New Investor Interest in the Heavy Truck Market

The United States heavy truck dealership industry is somewhat unique from the automotive market due to the higher prevalence of private family ownership. However, as recent years proved profitable for the heavy truck market, a new wave of investors, including at least one public company and numerous private equity/family office (PEFO) groups, entered the niche and remain active in 2016.

Why Are PEFO Investors Interested?

The entry of sophisticated investors into the automotive retail industry, including Warren Buffet of Berkshire Hathaway, headlined the dealership arena in 2014, launching dialogue surrounding how this new investor presence would affect dealerships nationwide. Around the same time, Penske Automotive Group (PAG) began growing into the heavy truck dealership market. Not surprisingly, other sophisticated investors are investing in the heavy truck market.

It begs the question – "why"? Given the steady and attractive rate of returns and the fact that blue sky multiples are somewhat lower than the automotive segment, it is no surprise these new investors are expressing interest in heavy trucks. Moreover, the industry remains ripe for continued consolidation, furthering growth prospects.

This new investment source introduces meaningful change to the heavy truck industry, including:

  • More options for dealers to execute exit strategies
  • Investor partnerships as an alternative to the typical straight sale
  • Potential increase in deal volume/size
  • Potential increase in manufacturers’ Right of First Refusals

Authors

David Wilkinson, Manager | DHG Dealerships
Pat Carroll, Managing Director | Haig Partners