CEOS NO. 2 TO 100

National Post (Latest Edition) - Financial Post Magazine - - CONTENTS - by Rob Black­stien and Kris­tine Owram

Bi­ogra­phies and com­pen­sa­tion data for the rest of Canada’s best ex­ecs.

Most com­pa­nies, after com­plet­ing more than a dozen ac­qui­si­tions in a year and a half, would feel like they’d earned a breather. But Au­toCanada Inc.’s buy­ing spree is show­ing no signs of slow­ing down. If any­thing, it’s speed­ing up.

The au­to­mo­bile deal­er­ship group, which is fo­cused pri­mar­ily on Western Canada, ac­quired 16 deal­er­ships be­tween the be­gin­ning of 2013 and the end of May 2014, and ex­pects to com­plete an ad­di­tional eight to 10 ac­qui­si­tions by mid- 2015. And the op­por­tu­ni­ties will keep com­ing as deal­ers hit re­tire­ment age and de­cide to sell, says Pat Pri­est­ner, CEO of Ed­mon­ton-based Au­toCanada. “There are so many deal­ers in Canada that are over 60 years old … and prob­a­bly half of those deal­ers have stated that they want to sell over the next four to five years,” he says. “If you take 3,000- plus deal­er­ships in Canada and half of them are think­ing of sell­ing over the next five years, that’s a pretty sig­nif­i­cant num­ber. So we see the trend con­tin­u­ing, if not grow­ing.”

If you bought Au­toCanada shares when they be­gan trad­ing on the TSX in 2006, you would have pock­eted a re­turn of nearly 500%, not in­clud­ing the cash from 14 con­sec­u­tive div­i­dend hikes. That re­turn is de­spite a sum­mer sell­off that saw shares tum­ble about 35% be­tween June and the end of Septem­ber, ap­par­ently on fears that the stock had risen too far, too fast.

But most an­a­lysts re­main up­beat about Au­toCanada’s prospects. The company has three ad­van­tages that will al­low it to seize new growth op­por­tu­ni­ties, says Sco­tia­bank an­a­lyst An­thony Zicha: ac­cess to growth cap­i­tal, a good re­la­tion­ship with au­tomak­ers and deal­ers, and a “highly dis­ci­plined and suc­cess­ful ac­qui­si­tion strat­egy.” On top of that, Cana­dian auto sales have been on a tear and are on track for a sec­ond con­sec­u­tive record year — another rea­son deal­ers are ea­ger to sell, since they feel they can get a good price for their busi­nesses.

Car buy­ers may not even no­tice this fast-ris­ing player. Un­like AutoNation Inc., a Florida-based company pur­su­ing a sim­i­lar strat­egy in the U.S., Au­toCanada doesn’t put its brand on most of the deal­er­ships it buys. “We agree with the man­u­fac­tur­ers that each store has to stand on its own in the com­mu­nity it’s in, and what­ever the name of that store is, that’s where we­brand and fo­cus,” Pri­est­ner says.

In­stead, Au­toCanada uses its scale to cut costs, im­prove sales and ser­vice, and em­pha­size on­line mar­ket­ing. The company also does its best to woo man­u­fac­tur­ers by im­prov­ing the per­for­mance of its deal­er­ships. “Our re­la­tion­ship with the man­u­fac­tur­ers is cru­cial to the business,” says Pri­est­ner, adding that Au­toCanada fo­cuses on ex­ceed­ing the man­u­fac­tur­ers’ sales ex­pec­ta­tions, im­prov­ing cus­tomer sat­is­fac­tion and build­ing shiny new fa­cil­i­ties.

Au­toCanada’s deal­er­ships cur­rently sell ve­hi­cles for Fiat Chrysler Au­to­mo­biles, Gen­eral Mo­tors Co., Nis­san Mo­tor Co., Hyundai Mo­tor Co., Subaru Co., Mit­subishi Mo­tors Corp., Volk­swa­gen AG and BMWAG, and Pri­est­ner says he sees “huge new op­por­tu­ni­ties” to de­velop re­la­tion­ships with other man­u­fac­tur­ers. Ge­o­graph­i­cally speak­ing, Au­toCanada’s foot­print is con­cen­trated in Western Canada, and Pri­est­ner says there are plenty more op­por­tu­ni­ties there. But he would con­sider ex­pand­ing in On­tario if he could find a deal­er­ship group with five or 10 stores that’s will­ing to sell. And a re­cent pur­chase of a BMWdeal­er­ship in Mon­treal has opened up the pos­si­bil­ity of more lux­ury ac­qui­si­tions in that mar­ket.

Of course, buy­ing so much in such a short time pe­riod has its costs. Au­toCanada’s ex­penses jumped 23.6% in the sec­ond quar­ter due to the due dili­gence and le­gal costs as­so­ci­ated with the high vol­ume of ac­qui­si­tions it has done over the past year. “But that’s a cost I’d love to in­cur ev­ery quar­ter if we could do that many ac­qui­si­tions,” Pri­est­ner says. — Kris­tine Owram

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