Group 1's acquisition path is resolute in the face of consolidation

Group 1 Automotive is focused on expanding through cluster acquisitions within hot markets, even if that means adding brands that aren’t necessarily favorites.

Driving the news: In a conversation with Haig Partners’ president and founder Alan Haig during Auto Team America's annual buy-sell summit, Group 1 CEO Daryl Kenningham shared his expansion plans for 2025 along with the issues he sees in the mergers-and-acquisitions (M&A) market.

• In the coming months, Group 1’s expansion efforts will focus on high-profile markets in Maryland, the Carolinas, Georgia, Texas, and Florida.

• Kenningham notes that he’s even willing to consider Stellantis dealerships “in the right place,” even though the brand struggled to generate profits in 2024.

• Above all, the company is targeting markets with enough room for Group 1 to move into. “We wanna grow in clusters,” explains Kenningham.

Zooming in: One brand that Kenningham is less interested in is Nissan, despite his previous work at the Japanese automaker.

• The Group 1 chief’s unwillingness to acquire a Nissan store stems from the brand’s oversaturated dealer network. “The world has enough Nissan dealers,” he comments.

• Kenningham believes that Nissan may need to follow the route of other brands, such as Buick and Mercedes, which bought out dealerships to lower the number of storefronts, boosting profitability at remaining locations.

Zooming out: Rather than being isolated to Nissan, however, the issue of too many storefronts is actually widespread, preventing dealership groups, like Kenningham’s, from expanding in “clusters.”

• During the same event, Jonathan Smoke, Chief Economist at Cox Automotive, said the number of both manufacturers and dealerships is too high:

• “In addition to having the need that we've got too many manufacturers and there needs to be consolidation, globally, we also have too many stores in the U.S.,” Smoke commented.

• But with many markets dominated by one group or another, it’s too difficult for companies like Group 1 to follow their cluster strategy.

Bottom line: Dealers still have plenty of options in the M&A market, but as time goes on expansion will become increasingly difficult as opportunities dry up. This will be especially problematic for public companies like Group 1 as they must meet shareholders' expectations for growth.

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