John Chisholm surveyed the changing dealership landscape and realized he had a choice to make.
As the owner of a single dealership, Rose City Ford in Windsor, Ont., he knew the costs of being a single-point owner were becoming prohibitive. That meant he had to either sell his beloved dealership, which he took over from his father in 1996, or buy more stores to gain economic scale.
“The problem in my case was that I’m in Windsor,” Chisholm said. “There are a few groups in Windsor that have consolidated most of the stores, so there really wasn’t a lot left, and it meant going to Toronto or London and commuting.
“I have a 10-year-old daughter and a 17-year-old daughter. I just don’t want to be away from them that much.”
So, Chisholm sold his store. But the sale, which closed in December 2018, wasn’t an ordinary buy-sell trans- action like those that have become increasingly common over the past several years.
It took nearly a year for the $24.8-million deal to finalize. And by the time the store changed hands, Ford of Canada had reversed one of its long-standing policies so that Edmonton-based AutoCanada Inc., the country’s only publicly traded deal- ership group, could add the coveted brand to its portfolio.
NO SELLER’S REMORSE
Almost a year after the deal closed, Chisholm said he had no regrets, especially as technology alters auto- motive retailing and as vehicle sales soften.
“The retail automobile business is changing, and it’s changing rap- idly,” said Chisholm, who stayed on as a part-time adviser to AutoCanada. “I’m not afraid of it, but I don’t know that, at 61 years old, if I want to go through all that.”
The Rose City Ford sale sheds light on the challeng- es single-point retailers face in an era marked by large, growing dealership groups. It also shows just how far some groups are willing to go to enter new markets and sell new brands.
In AutoCanada’s case, that meant waiting nearly a year before finally adding the store to its stable of 64 rooftops in Canada and the United States.
Farid Ahmad, whose Dealer Solutions Mergers and Acquisitions was hired by Chisholm to find a buyer for Rose City, said the process took at least twice as long as a typical deal he works on. That’s because Ford first had to change its policy barring pub- lic companies from owning its dealer- ships.
The automaker, Ahmad said, is strategic in selecting which people and groups own its stores. Overturning a long-standing policy in Canada was not going to be easy.
Still, Ahmad sensed an eagerness from Ford to get the deal done, an out- look he attributed to Chisholm’s repu- tation among Ford’s leadership team and AutoCanada’s plan to keep him as an adviser during the transition.
This month, Chisholm will leave Rose City Ford to join Ahmad at Dealer Solutions, managing mergers and acquisitions in the United States.
“We were well aware that Ford is a really desirable brand, and when a brand is as desirable as Ford, the manufacturer can get extremely fussy and choosy,” Ahmad said. “But that wasn’t the case here. They were willing to work to ensure that John Chisholm got a good deal and a straightforward deal. They could have derailed the deal if they wanted to.”
‘RIGHT TIME’ FOR NEW POLICY
In a statement to Automotive News Canada, Ford of Canada spokesman Matthew Drennan-Scace said the automaker made the decision in June 2018 to sell the store after care- ful consideration and con- sultation with its dealers across Canada.
“It was the right time to update the ownership policy for Ford and Ford-Lincoln dealerships in Canada,” Drennan-Scace wrote. “We remain focused on ensuring our updated own- ership model continues to meet the needs of the communities we serve.”
Chisholm credited Mark Buzzell, the former Ford of Canada CEO, for facilitating the deal. Now Ford’s director of North American fleet, lease and remarketing operation, Buzzell is an American who had worked for Ford in the United States before taking on his role in Canada.
For years, Ford has allowed pub- lic dealership groups to own its stores south of the border, even as the policy remained unchanged in Canada.
“I think that the stars lined up for us having Mark Buzzell as the CEO from the U.S. who understood public own- ership and was used to it and comfortable with it,” Chisholm said. “I think that really, really boded well for us in the approval process.”
Chisholm and his wife, Sophia, who was secretary-treasurer of Rose City Ford, met Ahmad on a trip to Toronto about 18 months before the sale. Chisholm said they talked about consolidation trends in the industry and about the store’s suc- cession plans.
“Really, the succession plan for us was to sell the dealership in due course,” he said. “Now, we had abso- lutely no inkling to sell the dealership. It was really a fact finding mission ... We were not even in the mindset to sell that store.”
About six months later, Chisholm contacted Ahmad to gauge what kind of interest there would be in the store. He and his wife pondered the future of the dealership and concluded it was time to sell. The costs of man- aging a dealership were spiralling, and the threat of a recession loomed, Chisholm said.
“I was really surprised at the number of groups that are consolidating in Canada,” he said. “My eyes were really opened to the fact that the mom-and-pop dealership, the John-and-Sophie dealership, is going by the wayside, and that consolidation is happening. Margins are compressing and costs are rising all the time.”
After Ford signed off on both its policy change and the AutoCanada sale, Chisholm broke the news to the 60 employees — people he considers family — at Rose City. “They were sad, but as it turns out, everyone is doing well,” he said, adding the staff has since grow to 72.
AutoCanada Executive Chairman Paul Antony declined to comment fo this story, but the company wants to improve the operations of its Canadian stores and develop new profit centres. The strategy includes the creation of a special finance and wholesale division and plans to increase used-vehicle sales.
AutoCanada’s Canadian operations reported net income of $12.8 milllion in the second quarter of 2019, up from a loss of $6 million a year earlier even as underperforming U.S. store dragged down the company’s overall performance.
The industry is changing rapidly but the future is bright for innovating retailers, Chisholm said.
“The brands that embrace what it is the consumer wants at a pace that the consumer can accept it and at a price that the consumer can accept it are going to survive really, really well.”