According to Bloomberg, Warren Buffett’s Berkshire Hathaway Inc. recently agreed to buy Van Tuyl Group, the largest privately owned U.S. auto dealership group.
Van Tuyl Group was a business that owned 75 various dealerships according to data from the end of last year. When all is said and done, the business will be renamed to Berkshire Hathaway Automotive and reports say that Mr. Larry Van Tuyl will continue to run the business.
Why did Berkshire Hathaway Purchase Van Tuyl Group?
Many people wonder why Berkshire bought Van Tuyl Group when the investment behemoth has yet to invest in the automotive sector. We can surmise on a few reasons for the purchase:
- Diversification – Berkshire has gone a long time without getting into the automotive industry
- Scale – Berkshire believes the business has room to scale
- Scale By Acquisition – Berkshire has been looking for businesses they can purchase and scale by way of acquisitions – a great model when you consider they have over 55 billion of cash in the bank.
When you thin of simply these three reasons, you can see why the purchase of Van Tyul Group makes sense.
Consolidation Is the Trend of Big Auto
Over the last two decades, the car dealership industry has consolidated as companies like AutoNation Inc. and Penske Automotive Group Inc. Buffet sees fewer companies with more dealerships as the trend for the industry.