Automotive News Canada - February 2020 - v2 - 12

12

* F E B R U A R Y 2020

Cooling M&A activity, except in Quebec
Slowdown in dealership
transactions puts brakes
on seller's market
By JOHN IRWIN
TORONTO BUREAU

MONTREAL - AFTER REACHING
its peak in 2017, the buy/sell market in
Canada is cooling down, with buyers
increasingly in the driver's seat, industry experts say.
Dealership transactions typically
mirror those of the new-vehicle retail
market, said Mike
Lewicki, president of
Lewicki Automotive
Consulting in
Toronto. So as
new-vehicle sales
have dropped off
from their peak in
2017, so, too, has the
buy/sell market.
Mike Lewicki:
"It's not too hot,
not too cold. It's just As new-vehicle
sales go down,
sort of mediocre, in
so does buy/
the middle," Lewicki sell activity.
said.
FILE PHOTO
One exception is
Quebec, which figures to be a hotbed of
dealership transactions, said Maxime
Theoret, CFO of Ontario-based Dealer
Solutions Mergers and Acquisitions.
Aging dealer demographics and rising costs will continue to spur consolidation nationwide, even as the
Canadian buy/sell market moves
away from its 2017 peak, Theoret said.
Those factors are particularly strong in
Quebec, he said, citing conversations
with buyers and sellers in the province.
"The overall trend applies pretty

much everywhere," Theoret said. "The
difference is I think Quebec is going to
see an uptick in the number of transactions compared to the rest of Canada."
In a typical year, he said, the province would see between 25 and 30 dealership transactions. Theoret expects
that figure to grow in 2020. Dealer
Solutions, alone, expects to close 15
transactions in Quebec, he said.

SELLER'S MARKET NO MORE
In recent years, the Canadian buy/
sell market had been a strong seller's
market, with potential buyers bidding
on stores up for sale thanks to a strong
new-vehicle market and low interest
rates.
That has begun to change, Theoret
said, as large dealership groups make
fewer transactions
and as smaller groups
or individuals seek
to expand their footprints within their
region or add a desirable brand. Many
large groups, meanMaxime
while, are steerTheoret:
ing away from furDealership
ther expansion as
consolidation
the new-vehicle maris expected to
ket declines and are
be particularly
instead selling some
prevalent in
of their locations, he
Quebec, due
said.
to rising costs
Canadian auto
and aging
retail has transformed dealers.
in recent years as sin- F I L E P H O T O
gle-point, mom-andpop dealerships become less common
in an era marked by consolidation.
A majority of Canadian new-vehicle
sales now take place at dealerships

AUTOMOTIVE NEWS CANADA

SPOTLIGHT ON
MERGERS AND
ACQUISITIONS

owned by groups. That figure stood at
just nine per cent in 2000, according to
DesRosiers Automotive Consultants.
Costly, automaker-mandated renovations; shrinking
new-vehicle margins;
and an aging dealer
body have combined
to force many small
dealers to sell stores
to large dealership
groups that are more
likely to handle rising
costs.
Gordie
"Eroding margins
Gerbrandt:
are going to be a con"Now we're
tributing factor for
in a very
the dealers," Gordie
balanced
Gerbrandt, director
market. And
it may be
of Canadian opergoing in the
ations for the Tim
direction of
Lamb Group, said in
a buyer's
a phone interview.
"As the market starts market."
to slow down, dealers F I L E P H O T O
start to become more competitive, and
they cut their margins in order to get
the sales and hit the [automaker] targets.
"We were in a seller's market three
years ago, but now we're in a very balanced market. And it may be going
in the direction of a buyer's market,
meaning there would be less buyers
than sellers.

"Which is interesting, because three
years ago, no one would figure we
would be heading in that direction."
Still, Theoret of Dealer Solutions
said he expected Quebec to be even
more active than the rest of Canada, in
large part thanks to the aging dealer
body. Dealer Solutions' sellers are typically between the ages of 58 and 74.

