauderdale, Fla.-based retailer bought more than 30 dealerships expected to generate $1.7 billion in revenue. "We will continue to seek acquisitions to leverage our scale," said Mike Jackson, the company chief executive.
Still, there was plenty of opportunity for smaller players. The McLarty Automotive Group, in Little Rock, Ark., acquired 15 stores in 2015, bringing the group’s total to 20. McLarty has snapped up stores from older retailers who hung on through economic crisis and are using the rebound to call it quits while valuations are high.
Group founder Mark McLarty said capital requirements continue to increase while profit margins haven’t expanded fast enough. "I think you are only going to see more consolidations in the future," he said.