7:09 am, August 17, 2020
Big isn’t necessarily beautiful when it comes to car dealer supergroups.
Appearing on Car Dealer Live, UHY Hacker Young corporate finance partner David Kendrick was asked to comment on Marshall Motor Group boss Daksh Gupta’s belief that five or six car dealers will soon break away from the pack and become supergroups.
Did he agree with Gupta’s assertion, wondered host James Baggott.
‘I’m not sure I do,’ he replied.
‘I’m not sure big is beautiful. There’s been so much speculation recently with regard to some of the bigger plcs – are they going to get bought, are they going to merge into another group?
‘I think there are definitely economies of scale of having a number of sites, but a number of very well-respected industry figureheads have said to me that once you get over 50 dealerships it’s very, very difficult to influence the culture and keep the controls within the business.’
But he conceded that Gupta may well be right.
He added: ‘If he is, we’ll be very busy for a number of years and then we’ll be out of a job, won’t we!
‘But there’s still a heck of a lot of very well-run family businesses, there’s still a significant number of smaller one-, two-site businesses that make really good returns.
‘We are seeing the manufacturers reduce their number of representation points, so clearly that will cleanse out a number of representation points and dealers within that, but then that leaves a bigger market area for those who survive it to hopefully take advantage of and make more money.’
Supermarket scenario
However, he didn’t think ‘a supermarket scenario’ would develop with perhaps six predominant players.
‘I don’t think that works for the manufacturers either, because the tail will be wagging the dog.’
He agreed that the number of sites would reduce or the number of players in the market may reduce, but metrics such as the top 100 or top 200 wouldn’t become the top six any time soon.
Baggott commented that when we published Gupta’s statement, he took a call from the CEO of another big dealer group who said it simply couldn’t happen because there weren’t enough good people in the industry to run the big groups.
- Five or six dealers will rise to become ‘supergroups’ predicts Marshall Motor Group boss Daksh Gupta
Kendrick agreed, saying: ‘It’s easy to go and buy businesses but how easy is it to integrate them into your group and how do you find those people to lead those businesses?
‘Because it is unfortunately an industry that doesn’t appear to have a significant number of high-quality, real top-end leaders.
‘We’ve seen it with a number of the bigger groups who have been recruiting for a while and it’s tough to find these people. Where is the next generation coming from?
‘I know a number of proactive groups have got initiatives to try and bring leaders through in their business from graduate upwards and it’s having a positive effect, but it’s going to take a long time before we have another Daksh or another Robert [Forrester, CEO of Vertu Motors] or another whoever.
‘It’s not as straightforward as it sounds.’
You can watch the interview in full by clicking on the main image.
You can see all of our Car Dealer Live interviews by clicking here
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- There’s a fresh new design and exclusive content for Car Dealer! Download issue 149 for free here.
