7:45 am, February 19, 2021
A significant up-tick in car dealer acquisitions is expected in 2021 as the big dealer groups look to build their ‘strategic positions’.
Accountancy experts BDO believe a ‘sense of normality’ will return to the automotive retail sector as the pandemic subsides and with it will come an increase in acquisitions.
BDO’s latest Motor 150 report, authored by head of motor retail Steve Le Bas, outlines the firm’s views on the road ahead for car dealers.
Le Bas writes: ‘Looking forward to a post Covid-19 world, it is reasonable to expect a sense of normality to resume in the sector.
‘With this, we can expect to see an increase in acquisition and disposal activity as companies look to both stabilise and build on their market positions.’
Le Bas says the sector has already seen the ‘emergence of a number of strategic plans’ and points to Inchcape’s disposal of a number of dealerships in the past 18 months.
Inchcape sold a number of its Cooper BMW dealerships to Vertu Motors and a JLR site in Southampton to Hendy Group, among other disposals.
Le Bas added: ‘Vertu Motors has continued moving forward with their acquisition strategy with the purchase of both Goodman Retail Limited and Leven Cars Group Limited in 2020 to add to their £22m acquisition of The Hughes Group in 2019.’
Longer term BDO believes there will be ‘broader structural changes’ to the industry that will have an impact on the ‘type of M&A pursued’.
Le Bas points to the need for different equipment and expertise for electrification and the fact this will need more investment. It’s thought this could put some dealer operators off and look for an exit.
He added: ‘Equally, customer acquisition will increasingly happen online and the OEMs will continue to build digital relationships with customers.’
Steve Eagell, the CEO of the eponymous dealer group, told the report that there could be further deals for some operators to be had.
He said: ‘Consolidation in the sector had already started prior to the Covid pandemic, and for some brands the current situation may increase consideration for dealer network realignment.’
Chris Yoxon, director at Foray Motor Group said he thinks there will be an increase in consolidation in the sector.
He said: ‘There will be those groups that have done well over the last year and those that haven’t – the latter may be thinking of selling and with mooted tax increases they could decide it is sensible to do so before those changes come into place.’
BDO highlights three deals as the most significant in 2020.
Cazoo acquiring Imperial Car Supermarkets, Stoneacre buying Hodgson Newcastle Limited for an undisclosed amount and Inchcape’s continued disposals across its portfolio.
Looking ahead, Le Bas says 2021 will be impacted by the level of the recovery in the economy and the confidence vaccines bring.
He added: ‘In terms of consolidation drivers, we believe that 2021 is going to be driven by dealerships defining what their focus is as a retailer.
‘One approach that can drive strong growth is a regional model, and there are clearly some very successful examples such as Hendy Group.
‘Alternatively, is it a focus on specific brands, an online focus or a bricks and mortar one? We see M&A driven by this, as it will shape both divestments and acquisitions.’
Car Dealer revealed the Top 100 list of most profitable dealers at the end of last year. The full list can be found in our dedicated section.
