| IN THIS ISSUE FEBRUARY 2014
To the Point
The Realities of Consolidation
Dave Kanicki, Executive Editor
In the past few weeks, I’ve had some interesting conversations with farm equipment dealers about the continuing consolidation that’s taking place in the industry. These have been straightforward discussions covering things like, “What should I do?” “Why is it happening?” and “What do you think about it?”
First, it doesn’t really matter what I think. Dealer consolidation is a reality and the best thing a publication like Farm Equipment can do is to keep dealers apprised of what’s happening. We’ve also made a point of it to report on dealers’ experiences on both sides of the consolidation equation and to share successful tactics and strategies — and pitfalls — when it comes to mergers and acquisitions.
Together with our partner George Russell of Currie Management Consultants, we track trends in dealership consolidation and publish an update each April called the “Big Dealer” report. The current scorecard shows 182 dealer groups that own and operate 5 or more farm equipment dealerships. That’s up from 151 in 2009.
If farm equipment sales soften as some forecast in 2014, Russell says the pace of consolidation will pick up. “Aggressive dealers are preparing to exploit M&A opportunities when the market turns down. They are ready with the experience and bench strength to be able to handle integration opportunities.”
As to why the industry is consolidating, the reasons are varied and many. But at least part of the reason can be placed on the shoulders of the dealers themselves for a lack of succession planning.
When Titan Machinery went public in December 2007, David Meyer, chairman & CEO of the dealership group told us that the industry was on the “front end of a major wave of dealership consolidation that’s going to take place. Take a look at the average age of a lot of dealer-principals today,” he said back then.
In fact, it was dealer owners who were ready to retire who initiated many of Titan’s acquisitions. We can see a similar scenario today, as dealers with thoughts of hanging it up stayed longer as equipment sales reached record levels. As things slow down, thoughts of moving on are returning.
Another reason can be found in the special report in this issue of Farm Equipment. Brian Carpenter of Champlain Valley Equipment in Vermont explains why expanding from 2 stores to 4 has made a huge difference for the company. “At 2 stores, you can gain some economies but not enough to have centralized processes,” he says. “At 4 stores was when the percent of our business expense that was overhead fell significantly.”
Then there’s the matter of farms getting larger and the escalating demands they place on dealers.
When these dealers ask about what they should do, I refer them to various articles published in Farm Equipment over the past 10 years with a search on the phrase “shark or bait.”
Of course, I can’t help wonder why these dealers were asking about dealer consolidation now. After all, it’s not a new phenomenon. But those conversations remind me that I need to look up every once in a while to see what’s happening out there in the big world beyond my desk. Working hard is always a good thing, but in today’s business environment, there’s no excuse for not knowing what’s going on beyond our immediate businesses.
Nothing frustrates like having cash to invest but having no real trustworthy or decent earning place to invest it.