401 Group’s seven-store acquisition doubles down on smaller markets

The 401 Group of Companies is nearly doubling its portfolio of new-car dealerships with two acquisitions accounting for seven stores in southern Ontario.

The deals solidify the Cambridge, Ont.-based company’s standing as a “growing group that’s looking to expand within the Canadian marketplace,” said Ted Lancaster, the dealership group’s executive vice-president of business development, and mergers and acquisitions.

The 401 Group — now with 16 stores — brings four new vehicle brands under its umbrella with the two transactions, which it hopes will create further opportunities as it pushes to expand.

“While our focus has been in Ontario, we’re not going to be limited by one single province or even country,” Lancaster said. “We think there’s opportunity to continue to diversify and grow.”

Financial terms of the two deals — one for six stores, the other for a single dealership — were not disclosed.

SIX PLUS ONE

The 401 Group signed the larger of the two purchase agreements with longtime eastern-Ontario dealer Jimmy Lapointe. The deal, completed Nov. 30, includes Lapointe Chrysler-Dodge-Jeep-Ram, Pembroke Honda, Pembroke Nissan, Peterborough Hyundai, Peterborough Subaru and Renfrew Chrysler. Three other Jimmy Lapointe’s Automotive Group dealerships were not included.

The 401 Group’s initial offer was for two stores, Lancaster said, but that expanded to six as the two parties worked toward an initial handshake agreement. As part of the deal, most of the staff will join the 401 Group, he said.

On the opposite side of the Greater Toronto Area, the 401 Group acquired family-run Stratford Hyundai from Todd Saunders in a transaction that closed at the end of October, Lancaster said.

The two purchases will provide greater brand diversity. Before the two deals, six of the company’s nine stores were Kia franchises.

Prior to joining the 401 Group in 2018, Lancaster was COO of Kia Canada from August 2015 to October 2018.  The group, which acquired its first Kia store in Tillsonburg, Ont., had been “heavy” on the South Korean brand, largely because of the good relationship it has built with the automaker, he said.

SMALL-MARKET SUCCESS

While the company’s association with Honda, Nissan, Stellantis and Subaru is new, the smaller-town markets in which the stores are situated are familiar. Apart from one Mississauga, Ont., dealership, Lancaster said, the 401 Group has avoided metro markets as part of its strategy.

“We’ve proven we can go into these smaller markets and increase the volume of sales, increase retention, [and] Google ratings,” he said. “I think overall, we’ve proven our model, and now we just want to continue to grow and develop it.”

The 401 Group will not be overhauling operations at the dealerships it acquired, Lancaster said, but will integrate some new techniques, plus an in-house lead-generation tool it has built to prioritize new clients.

The group now now represents 60 brands of auto, recreational vehicle, marine and power sports stores under its 39 Ontario rooftops and employs more than 800 employees all its businesses.

EYEING U.S. EXPANSION

The dealership group is also scouting opportunities in the United States as it has watched the Steele Auto Group, AutoCanada Inc. and HGrégoire successfully move south, Lancaster said.

“There’s a lot of groups out there that have branched outside their original province of operation and found great success, and I think that’s something that for us to continue to develop and grow the business we need to be open to,” he said.

Whether the 401 Group will first move into the United States or expand into another Canadian province is “still to be determined,” Lancaster said, but “sometime in the next year or so, we’ll probably step out of our comfort zone.”