Berkshire Hathaway Automotive is actively looking for acquisitions, and the CEO of the company, which has been quiet publicly since buying Van Tuyl Group in 2015, said he thinks it may have an advantage in the industry's next cycle.
Jeff Rachor, CEO of Berkshire Hathaway Automotive, a subsidiary of billionaire investor Warren Buffett's Berkshire Hathaway, said dealership valuations have been at peak levels and his company is patiently waiting for the right deal. He said that as industry performance moderates, that could motivate sellers on valuations and provide an opportunity for Berkshire Hathaway Automotive to accelerate growth.
"We are committed to growing," Rachor said Thursday at the Automotive News Retail Forum: NADA. "We're disappointed that we haven't grown more."
Berkshire Hathaway in March 2015 acquired Van Tuyl Group, then the nation's largest privately held dealership group, with 81 stores. Buffett then pledged to grow even larger.
"From the beginning, Warren and all of us had expressed the desire to grow. And yet Warren also always couched that with sensible growth," Rachor said. "And of course, I would assert that the Van Tuyl-Berkshire transaction itself contributed to what will be looked back upon, in my opinion, as the highest dealership valuations in history."
While Berkshire Hathaway Automotive has considered hundreds of transactions, it has only acquired a "handful of dealerships," Rachor said. Its website lists 85 dealerships in 10 states.
Rachor expects the group to be a larger organization in 10 years, but he wasn't specific.
The 35-year auto industry executive said the company remains disciplined about its criteria for acquisitions — factors such as valuations, cultural fit, brand, geographic fit with its existing footprint, scale and high throughput per outlet. Most transactions it considers include multiple dealerships.
He likened the company's strategy to a Buffett saying: "Investing, unlike baseball, has no called strikes."
Rachor said a batter can wait for pitch after pitch. The batter has to ignore most "until the perfect pitch presents itself," Rachor said.
"It's all about earning reasonable risk-adjusted returns on capital," he said. "And it's about making sure it's a very, very special group of assets and talent that would be a fit for what we view as a very special culture at Berkshire Hathaway Automotive."
Rachor said the private Berkshire Hathaway Automotive has no pressure to grow and no analyst expectations to meet.
"We're going to remain disciplined. And I think as we look to this next cycle that there might be opportunities, because we believe Berkshire Hathaway provides unprecedented access to permanent capital," he said. "And we'll have access to capital at a time that it might not be as abundant as it has been in recent years for others."
