Our View: Mergers & Acquisitions defined year in tires

In a year marked by supply issues, the big deals happening in the retail-tire industry have defined 2021.

A decade or more from now, 2021 might be just a small blip in the history that is the tire business. Compared with the year that preceded it — will anyone forgot when COVID-19 became part of our collective vocabulary? — there's a good chance 2021 will be the nondescript middle child who gets overlooked when the first-born excels at sports or the baby of the family graduates from high school.

But behind the vanilla facade that is the last 12 months lurks a year that just may go down as one that changed the tire industry.

Some may remember it for the supply-chain issues that tamped down those sales celebrations in every tire shop. While many manufacturers and dealers have registered double-digit growth in 2021, even compared with a non-pandemic fiscal year, the thought invariably is: "If we had more product, we could sell even more."

The supply chain, of course, is an issue today, with ports filled with container ships, waiting to be unloaded.

We've all heard, or perhaps witnessed first-hand, the rising costs of transportation, as well as the for containers used for shipment.

Then there's the daily notice that a tire maker is raising prices on some specific fitments, and the consumer who came into your shop six weeks ago asking for a price of a replacement set gasps when he or she discovers that price has increased substantially.

A big part of the problem, both with supply and pricing, is the effect the pandemic had on the industry itself. When factories around the world shut production in early 2020 for weeks at a time, some multiple times, the result is less product on the market.

Those supply chain and product shortages are problems today, and we guarantee we will be discussing those topics for months to come. There is no easy fix but time.

This year, however, may go down because of one other business phenomena — one that occurs ever year but has affected this year more than most — mergers and acquisitions, or M&As as we know them.

The acquisition binge began in March when the biggest M&A in the last 30 years involving a North American tire company was consummated. Goodyear's $2.5 million cash-and-stock purchase of Cooper Tire & Rubber Co. — the world's No. 3 and 13 tire makers in terms of sales — sent shock waves through the industry.

Not that a deal for Cooper was a surprise — Apollo Tyres Ltd. nearly acquired Cooper in 2013 — but that it happened almost in a vacuum, without any industry leaks that so often occur in such mega deals.

Of course the M&As continued throughout the year, as several of the better-known growth-by-acquisition players, Monro Inc. and the Leeds West Group among them, continued to get bigger.

The year hit a crescendo, however, in the last few weeks with two big retail M&As, spearheaded by a pair of investment firms.

First, Percheron Investment Management L.P., owner of Big Brand Tires, closed three acquisitions in rapid-fire success, for Integrity Tire of Moorpark, Calif.; Tire World Inc. of Colorado Springs, Colo.; and nine Purcell Tire retail outlets in Arizona.

Then it was revealed the firm had struck a deal to buy American Tire Depot, a family-owned dealership with 101 outlets throughout California.

The deal makes Percheron — under the Big Brand Tire brand name — one of the 10 largest dealerships in the U.S., with more than 160 retail tire and auto service centers in Arizona, California and Colorado.

Then on Black Friday, appropriately enough, another industry-rattling transaction was announced: Sun Auto Tire & Service Inc. had reached a deal to buy family-owned and -operated Plaza Tire Service of Cape Girardeu, Mo.

Sun Auto, formerly known as GB Automotive, not only added all 70 Plaza Tire retail outlets and its wholesale business, but it also secured the services of industry stalwarts Mark and Scott Rhodes, who invested "substantially" in Sun Auto and will join the company once the transaction closes later this year.

Sun Auto will operate more than 300 locations in a dozen states when we ring in the New Year, putting it among the eight largest dealerships in the country. And it doesn't appear as if it will stop acquiring tire shops anytime soon.

In a year of shockers, the most surprising also is the most recent. Discount Tire, the second largest independent retailer in the U.S., announced on Dec. 3 a deal to buy Tire Rack. Tire Rack.com is a behemoth in the world of online tire sales and also a trusted source for customer research.

Discount Tire said it intends to continue to use the Tire Rack brand name as Tirerack.com online, TR Wholesale Solutions in car dealer and wholesale channels, and Tire Rack Mobile Installation in the mobile installation arena.

With Tire Rack, Discount tire — with 1,113 stores and annual sales of $5.17 billion in 2020 — will be in the driver's seat in 2022, and it will be interesting to watch who the two company integrate and the impact it may have on the rest of the industry.

What does that mean for the future? That answer must come from the next generation.

This generation, however, will remember 2021 not only for the supply that isn't here today, but also for the M&A opportunities that are ahead.