Sun Auto blueprint: Successful shops in key areas

PHOENIX — It was less than three years ago when an equity upstart consummated a deal to purchase Wilhelm Automotive & Tire, a 92-year-old family-owned dealership with nine locations in the Phoenix area.

One of the owners, in his early 60s, was ready to retire and enjoy life on the golf course. The other owner, in his mid-40s, thought the timing was right and the deal was fair.

In August 2019, the deal closed. It would be one of several acquisitions made that year by GB Automotive, named after its majority owner, Greenbriar Equity Group L.P.

Wilhelm's other owner, however, wasn't quite ready to retire.

"So I struck around," said Chris Garman, who had run Wilhelm Automotive for 20 years, including the last 15 as president and general manager.

"I really liked what GB was doing. One of the reasons we sold to them is I liked what their thesis is."

After spending a year running GB's Phoenix-area locations, Garman was promoted to a new position: Today, he is the hunter, instead of the hunted.

Garman is vice president of business development for Sun Auto Tire & Service, the former GB Auto, which operates with a new name and a new majority equity owner, Leonard Green & Partners. Greenbrier remains a shareholder in the company.

It is Garman's job to keep growing Sun Auto, as he is entrusted with overseeing all merger-and-acquisition activity for the company. And by the pace of the dealership's growth over the past 12 months, it's a wonder Garman has had time to sleep.

"We've been moving at record pace the last 14 months or so, really last eight months," Garman told Tire Business. "It's pretty, pretty crazy since Q4 of 2021."

How crazy? Try eight acquisitions involving 134 locations. Nearly two-thirds of Sun Auto's 2021 acquisitions occurred in December. That's more insane than crazy.

Including other acquisitions announced in the second quarter of 2022, Sun Auto now operates 363 points of sale in 18 states, mostly throughout the Southwest and Midwest.

"It hasn't let up," Garman said. "We have some things in the hopper, so they'll be a lot of good things in 2022 from a growth side."

The biggest, and perhaps most surprising to the industry, came around Thanksgiving of last year, when Sun Auto announced it was acquiring Plaza Tire Service of Cape Girardeu, Mo., with 70 locations spread across Missouri, southern Illinois, western Kentucky and northern Arkansas. The deal also included Plaza's wholesale business.

As part of the deal, Plaza Tire owners Mark and Scott Rhodes "invested substantially" in Sun. Along with Mark Rhodes' eldest son Sam, all remain active in day-to-day operations of Plaza Tire, founded in 1963 as a car wash by Vernon Rhodes, Mark and Scott Rhodes' father.

"Their decision to invest and stay engaged in the business reflects their love of the business and their belief that prospects for Sun Auto are bright," Rob Stavitz, Sun Auto's chief marketing officer, said.

Plaza Tire President Mark Rhodes said the dealership didn't pursue a buyer.

"But when Sun Auto reached out, and we saw their plans, the way they do business, the other acquisitions they made, it became clear that this could be a good option for us," he said.

Scott Rhodes is tasked with building greenfield locations for Sun Auto, similar to what he was doing before the deal was struck, while Mark Rhodes runs operations at the dealership while helping out in other markets.

To date, the Plaza deal ranks as Sun's largest single acquisition in sheer number of locations, but it wasn't any more complicated or took any longer to consummate than any other, according to the man who helped broker the deal.

"There is level of complexity that goes up, the larger the deal and the transaction," Garman said. "Truthfully, a large transaction in some ways is a little bit easier than a small one. There is just as much work that seems to go into, or almost as much work goes into a single or two- store as does a 20- or 25-(location) store."

With more stores, more work ensues, he said, but more employees are involved in the process.

"It's gone as well or better than expected," Garman said of the transition. "It's a fantastically well-run company. It's been a great, great addition to our network. We're very excited about that one."

So just how does a deal with Sun Auto come together? Does the dealership pursue the independent, or vice-versa?

The answer, Garman said, is yes.

"Some of it is targeted: We're looking at markets we are already in or markets we want to be in, trying to establish relationships with the dealers we want to purchase or we want to join our team," Garman said. "We want to add the top tier talented dealerships across the country.

"Some of it is, we get called and asked if we're interested. … We do a lot of that as well."

Referrals play a huge part. One dealer may not be interested, but he or she might recommend another more willing. As Sun Auto continues to grow — today it ranks as the seventh largest independent retail tire dealership in the U.S., in terms of locations, according to Tire Business research — more dealerships are reaching out to Sun, leading to more opportunities.

Garman said he and the Sun Auto team have several criteria when evaluating the merits of any acquisition. They include:

This applies not only to what region of the country the dealership is located, but also where its shops are located relative to that region.

