Dealerships Are Far Too Valuable To Be Sold Any Other Way · Consolidation Provides Economies of Scale and Scope ... Auto Retail –Still a Highly ... Auto Dealerships Still Highest

Dealerships Are Far Too Valuable To Be Sold Any Other Way

©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.

Kerrigan Advisors’ Transactions

The Success of a Confidential, Client-Focused Approach

Sell-Side Transactions since 2015 – 60 Dealerships SoldThe Most Active, Licensed Sell-Side Advisor in Auto Retail Nationwide

Sold To

Kendall Auto Group

Sold To

Lithia Motors Sold To

AMSI

Sold To

Gee Automotive Companies &

O’Brien Auto Group

3

Sold To

Bakhtiari Auto Group

Sold To

Lithia Motors

Sold To

McManes Auto Group

MERCEDES-BENZ OF

EDMONTON WEST

Sold To

KDW Automotive

Sold To

AutoNation

Sold To

CarPros

Sold To

Victory Auto Group

Sold To

Pendragon


400+ Contacts

35 Countries

Kerrigan Advisors’ Blue Sky Report® is now sent to over 35 countries and 323 individuals outside of the US,

a testament to the growing interest in North American dealership values in today’s active M&A market.

Boost of International Interest in Auto Retail

Cross-Border Buy/Sell Activity is Increasing


0

100

200

300

400

500

600

700

800

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

The Kerrigan IndexTM S&P 500 (rebased)

584.7

Source: Yahoo Finance

The Kerrigan Auto Retail Index – Historic Appreciation


0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2010 2011 2012 2013 2014 2015 2016 2017 2018

AutoCanada – Up Nearly 700% Since 2010

Source: Yahoo Finance

AutoCanada Market Cap in Millions2010-2018

629.952018.01.31


Public Dealership Groups’ Price to Earnings Ratio

Based on Last Four Quarters Earnings

Growth is Rewarded & Higher Valuation Multiples Drives More Acquisition Activity

Source: SEC Filings, Yahoo Finance

15.1x

13.9x

11.4x10.8x

10.2x 9.8x 9.5x

AutoCanada Lithia Penske AutoNation Asbury Sonic Group 1


Sellers See Risks

©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.Source: Automotive News

Canadian Auto Sales at Peak Levels

40%

50%

60%

70%

80%

90%

100%

110%

120%

130%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Canadian Sales Index US Sales Index

Canada vs. US Auto Sales

Indexed to 2007


$594

$1,649

$3,176

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e

Canadian Dealership Net Income After Tax2003 – 2017e, $ in Millions

Source: Scotiabank

Canadian Auto Retail at Peak Profit Levels

©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.Source: Scotiabank

Canadian Dealerships at Peak Profit Levels

0.69%

2.63%

2.43%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q32017

Canadian Dealership Pre-Tax Margins2003 – 2017, $ in Millions


Fear Factor from Industry Disruption – Driving More Sellers to Market

Source: ReThink X

$0.65 $0.62

$0.38

$0.16

Combustion Engine Electric Vehicle Transportation as aService Combustion

Engine

Transportation as aService Electric Vehicle

Vehicle Costs per Mile

Autonomous vehicles lower costs

and potentially drive consumers to

choose transportation as a service.

©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.Source: Deloitte, Automotive News

80%

15%

5%

71%

22%

7%

Gas/Diesel Hybrid Other

United States Canada


Consumer Preference for Type of

Engine in Next Vehicle

2018

©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.Source: Deloitte, Automotive News


Types of Companies Consumers Trust Most to Bring

Fully Autonomous Vehicle Technology to Market

2018

47%

28%25%

43%

33%

24%

Traditional car manufacturer New AV company/other Existing tech company

United States Canada

©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy. 23323644506068687070

101110120

138160160168171

187190

220250

400400

Ralph Lauren****

Gander Mountain

Eastern Outfitters

Lucy Activewear

Chico's

Guess

MC Sports

Macy's***

CVS

Staples

Gordmans Stores Inc.

