An expanding Swickard Auto Group entered Southern California via a majority stake purchase of John Elway’s Crown Toyota in Ontario, one of the Japanese automaker’s highest-volume U.S. dealerships.
And the dealership’s price tag also fetched near-record blue sky value, according to the broker who facilitated the sale. Blue sky is the intangible value of a dealership, including goodwill.
Swickard Auto on Aug. 22 bought a 90 percent stake in the dealership just east of Los Angeles from Elway, Mitch Pierce, Dan Grubb and Paxton Gagnet, said Swickard’s Greg Gates, vice president of business transformation. The four Elway partners collectively kept a 10 percent stake in the dealership, Gates said.
Gagnet will stay on as the store’s general manager and the dealership’s name will not change, Gates said.
“Crown Toyota was an opportunity to really get a foothold in Southern California,” Gates told Automotive News. “What we’ve learned over time is it makes sense to have some scale when we go into a new market. The great thing about a place like Crown Toyota is just the size of the operation. I mean, with one store you almost immediately achieve scale because of the size of the operations.”
Alan Haig, president of Haig Partners, a buy-sell firm in Fort Lauderdale, Fla., which facilitated the Swickard-Elway transaction and worked with both parties, described the store as “one of the top-performing dealerships in the country.”
John Elway’s Crown Toyota was among the top 10 in the U.S. in terms of new-vehicle sales volume in 2021, Toyota Motor North America confirmed to Automotive News.
Elway, a former NFL star and longtime Denver Broncos quarterback, owns several dealerships with partners. He got into dealership ownership years ago and sold numerous stores in 1997 to Republic Industries Inc., which later became AutoNation Inc.
In June, John Elway Dealership Group sold John Elway’s Claremont Chrysler-Dodge-Jeep-Ram in California to Canadian auto retailer Knight Automotive Group.
Haig Partners believes, based on its review of public auto retailers’ regulatory filings and its industry knowledge, that the Swickard-Elway transaction garnered near-record blue sky value.
Haig said what Swickard Auto paid for the majority interest in John Elway’s Crown Toyota — which he declined to disclose — is lower than the $206.5 million in blue sky value it says Group 1 Automotive Inc. paid in March when it acquired Charles Maund Toyota in Austin, Texas. Haig, citing Group 1’s first-quarter regulatory filing for the figure, said that is the highest amount paid for blue sky that it knows of for any dealership. Group 1 declined to comment on the acquisition price or how it ranked against other purchases.
Gates also declined to disclose what Swickard Auto paid for the majority stake.
“The fact that dealerships now are worth two or three times what they were worth before the pandemic, even just by that alone, kind of precludes the old deals from surpassing this,” Haig told Automotive News. “And between the Swickard folks and the owners of the Elway store, nobody can think of any store that’s sold for a greater number than this one, except for Charles Maund, of any franchise anywhere in the country.”
Haig said his buy-sell firm is seeing a heightened interest in transactions that include partnerships between investors and dealers, with some investors buying majority or minority interests in dealerships, especially amid higher store values.
“Some of those dealers are not at retirement age yet,” Haig said. “They still like being part of the industry, they still want to have a place to go to work and be part of a team, etc. And so the opportunity exists now when they can sell a majority stake or a minority stake that wasn’t common before. And so they’re saying, OK, well, I could sell a portion of my company at a high value, put a lot of cash in the bank to use for diversification. Or maybe they want to invest in three or four years when values are lower. They have different reasons for it.”
Crown Toyota is the only dealership in Swickard Auto’s portfolio with a majority stake ownership structure, though Gates said the group had a similar structure in a store previously.
Haig said the Elway group is continuing to buy powersports dealerships because they are cheaper than car dealerships and is focused on growing outside of California.
But he said in the Crown Toyota deal that the Elway partners “didn’t want to give up all the cash flows in that store. So by selling a majority stake, they took a lot of their chips off the table, but they still have a relationship with Toyota, they still are getting ongoing cash flow and that’s something that was appealing to them.”
Haig said Gagnet staying on at the store will provide stability in operations because the minority owners have a vested interest in the dealership’s success.
“It’s not likely to suffer any loss of personnel, any loss of momentum, any changes in terms of the sales volume, the customer experience, etc.,” Haig said.
Swickard Auto also has dealerships in Northern California, Texas, Oregon, Washington and Alaska. In July, Swickard bought a Porsche-Audi-Volkswagen dealership in Anchorage from Kendall Automotive Group. The July acquisition was Swickard’s first since it bought two General Motors stores in Alaska in December 2021, Gates confirmed.
Swickard, of Las Vegas, ranks No. 64 on Automotive News‘ list of the top 150 dealership groups based in the U.S., retailing 14,107 new vehicles in 2021. John Elway Dealership Group, of Englewood, Colo., ranked No. 102 on that list, retailing 10,120 new vehicles last year.
Swickard Auto Group, one of the largest private dealership groups in the country, entered Southern California when it bought a majority stake in a high-volume Toyota dealership from former NFL quarterback John Elway and partners.
Swickard Auto Group, one of the largest private dealership groups in the country, entered Southern California when it bought a majority stake in a high-volume Toyota dealership former NFL quarterback John Elway and partners.