CEOS NO. 2 TO 100
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