Colonnade’s Managing Director and CEO Gina Cocking contributed an article to Automotive News on March 27, 2022.
In the article, she predicts that 2022 will be a high-volume year for F&I agency M&A.
Private equity firms are driving the current frenzy with their desire to take advantage of the booming growth in this industry.
In this article, Gina describes the private equity buy-and-build strategy.
Private equity buyers are attracted to the industry’s fragmented ecosystem, high cash flow, and expanding market size. Private equity firms are experts at acquiring a platform investment and then making several strategic acquisitions to increase market share and expand capabilities.
When a platform investment experiences organic growth fueled by acquisitions, the larger, synergistic entity is generally awarded a higher exit multiple. Financial leverage in the initial and follow-on acquisitions boosts returns for the financial sponsor and other equity holders.
Gina also talked about the challenging competitive dynamics for independent agencies. She discusses how in order to compete, agencies need scale to produce the breadth of products and geographic footprint. This has been the motivating factor for M&A activity.
Gina concluded that M&A in the F&I sector will continue into the foreseeable future because private-equity firms have record levels of dry powder, and add-on Acquisitions will be utilized to bolster existing platform Investments.
We invite you to read the article here.
Please also visit our Quarterly Updates on the F&I Industry for more industry news and updates