When five large dealership groups went public in a span of two years in the mid-1990s, we thought the roll-ups might continue unabated for years.
America's showrooms could soon be controlled by a league of companies answering to the Securities and Exchange Commission. Executives would be too busy putting out 10Ks to go to 20 group meetings.
Another public group came along, of course. Asbury took the plunge in 2002, but the retail terrain did not become the land of the giants. The Big Six are still the Only Six, and they account for just 6 percent of the U.S. market.
For a while people questioned why more public groups weren't forming, but rarely does the question come up anymore. The answer is obvious. It is too much fun, and too lucrative, to run a big retail group in the privacy of your own private company.
You can own something with the size and heft of a public, or nearly so, without armies of sharp-eyed analysts wanting "a little more color" on why total gross last quarter on a same-store basis was up on the front end and down on the back end.
Still, the expectation was that publics would be needed to cash out mom-and-pops, as well as dealerships where passing the torch to the next generation wasn't feasible. But a couple of things have happened.
Private equity, for one, of course. And then "family office" entered the vernacular -- a term first mentioned to us by broker Alan Haig in January 2014 at the National Automobile Dealers Association convention in New Orleans. A lot of the talk in the Big Easy was about the investment arms of super-rich families -- wealthy clans with long-term horizons, a desire to stick with existing store management and, most of all, the resources to provide a single-transaction exit strategy.
Still, it took nearly two years for what many consider the first big family office deal to happen, the Bechtel family's majority purchase of Morrie's Automotive Group in Minneapolis last month.
Now it turns out that publics, private equity and family offices aren't the only ones offering exit strategies. In fact, it is astonishing to see how much wealth has been created among private groups after six straight years of rising U.S. sales.
Just ask Terry Taylor.
Well, you could try asking Terry Taylor, but the proprietor of Automotive Management Services Inc. operates significantly under the radar. Yet he has built a network of dealerships so big he could take a seat at the table with the public groups.
Taylor just added 11 stores from Sam Swope Auto Group in Kentucky and by some accounts has about 140 altogether. We hear he wants to own 200 within a year.
As for his acquisition strategy, Taylor has done a bit of everything. He has bought from Group 1, he's taken over largish groups after the patriarchs died, and he's snapped up lots of onesies and twosies.
People who know the Florida entrepreneur or have competed against him cite a few basic Terry Taylor precepts. The general managers get a stake and those that perform don't get micromanaged.
The facilities are grand, and CSI is a central focus. The factories like Terry Taylor. Who cares if he is the Invisible Man?
It sounds like the franchise system at its best.
Locally run businesses have store managers with skin in the game -- but also access to group resources.
Not many dealership companies are as big as Terry Taylor's (unless others like him are operating in a parallel universe of giant private groups). But lots of large independents are ready to roll in the buy-sell world.
And they don't need banks because, effectively, they ARE banks.
Sheldon Sandler of M&A adviser Bel Air Partners says Taylor told him: "I don't need anyone's money."
No doubt others are in the same position.