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Sunday, 05 July 2015 22:00

Q&A: Aaron Zeigler, President, Zeigler Auto Group LLC

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Aaron Zeigler Aaron Zeigler COURTESY PHOTO

 

Since taking over as president of Kalamazoo-based Zeigler Auto Group in 2002, Aaron Zeigler has grown the company’s network of automotive dealerships to encompass 20 locations spanning West Michigan, Illinois, Indiana and New York. Sales for the dealer group grew from $650 million in 2013 to $850 million last year, and the company is on pace to exceed $1 billion by the end of 2015, driven largely by acquisitions and new franchises, Zeigler said. In recognition of that growth, Ernst & Young Global Ltd. named Zeigler as one of its 2015 Entrepreneurs of the Year for Michigan and Northwest Ohio. Zeigler spoke with MiBiz about his outlook as M&A activity continues to heat up in the industry

With auto sales continuing to improve, how does that affect the dealership environment?

There’s a lot of people right now willing to sell dealerships, but the prices are extremely high — or the exceptions of the sellers are extremely high — and the buyers aren’t necessarily always willing to pay that. I think that’s because the industry is really healthy right now and people are doing really well. You also have a lot of pent-up demand with people who made it through the recession and waited for their business to come back and who didn’t have to sell that are now looking to sell.

While there was heightened M&A activity last year, experts have suggested that the pace of deals among dealers has decreased this year. What have you seen?

I don’t necessarily think there’s a decrease in demand. Last year was a big year for M&A. We did a handful of deals last year. This year it’s maybe slowed up a little bit, but I think it’s just getting buyers and sellers together from a pricing standpoint.

Are large public companies looking to cultivate deals facing any push back from smaller dealerships that would rather sell to family-held groups?

The public companies that are already in the business — the AutoNations of the world — people are fine selling to them because they’ve been in the industry for a long time. You’re seeing a lot of wealthy individuals outside of Warren Buffet who wanted to come into the industry and said, ‘Hey, we’re going to buy a lot of dealerships,’ and they haven’t been able to do that.

Why’s that?

Dealers have been extremely leery of private equity money because of the amount of due diligence that they do. There’s also a high likelihood that somebody coming from outside the business can’t get approved by a manufacturer. You could spend a lot of time on a deal and not get it approved. We’re seeing a lot more of manufacturers controlling who’s going to buy the dealerships. They’ve been a lot more aggressive in the last few years.

As a family-owned dealership group, how do you go about identifying and sourcing potential deals?

It’s interesting. There’s a lot of different pipelines. Some I find out from the manufacturer, and sometimes I hear that someone might be interested in selling so I call them up. I’m starting to get a lot of phone calls myself because we’re well-known in the industry for buying dealerships and that we’re pretty easy to deal with.

Is there anything in particular you look for in a deal?

First and foremost, we are looking for the right location and then the right franchise in the right location. Those are the two major things. We’ve got a set profile of what we’re looking for. If it meets that criteria, we move forward, look at it a lot harder, meet with the owner and try to consummate a deal.

Beyond the high prices being asked by sellers, what are some of the other challenges you’re addressing as a growing dealership group?

It’s not so much a challenge, but the manufacturers like new buildings. We build a lot of buildings, so we’ve been nonstop under construction. Last year, we built five buildings and this year we’re building three. You have big capital expenditures going in up front on these, but if you have a really nice facility, customers like to do business there and employees like to work there. It’s kind of a win-win. It also enhances the communities we’re in by putting a lot of contractors and subcontractors to work, which is pretty cool.

Can we expect to see Zeigler Auto Group adding more dealerships in the near future?

Unfortunately, every time you do these, you’re under confidentiality so you can’t talk about them until they get close to being done. But there is some stuff that’s going to be coming down the pipeline, some locally and some out of state, that is going to be happening still in the next three to four months.

People might not associate car dealership executives with being entrepreneurial. What do you think caught EY’s attention?

I think we’re different than the typical organization. … Distribution comes into the sales part of this thing. We’re dealing with all of the different manufactures and we’ve more than tripled the size of the company in the last three years. I think that’s probably something that caught their eye. We’ve (also) done a lot of development internally with our own people every time we buy a new business.

Interview conducted and condensed by John Wiegand. 

Read 5760 times Last modified on Tuesday, 21 July 2015 10:10

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