From Warren Buffett to Bill Gates: How auto dealerships are attracting a whole new class of investor

From left to right: Investor Warren Buffett Bill Gates and billionaire financier George Soros are among an impressive list of magnates who have invested - or seeking to invest in - car dealerships.

There are certain must-have status symbols for the rich and famous: yachts, private jets, mansions in the Hamptons – and now, apparently, dealerships.

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Warren Buffett had become the latest billionaire to purchase into the industry when his Berkshire Hathaway Inc’s acquisition of the Van Tuyl Group, the biggest privately held dealership group in the usa, closed a week ago.

It was the biggest acquisition in automotive retail history, giving the newly dubbed Berkshire Hathaway Automotive 81 dealerships with more than US$9 billion in annual revenue, and Mr. Buffett signalled that this is just the start of his foray into the car-sales business.

\”This is the beginning of an outing that will don\’t have any end,\” Mr. Buffett said inside a statement your day the acquisition closed.

\”Cecil and Larry [Van Tuyl] have given us the ideal platform with which to build an auto dealership business that\’ll be thriving and growing 50 and A century from now. The fun has just started.\”

Mr. Buffett joins a remarkable list of magnates who have invested in car dealerships. Microsoft Corp. co-founder Bill Gates owns a lot more than 15% of U.S. dealership group AutoNation Inc., while Eddie Lampert, founding father of hedge fund ESL Investments and CEO of Sears Holdings Corp., owns 12%.

They\’ve had a jet along with a yacht and today they all have to possess car dealerships

Michael Dell, founding father of Dell Inc., tried to get into the company in 2008 with the creation of a venture called MSD Automotive Partners, but that fell apart once the financial crisis hit. And billionaire financier States is also thinking about buying a large dealership group, according to a report from Automotive News.

\”In my thoughts, there\’s still a bit of a question if this is just the latest thing every billionaire has to have,\” Steven Szakaly, chief economist in the U.S. National Automobile Dealers Association, said in an interview. \”They\’ve had a jet and a yacht and today they all have to possess car dealerships.\”

It can not be easy knowing your company is suddenly going toe-to-toe using the Oracle of Omaha, but Mr. Buffett\’s presence also lends force to the growing trend of dealership consolidation, said Marc Cannon, chief marketing officer at AutoNation, the biggest dealership group within the U.S.

Mark Elias/Bloomberg

\”It just proves the auto retailing segment is clearly someplace for investors to become and it validates our whole strategy, to be honest, when people like [Mr. Buffett] come in,\” Mr. Cannon said within an interview.

It\’s not only billionaires who want to get in on the dealership game. Booming auto sales are resulting in record dealership profits and \”the most robust buy-sell market we have seen in over a decade,\” based on a report from Haig Partners, a Florida-based dealership brokerage.

There\’s a significant amount of room for consolidation in the U.S., with approximately 17,000 dealerships at the disposal of more than 8,000 owners, based on Mr. Szakaly.


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