Sun Auto's main objective, he said, is to build in and around the areas of the country the dealership already serves. The interest intensifies if the dealership in question, whether it be a single location or multi-location, checks that box.

"We obviously would like to expand our footprint and fill in gaps where we're not," he said. "We still have some work to do in the Southwest (and) South. We have some opportunities in the Midwest that we like and will continue to pursue."

If a dealership in, for example, Idaho or Massachusetts were to inquire — areas where Sun currently has no footprint — Garman said it's unlikely Sun would be interested.

"It's much harder even if it's a high-quality, good-performing, great talented dealer," he said. "I don't have the infrastructure to support that market for just one store. It doesn't become cost-effective for us to do that. We'll be there eventually, and we'll tell those sellers, 'If you're not in hurry, hang tight, and when we get in the market, you'll be the first call we get.'

"It doesn't mean we won't ever do it; it just means the timing isn't right."

The shop not only must perform well, but its work culture must be strong and feature a full team of employees.

Struggling shops, at least at this point, aren't considered.

"We want to add good, highly productive companies, and we want to add talent in an environment where it's hard to find good people," Garman said. "One thing we're looking for, and we do a very good job of it, is retaining the talent of our acquisitions. Their team is important to us. A lot of our process is designed to keep that team in place."

To that end, most Sun Auto acquisitions retain their current name and community identity. Garman said Sun Auto not only values the local brands, but the people who help establish that brand identity.

"The very core is about valuing local brands, understanding that consumers do business with people and people do business with people," Garman said. "And there is a value that these legacy brands have established and built. The intent is not to destroy value in an acquisition."

Three years after Sun acquired Wilhelm Automotive, Garman said all of the dealership's key personnel continue to work for Sun.

"The sellers know we're going to take care of their team," he said. "It's an important part of what we do. It's important as a seller, too."

He said that employee-first mentality factored into the decision to sell Wilhelm. Now, he said, employees can grow in their positions without leaving the company to do it.

"That value the local brand, that commitment to people and teams really sets us apart," he said.

The sale price is important to both buyer and seller, Garman said, as they negotiate any sale.

But money, he said, is not the primary driver.

"For everybody, there are specific components for what is important in a deal, and price is definitely a component, but it's not the main component for everybody," he said. "That's not to say we're not paying top dollar for these companies, because I believe we are very competitive in our pricing.

"Everybody's got to pay the price. The intangibles that make us different is that commitment to people, that commitment to the team and that value of the local brand."

One other intangible that Sun Auto can offer is Garman: A former legacy shop owner who once walked in their steel-toed shoes.

He not only understands but lived through two of the most common concerns: the emotional hurdle of selling a shop; and understanding and accepting the depth that a buyer will delve into data in order to assess the business accurately.

"I understand the questions they are going to ask, and we can address them up front," Garman said.

"We can talk through things. I know the pain points for me, and quite honestly the pain points we see in every transaction we do. There are some things that come with the territory."

Most importantly, all negotiations are kept confidential, and Sun Auto won't comment on any acquisition until the owner shares the news internally.

"Confidentially is a big deal for us," Garman said. "It goes back to the concept of people. We know the right person to tell the team that they are going to sell the company is the guy that is selling it. ... If they find out from someone else because we didn't keep it confidential, that just creates problems for everybody. We don't want that. Nobody does."

Garman said Sun Auto has no definitive goals to expand to every state in the continental U.S., nor does it have any magic number in mind. And he assures that the dealership won't double in size in 2022, as it did the year before.

The company used the first quarter of this year to acclimate itself to its 2021 growth spurt while supporting the teams that focus on details of the transition.

"We've worked hard to improve our process and shorten our time frames with sellers, so that when we sign the MOI (memorandum of incorporation), it closes much quicker than it used to. Some of those deals that got dragged out a little bit, we learned a lot about why and how. We worked really hard to try and shorten those time frames up so that we're not as Q4 heavy this year."

In the first five months of 2022, Sun Auto has acquired or opened nine points of sale. Its most recent acquisition, of Renton, Wash.-based Good Neighbor Tire & Auto Service, added two locations each in Oregon and Washington.

The locations in Oregon — in Portland and Beaverton — are Sun Auto's first in the Beaver State. Good Neighbor's Seattle and Renton stores give Sun Auto a total of 16 locations in the state.

In mid-April, Sun purchased Superior Tire, an automotive tire and auto repair dealership with four stores in northwest Arizona, Sun Auto's first in the Arizona-California-Nevada tri-state area. It also opened a greenfield Sun Devil location in the Phoenix area.

Don't expect the buying spree to end anytime soon.

"We're excited about where we are," Garman said, "a talented company with talented people. I expect to see great things ahead."