Akhavan said he also expects the Lithia purchase to be an “aha moment, a catalyst” for other dealership groups looking either to expand or sell their businesses.
“The Pfaff-Lithia deal has got a lot more people thinking seriously about what they want to do down the road. They’re thinking, ‘We have had record years, it’s the top of the market. Do I want to work another 10 years or get out now?’”
Akhavan estimates there are about 10 or more dealership groups in Canada with 20 or more stores, and he expects those groups to grow, primarily by acquiring existing dealerships. Smaller, regional groups might also seek to stretch outside their current footprint by purchasing dealerships in neighbouring provinces.
Pfaff said Lithia CEO Bryan DeBoer first kicked the tires about six years ago, but talks got serious last September. Pfaff would not disclose the purchase price or the size of the stake Lithia assumes. He did say that Pfaff owns a minority stake.
Aside from growth and increased efficiency due to adopting some Lithia management practices, there will be few visible changes, said Pfaff. “Even the branding of Pfaff remains the same. I’m still running the platform, what we have and what we had before in Canada ... the management is still the same,” he said. “I would say we’ve got some very sophisticated support back in Medford, Ore., in terms of what they do with technology and management reporting.”
Not included in the sale were Mercedes-Benz Kitchener-Waterloo and Pfaff HarleyDavidson. Pfaff would not say why.
“They may go into [the deal] at some point, who knows? But I really can’t comment on that.”
Officials for Mercedes-Benz Canada said in a statement it does “not comment on dealer network transactions.”
Also not included in the deal is Pfaff Motorsports, which has been racking up podium finishes at the International Motor Sports Association with its distinctive plaid Porsche GT3 R as well as competing in Vintage Auto Racing Association of Canada (VARAC) with its H.J. Pfaff Audi historic race team.
Pfaff said he’s excited about the prospects for Lithia’s Driveway sales platform, saying that Canadian consumers “are not really taking the full journey online in terms of purchasing a car, but they are certainly taking part of the steps towards it.
“But I do think as time moves on, it’s going to become more and more where people will be comfortable with that.”
Pfaff Automotive began in 1964 when Hans J. Pfaff was awarded a Volkswagen franchise, which opened in Newmarket, Ont. Today, the company’s brands include Porsche, Pagani, McLaren, Mercedes-Benz, Audi, Subaru and BMW.
The company’s position in the luxury and ultraluxury market is one facet of the deal that makes the partnership with Lithia strong, Pfaff said.
“I would say that the mainline domestic and Japanese business, they know for sure better than I do, where maybe in the higher end, exotic and luxury, we’ve got a lot of experience there. So I think there’s a really great complement there.”