To view the 2002 Ward's Megadealer 100, here.
Ward's Dealer Business Megadealer 100, a ranking of the nation's top dealer groups, increased its total revenue $8 billion in 2001 — from $101.6 billion in 2000 to $109.8 billion in 2001.
However, four of those collections alone — the Van Tuyl Group, United Auto, AutoNation and Bill Heard Enterprises — accounted for half of that $8 billion increase leaving the other 96 groups to fight for the rest.
But did that growth come from buying up more dealerships or from internal operational growth?
That's important, says Mike Maroone, president of AutoNation Inc., the No. 1 on the Ward's Megadealer 100 for fourth year in a row.
He explains, “We have to show investors that the business model does work — that we are able to grow the business internally rather than by acquisition.
“Making sure that people understand that is one of our biggest struggles. There is more investor interest than at any other time.”
AutoNation in recent times has focused on internal growth — after establishing its top-dog status through a series of dealership buying sprees in its formative years.
Most of the top 100 dealer groups are focusing more on internal growth, although some groups such as Sonic Group 1 have purchased several dealerships in recent months.
The Ward's 100's overall pace of acquisition slowed last year to 79 acquisitions for a total of 1,759 stores. In 2000, they added 129 stores.
The key fact, though, is in 2001, revenue per dealership increased to $62.4 million from $60.3 million in 2000. Half of the revenue increase came from new retail sales with the other half spread out among used car sales, finance & insurance, service, parts and body shop.
Despite the increase in revenue, the Ward's Megadealer 100 did lose market share in 2001 with new car sales — 15.8% in 2000 down to 15.6% in 2001.
The decrease was caused by a decline in fleet sales mostly due to Sept. 11th. Because travel was down, the rental companies stopped buying cars and instead looked to dump excess inventory piling up at the airports.
The top five groups remain the same this year as last year, except the Asbury Group and Van Tuyl switched positions. Asbury slips to the fifth position. Van Tuyl goes to fourth.
The threshold for getting on the Ward's Megadealer 100 list increased significantly in 2001 — from $241 million last year to $271.4 million this year for the last spot.
Consolidation slowed in 2001 — in part in response to what was perceived as volatile market conditions, says Sheldon Sandler, founder of Bel Air Partners, LLC, a dealership brokerage firm.
“The buyers didn't trust the market and weren't willing to pay top dollar last year,” he says. “And the sellers weren't interested in selling at the prices they were hearing.”
But don't expect that to continue.
“Consolidation is definitely going to pick back up,” says Sandler. “Dealerships have become much more valuable the last few years. Also, the cash flow is available now. The private groups raised $700 million in fresh capital for acquisition purposes. And, they've had significant cash flow the last four years.”
Another factor driving the consolidation trend is that fewer general managers or dealers' children are taking over the stores as owners retire or pass from the scene.
Sonic Automotive ranked second on the current Ward's Megadealer 100 (measuring 2001 performance) with $6.3 billion in total revenue and 115 dealerships.
Sonic started buying this year with its acquisition of the 21 store-Don Massey Group. Sonic continued in March, purchasing five dealerships in the southwest region of the country.
That should put Sonic right up there in the next Ward's 100. But Sandler doesn't expect to see much more action from Sonic this year, citing lower cash reserves that preclude continued buying.