The most frequent questions I get revolves around the current state of mergers and acquisitions (M&A) in the industry. Folks want to know who’s buying, who’s selling and where business values are coming in. Some questions are easy to answer, others are more complicated. So I’ll outline what the current M&A landscape looks like, what some of the key players have been up to, some thoughts on where things may be headed and, finally, what you can do to put yourself and your company in the best position.
Donald Trump’s presidential election victory in November marked a sea change for the business environment in the U.S. I speak with dealership owners daily, and most of them are very encouraged by the expected change in the business environment going forward. A new level of confidence seems to have swept the business world. We’ve seen dealership retail sales increase significantly since the elections. And while there’s concern about the impact of tariffs, businesses are going forward with capital expenditures that were previously on hold. Our industry has benefited from this freeing up of the purse strings. Along with this, I’m seeing independent dealerships getting back into the acquisition game after sitting on the sidelines. This too seems to be spurred on by increased confidence in the economy.
Interest rates are another key indicator and factor at play in the M&A world. As I’ve mentioned in earlier articles, I expected higher interest rates to slow the pace of acquisitions. It doesn’t seem to have impacted the larger, private-equity players. This is likely because they’re typically not using debt to finance acquisitions but rather are investing funds they’ve raised for the sole purpose of acquisition.
There’s been another interesting side effect of higher interest rates. Owners looking to sell their companies have been more willing to take a seller held note for part of the purchase price. With interest rates in the 7–8% range, these owners are happy to get a good return on what they perceive to be a very safe investment. This in turn has allowed buyers to finance part of the purchase price at a rate that’s slightly below bank rates and do so without the hassle and security interest that comes with bank or SBA loans.
The industry’s evolution itself is another factor that’s driving acquisition activity. Organic growth is getting increasingly difficult. Net new placements are harder to come by, and with the transition to A4, revenue per unit is dropping. It’s now common to replace an A3 machine that sold for $10,000 four years ago with an A4 that now sells for $5,000. This drives both revenue and gross profits down. To meet growth objectives, more dealerships are turning to acquisition as a way to rapidly grow revenue to meet their goals and the goals of their manufacturers.
Along with market changes, the acquisition landscape is affected by the numbers of baby boomers who are reaching the age when they’re looking for an exit strategy. While there are fewer large independent dealerships, there are quite a few smaller ones that have hit the market and still more that will hit the market in the near future. The availability of smaller dealerships opens these acquisitions to independent dealerships that don’t have the resources, knowledge or desire to acquire larger companies. We’re seeing more independent dealerships getting into the acquisition game.
Of course, the majority of the attention and questions revolve around the bigger players, most notably those owned or backed by private equity (PE) companies. There have been some recent moves that made headlines. One thing to understand is that the typical business model for PE companies is to acquire a company, grow it organically and through add-on acquisitions, and then sell it within 5–10 years from the time it was purchased. Most dealerships in this case are sold to another, larger PE company. PE is still relatively new in our industry; to my knowledge, Marco was the first large PE acquisition, and that occurred in 2015.
In 2024 we saw two of the PE-backed companies change hands. DEX Imaging, which was owned by Sycamore Partners (under their Staples umbrella), was sold to the Doyle family alongside Gamut Capital Management, a PE firm based in New York. Novatech, which was owned by Trivest Partners, was sold to Perpetual Capital. The fact that these companies were sold to other PE companies reveals general confidence in the industry and the business model of a strong dealership. Acquisition criteria and valuation models are driven by profitability and expectations that the business value can be grown in the coming years. I’ve spoken with the acquisition teams at DEX and Novatech, and the good news is that the sale of the business seems to have brought about a renewed interest in acquisition. In fact, DEX has already closed a couple transactions in 2025.
The sale of these to PE-backed dealerships raises questions about what will happen with other players. There are a handful that have the tenure with their existing PE firm that would indicate a change could be coming. FlexPrint was acquired in 2015 by Oval Partners, UBEO was acquired in 2018 by Sentinel Capital, Visual Edge has had a long-standing debt and equity arrangement with Ares Capital and as mentioned earlier, Marco was acquired in 2015 by Norwest Equity. I wouldn’t be surprised to see any one of these companies sell. But, like DEX and Novatech, I would expect the sale of any of these larger players to lead to a renewed interest and drive for acquisitions.
One additional group showing signs of being more active is independent large and mega dealerships. We’ve seen an increase in activity among this group; they tend to be more regionally focused and will typically entertain acquiring large and small companies. This provides additional opportunities for smaller dealerships that aren’t targeted by the PE-backed companies. PE companies have such a high cost for completing a transaction, driven by the outside resources they use, that they typically won’t entertain smaller dealerships. These large and mega dealerships often have more flexibility than the PE-backed groups as the ownership is making the decisions locally.
All in all, the M&A indicators for our industry are mostly positive. For those who are thinking about their endgame and a business exit, the key is to plan and prepare ahead of time and seek out the best fit. I’ve seen too many take the path of least resistance and speak with one potential buyer. These folks leave money on the table and often miss a more beneficial partnership with the company that would have been a better fit for all going forward. My advice for those who are looking to either buy or sell a business is to prepare a few years out, stay up to date on what’s happening in the market and do your homework before moving forward. If you feel you need assistance, don’t hesitate to reach out—we’re here to help!
