Using his knowledge as an attorney with an auto dealer mergers and acquisitions (M&A) practice, Stephen Dietrich shared his thoughts on trends in the automotive industry with Mergers & Acquisitions. Mr. Dietrich answered questions focused on the influence of ride-sharing and autonomous vehicles and what middle-market private equity firms should consider when looking at potential deals with dealerships.
Mr. Dietrich stated that, due to the amount of businesses involved with operation and sales, new vehicle dealerships are attractive to private equity firms because "there is a diversified revenue and profit model, which helps to combat cyclicality. A well-run dealership can provide high returns on invested capital and free cash flow from operations." However, he pointed out that services like Uber and Lyft will cause dealerships to shift their focus from the "buying, selling, financing and servicing" of cars to a focus on being a "transportation solution" instead.
"There is tremendous innovation and change occurring in the industry," he said, "and when that occurs, there are usually two camps: folks who see change as obstacles and others who view change as a significant opportunity to enter markets and industries."
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