American Apparel

BCBG

JCPenney

Sears and Kmart**

Crocs Inc.

Bebe Stores Inc*

Wet Seal

RadioShack

GameStop

hhgregg

The Limited

Payless Inc

Rue 21

Total: 3,296

Announced Store Closings

97% YoY

Major U.S. Retail Store Closings Announced2017 YTD

Retail Real Estate – Vacancies on the Rise

Source: Fung Global Retail and Technology


26

51

40

72

2014 2015 2016 2017 YTD

Estimated Number of US Dealerships

Which Sold a Minority or Majority Stake2014 to 2017 YTD

Dealers More Open to Partnership Model

Source: The Banks Report, Automotive News, Kerrigan Advisors Analysis


Buyers See

Opportunity to Score Big


31% 33%

36%

Top 88 DealershipGroups

Small DealershipGroups and

Individual Dealers

Canada Dealership Market Share

Individual Dealerships

2-5 Store Groups

Over 2/3rds of the Canadian

market is owned by small groups

or single-store owners69%

Canadian Auto Retail Market – Highly Fragmented


Average Dealership SG&A Expenses

as a Percentage of Gross Profit2017

Consolidation Provides Economies of Scale and Scope

Source: SEC Filings, NADA, Kerrigan Advisors Analysis

88.1%

78.2%74.3%

Average PrivateDealership

AutoCanada Average US Public


8.8%

15.8%

47.3%

New Vehicle Used Vehicle Fixed Operations

Average Dealership Gross

Profit Margin by Department

5.4x

Auto Retail – Still a Highly Profitable Hedged Business Model

Source: NADA

©2016 Martinrea International Inc. Confidential and proprietary. Do not distribute or copy.Source: Bank of Canada

Low Cost of Capital Drives Equity and Asset Values

1.25%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Bank of Canada Interest Rate2007 – 2017


Source: Yahoo Finance and Kerrigan Advisors Analysis - analysis assumes average multiples and

no improvement in earnings or leverage – working capital and assets represent 2 times earnings.

Auto Dealerships Still Highest Return Opportunity for Dealers

2.0% 2.2% 2.9%

4.1%

6.0%

7.8%

13.6%

19.2%

22.1%

FloorplanFinancing

Canada 10-Year Treasury

CanadaCorporate

Bonds

MSCI WorldReal Estate

10-Yr

Canada HighYield

CorporateBonds

S&P 50010-Year Avg

Top LuxuryFranchise ROI

Top Non-luxuryImport

Franchise ROI

DomesticFranchise ROI


Factors Affecting Franchise Multiple Variability

Average

Blue Sky

Multiple

Adjusted

Blue Sky

Multiple

Lower Multiple

Higher Multiple

High

CSI & SSIHigh

Demand

Franchise

Highly

Suitable

Low Rent/

Image

Compliant

Low

CSI & SSILow

DemandFranchise

Unsuitable

High Rent/

Building

Project

Customer

RelationsBuyer

Demand

Market

Vehicle

Preference

Real

Estate

Single-

Point

Market

Over

Franchised

Market

Repres-

entation

High

Growth

Low

Growth

Earnings

Growth

Expectations


Securities offered through Bridge Capital Associates, Inc. Member FINRA, SIPC

Recent Transactions

Sold To

Kendall Auto Group

Sold To

Lithia Motors Sold To

AMSI

Sold To

Gee Automotive Companies &

O’Brien Auto Group

25

Sold To

Bakhtiari Auto Group

Sold To

Lithia Motors

Sold To

McManes Auto Group

MERCEDES-BENZ OF

EDMONTON WEST

Sold To

KDW Automotive

Sold To

AutoNation

Sold To

CarPros

Sold To

Victory Auto Group

Sold To

Pendragon

Documents

Dealerships Are Far Too Valuable To Be Sold Any Other Way · Consolidation Provides Economies of Scale and Scope ... Auto Retail –Still a Highly ... Auto Dealerships Still Highest