Michael Lewicki, President of Lewicki Automotive Consulting Ltd.
Canadian auto dealers are buying American-based dealerships or stores with more regularity.
Erin Kerrigan, Founder and Managing Director of California-based Kerrigan Advisors, says she is currently working on three sizable transactions involving Canadian-based dealership bodies buying American stores.
She did not reveal the names of the particulars involved.
“I see more Canadians acquiring dealerships in the U.S. than I’ve ever seen,” she told Canadian auto dealer. “It’s like triple the amount of Canadian buyers than we’ve seen before the COVID pandemic. The California market alone is larger than the entire Canadian market.”
She said one important factor in all of this is U.S. franchise laws that do a good job protecting dealer interests. She added this is not only attractive to Canadian dealers but also ones outside North America.
“It’s a huge protection for auto dealership franchises and it’s one that makes an investment in an auto franchise in the U.S. much more attractive than outside the U.S.,” she said. “Dealers in the U.S. have legal protection against changes that OEMs might want to make related to going direct to consumers or starting a new dealer network.”
Kevin Kutschinski, President/CEO of Foundation Automotive Group, which is based in Western Canada, has been aggressively building up the company with a U.S. presence since making seven purchases in 2019. He expects to own 38 stores in the U.S. by the end of this year and close to 50 by the end of 2023.
He said the strong franchise laws in the U.S. that protect dealers factored into the purchases but it wasn’t the primary reason.
“We liked the growth in the U.S., did not like the political climate in Canada and the creativity in deals was a lot better than it was in Canada,” he said. “The multiples at that time were considerably more. They now seem to be leveling off similar to in Canada.”
Michael Lewicki, President of Lewicki Automotive Consulting Ltd., said within the past two years Canadian-based companies have ramped up buying American companies.
“The attraction for going the other way is to move investment capital to an environment that is just a bigger economy,” he said. “The American auto retail market is much more robust than the Canadian market is, largely driven by the fact that Americans have a larger disposable income per capita than Canadians do. They’ve also got weather that’s much more conducive to driving cars and being car fanatics more than Canadians.”