YOUNG PERSON'S GAME
"Depending on where you are within
your cycle, if you're a young dealer and
you're willing to reinvest for the next
20 years, that's great because you have
time to get your return on investment,"
Theoret said. "But if you're at the end
of your career, do you really want to
invest $4 [million] or $5 million in your
facility? How long is it going to take to
get a return on investment?"
A language barrier will also continue to deter some dealership groups from
expanding into Canada, he said. Many
dealership groups that would otherwise
be interested in buying a dealership in
Quebec might not do so because they
might lack a manager who can speak
both English and French, Theoret said.
"I think a lot of buyers just don't
want to deal with the language factor.
I think they decide, 'Let's just buy in
other provinces or the U.S.' "
Lewicki said the strength of the market in Quebec and Montreal, much like
Ontario and Toronto, depends in large
part on the strength of the Canadian
and U.S. economies. That appeared to
be a good sign for the market heading
into 2020.
"So goes the American economy, so
goes the Toronto car market, including
the Toronto buy/sell market," he said,
"and you can probably make the same
argument in Montreal." - ANC

Networking events directed
at women must speak to women
show with an automotive twist.
The runway will showcase 20
models - 16 women and four
science, technology, engineering
men - who all work in the auto
and math occupations.
industry. They will sport designer
In 2016, women made up 34
clothes as a moderator shares
per cent of STEM bachelor's
details of how they launched their
degree holders and 23 per cent
of science and technology workers careers.
"We had a lot of naysayers
among Canadians aged 25 to 64,
about the fashion show,
according to Statistics
but I know our audience,
Canada.
and women want to have
"If we can boost their
some fun," Gubasta said.
numbers at the entry-job
"The fashion show allows
level, we'll see more in the
us to have a cross-secmanagement level," said
tion of people to tell their
Saini, also a doctoral stustory of how they entered
dent at Ontario's University
the world of automotive.
of Windsor.
We have people who
The sold-out cyberseIkjot Saini:
have been in the industry
curity conference, featurIncreasing
for a year and for 30
ing a slate of female lead- the number
ers in that field, is expect- of women in years."
The next step for
ed to draw more than
management
Women Driven is to roll it
500 participants, she
begins by
out provincially and
increasing
said.
nationally, Gubasta said.
their
"Women network dif"This is not a one-hit
ferently than men," Saini numbers in
entry-level
wonder," she said, addsaid, adding that while a
ing that the initiative has
strong demand exists, far jobs.
the support of TADA and
too few networking events F I L E P H O T O
the Canadian Automobile
speak directly to women.
Dealers Association. "There is just
The Women Driven event, for
so much opportunity in automoexample, steers away from the
tive, but we are not on any womtypical conference format featuren's radar ... when it comes to
ing keynote speakers and panelgrowing up and thinking, 'Where
ists, Gubasta said.
do I want to hang my hat?' So, if
Participants will be treated to
we can start to open this door, it
wine, beer, hors d'oeuvres, popwould be a coup." - ANC
up shopping kiosks and a fashion
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Automotive News Canada - February 2020 - v2

Table of Contents for the Digital Edition of Automotive News Canada - February 2020 - v2

Automotive News Canada - February 2020 - v2 - Intro
Automotive News Canada - February 2020 - v2 - 1
Automotive News Canada - February 2020 - v2 - 2
Automotive News Canada - February 2020 - v2 - 3
Automotive News Canada - February 2020 - v2 - 4
Automotive News Canada - February 2020 - v2 - 5
Automotive News Canada - February 2020 - v2 - 6
Automotive News Canada - February 2020 - v2 - 7
Automotive News Canada - February 2020 - v2 - 8
Automotive News Canada - February 2020 - v2 - 9
Automotive News Canada - February 2020 - v2 - 10
Automotive News Canada - February 2020 - v2 - 11
Automotive News Canada - February 2020 - v2 - 12
Automotive News Canada - February 2020 - v2 - 13
Automotive News Canada - February 2020 - v2 - 14
Automotive News Canada - February 2020 - v2 - 15
Automotive News Canada - February 2020 - v2 - 16
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Automotive News Canada - February 2020 - v2 - 25
Automotive News Canada - February 2020 - v2 - 26
Automotive News Canada - February 2020 - v2 - 27
Automotive News Canada - February 2020 - v2 - 28
Automotive News Canada - February 2020 - v2 - F1
Automotive News Canada - February 2020 - v2 - F2
Automotive News Canada - February 2020 - v2 - F3
Automotive News Canada - February 2020 - v2 - F4
Automotive News Canada - February 2020 - v2 - F5
Automotive News Canada - February 2020 - v2 - F6
Automotive News Canada - February 2020 - v2 - F7
Automotive News Canada - February 2020 - v2 - F8
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Automotive News Canada - February 2020 - v2 - F10
Automotive News Canada - February 2020 - v2 - F11
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Automotive News Canada - February 2020 - v2 - F31
Automotive News Canada - February 2020 - v2 - F32
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