‘Grow or go:’ M&A activity puts pressure on equipment dealers

The acquisitions of three equipment dealers in January highlight the pressure small and independent shops are facing amid high interest rates and increased arm-twisting from manufacturers to consolidate — or else.  

Equipment dealer mergers and acquisitions are pressuring smaller dealers to grow, a trend that is likely to continue for CNH Industrial and Kubota brands, Pat Albero, partner of the equipment and commercial truck divisions at Performance Brokerage Services, told Equipment Finance News.  

“Most of the major manufacturers and commercial trucks have started their consolidation,” he said. “For the single-point or the two-rooftop locations, the writing’s on the wall for them. Not in a scary way, but in a way of saying, it’s almost grow or go.”  

Performance Brokerage Services acted as an adviser to 84 equipment dealer transactions in 2023.  

CNH and Kubota equipment dealers are likely to further consolidate amid pressures from the OEM, similar to the widespread consolidation of John Deere dealers over the past 20 years, Albero said.  

The two agriculture dealer consolidations completed this year fit the trend, with Boston, Ga.-headquartered John Deere dealer Ag-Pro announcing the acquisition of Waycross, Ga.-based Southeast Mower & Saw Shop on Jan. 26, and Wells Fargo, N.D.-based CNH dealer Titan Machinery completing the acquisition of Mitchell, S.D.-based Scott Supply Co. on Jan. 10, according to the respective dealers’ press releases. 

In addition, Vanguard Truck Centers announced it acquired all nine locations of East Coast-based Nacarato Truck Centers Jan. 10 to form one of the largest Volvo Truck dealer groups in the world. 

Meanwhile, some large equipment dealers, such as Alta Equipment Group and Titan Machinery, have made M&A a cornerstone of their business models. Alta has acquired 16 equipment dealerships since its 2020 initial public offering, according to the company.

Dealer defaults increase M&A 

Worldwide, the equipment market continues to remain strong, but high interest rates are pushing some dealers into default, which can further fuel M&A activity, Roman Basi, president of the Center for Financial, Legal & Tax Planning, said during this month’s 2024 AED Summit in Las Vegas.  

“The merger and acquisition market is still very alive,” Basi said. “I think that the longevity of this interest rate [environment], where we’ve been now for several months, is having an impact.” 

As a result, consolidation seems likely to continue as values remain at an all-time high, Performance Brokerage’s Albero said. 

“There’s going to be rapid consolidation for the foreseeable future, and a lot of diversification within a dealership group that owns a car dealer or multiple car dealers that wants to start getting into agricultural equipment dealerships,” Albero said. 

“The other side is you’re going to see some very large transactions that are going to happen this year in all of those verticals, so it’s not just the single rooftops that are trading at this point. It’s the very large, consolidated dealerships that also could exit at an all-time high,” he said.  

CNH, Kubota, and John Deere did not respond to requests for comment ahead of publication.

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