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The management magazine for auto dealer professionals |
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He has the company, the money and the CEO. Now all he needs are dealerships. Dell’s private investment firm, MSD Capital, L.P., which manages $12 billion in capital, has been searching for an opportunity to get into the automotive retail business for the last five years. It has been unsuccessful until last week when it announced the creation of MSD Automotive Partners LLC with industry veteran Jeffrey Rachor. ADVERTISEMENT Rachor, who resigned as Pep Boys chief executive in late April, now will serve as MSD Automotive’s chief executive officer. Prior to his one-year stint at PepBoys, Rachor was with the Charlotte, NC-based Sonic Automotive Group for 10 years, serving as its president from 2004 to 2007.
Having Rachor involved is a critical component for MSD, says Sheldon Sandler, founder and partner of Bel Air Partners, an investment-banking firm that helps dealers buy and sell dealerships. “It was a stroke of genius bringing Rachor on board,” Sandler says. “He has hands-on experience at a large dealer group and has manufacturer experience. He also understands dealership valuations having handled numerous acquisitions for Sonic.” Establishing a dealer group without having dealerships is a change in strategy for MSD. The firm has made numerous attempts the last five years to acquire a dealer group but hasn’t been able to put together a deal. Two years ago, MSD reportedly was close to acquiring the Asbury Automotive Group, a publicly held dealership group that ranks sixth on the Ward’s Megadealer 100 list with $5.7 billion in total revenue. That deal fell through, however. Sources close to the situation say the auto makers had a hand in keeping the acquisition from happening because they were nervous about letting a large private investment company own so many dealerships with the possible intention of selling them in a few years. Rachor believes MSD is the kind of company auto makers want to work with. “It’s a family-run investment company,” he says. “There’s no pressure to have to meet certain numbers or to sell in a few years. We really believe in the long-term strength of automotive retail.” Sandler says MSD’s strategy is a humbler approach. “This is a prudent, long-term investment,” he says. “MSD brings more than capital to the industry,” Rachor says. “They’ve studied it and came to the conclusion this is where they want to be. And rather than waiting for a specific dealer group, this opportunity came up.” Rachor doesn’t believe the firm will have a problem acquiring dealerships, but he refrains from specifying a target number. He tells Ward’s that since the announcement this week MSD Automotive has been inundated with inquiries from dealership brokers and dealers looking to sell. “We’re just getting started,” he says. “We have the capital for unlimited growth. We’ll be disciplined. We’ll prioritize with import and luxury. And just like everyone else, we like the sunbelt states.” However, MSD will look at every opportunity, Rachor says. MSD headquarters will be in Chattanooga, TN, Rachor’s hometown. In addition to looking to acquire dealerships, Rachor also is working to complete his management team. MSD’s approach will be to have strong local management where it has dealerships. Management will have ownership equity in the company. © 2009 Penton Media, Inc. All rights reserved.
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