Dealerships Are Far Too Valuable To Be Sold Any Other Way

I. Buy/Sell Activity

II. Market Drivers

III. The Look Ahead

IV. Buy-Sell Multiples

Overview of Session

Lots of Activity in

the Buy/Sell Market

114 Transactions

206 Transactions

241 Transactions

242 Transactions

2013 2014 2015 2016 LTM

Source: The Banks Report

Number of Transactions

2013 to 2016 LTM

Acquisition Activity Has Grown 112% Since 2013

“Some of these big deals

come in as package

deals. When it is one

store and they are selling

them as a bundle, it is

hard to exercise our right

of refusal.”

Steve Cannon,

Prior CEO of Mercedes-

Benz USA, July 2015

Automotive News

Average Franchises per

Multi-Dealership Transaction

Size of Average Transaction Continues to Rise

2.8

4.9

Q1 2015 Q1 2016

81 Stores

13 Stores

11 Stores

11 Stores

Manufacturers Approve Large Multi-Dealership Transactions

12 Stores

12 Stores

5 Large New Entrants Represented 29% of 2015 Acquisitions

The Five Most Active New Entrants in 2015

1. Berkshire Hathaway Automotive

2. McLarty Automotive

3. RFJ Auto Partners

4. Fremont Private Holdings

5. ZT Motor Holdings6 Public Dealership

Groups38 Franchises

7%

New Entrants165 Franchises

29%

Private Dealership Groups

355 Franchises64%

2015 Buyers by Type

Source: The Banks Report and Kerrigan Advisors Analysis

Source: The Banks Report

Domestic53 Franchises

32%

Import Luxury29 Franchises

18%

Import Non-Luxury

83 Franchises50%

Franchises Acquired by New Entrants

New Entrants Focused on Non-Luxury and High ROI

Source: SEC Filings

Public Dealership Group Acquisition Spending

in US Since 2009

Public Acquisition Spend Very Strong

$211$504 $502

$659$860 $832

$590

2009 2010 2011 2012 2013 2014 2015

Domestic Acquisitions Lithia/DCH

$162

$271

Q1: 15 Q1: 16

Domestic Acquisitions

99%

84%

16%

2015 Q1 2016

US International

Public Acquisition Spending

US versus International

1%

International Acquisitions Provide Attractive ROI

US Dealership Market Share

Source: Automotive News

14,703 dealerships are owned

By small groups and individuals

Auto Retail Remains Highly Fragmented

5.5%

81.7%

12.8%

Top 125 Dealership Groups Small Dealership Groups

Non-Public Dealerships

Public Dealership Groups

Why are Dealers

Selling?

$279,685

$1,166,675

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Average Dealership Earnings

Average Dealership Earnings at Peak Levels?

2000-2007

Average Earnings $542,881

New Normal

or Peak?

The Kerrigan Auto Retail Index – THE KAR INDEX™

TMTHE KAR INDEX

472.937/15/2016 - Market Close

0

100

200

300

400

500

600

700

800

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

KAR Index S&P 500 (rebased)

Ticker Company

AN AutoNation

PAG Penske Automotive Group

LAD Lithia Motors

ABG Asbury Automotive Group

GPI Group 1 Automotive

SAH Sonic Automotive

KMX CarMax

Green Street Commercial Property Price Index

Source: Green Street Advisors & Wall Street Journal

Real Estate Values Increasingly Drive Up Transaction Pricing

$125

$60

$70

$80

$90

$100

$110

$120

$130

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Higher Real Estate Values Result in Higher Transaction Values

Higher Real Estate Values Result in Higher Transaction Values

Annual Rent:

$500,000

Earnings Before

Taxes: $1,000,000

Total Blue Sky

and Real Estate:

$13,100,000

Annual Rent @ 7%:

$700,000

Earnings Before

Taxes: $800,000

Total Blue Sky

and Real Estate:

$14,800,000

Real Estate at

7% Cap Rate:

$7,100,000

Blue Sky @

6x:

$6,000,000

Appraisal:

$10,000,000

Blue Sky @

6x:

$4,800,000

Blue Sky

Multiple

Real Estate

Multiple

Multiples Cap Rates

3 33%

4 25%

5 20%

6 17%

7 14%

8 13%

9 11%

10 10%

11 9%

12 8%

13 8%

14 7%

Real Estate Values and Transaction Values

Storms

In the

Forecast?

11.612.8

14.515.6

16.517.5 17.8 18.0

11%10%

13%

8%

6% 6%

2%1%

-6%

-1%

4%

9%

14%

19%

-2.0

3.0

8.0

13.0

18.0

23.0

2010 2011 2012 2013 2014 2015 2016E 2017E

TOTAL U.S. Light Vehicle YoY Growth

Source: Automotive News and Kerrigan Advisors Analysis/Estimates

Annual Auto Sales and % Growth

SAAR Plateau?

“We see this kind of

mid-17 [million]

going for a few

years.”

Mary Barra, CEO

GM

CNBC

June 17th, 2016

400

450

500

550

600

650

700

750

THE KAR INDEX

The Kerrigan Auto Retail Index – The KAR Index™

™

472.937/15/2016

709.276/5/2015

Ticker Company

AN AutoNation

PAG Penske Automotive Group

LAD Lithia Motors

ABG Asbury Automotive Group

GPI Group 1 Automotive

SAH Sonic Automotive

KMX CarMax

Public Estimated Blue Sky Multiples Down Since 2014

9.2x 9.1x

7.6x

6.1x

2013 2014 2015 Q1 2016

Blue Sky Multiples

Source: Kerrigan Advisors Analysis

John Rickel, CFO

Group 1 Automotive

February 2016

4th Quarter Earnings Call

“The hurdle to have an

acquisition is steeper

than it would have

been. Our shares are,

obviously, a very

attractive alternative

for capital allocation at

these prices.”

52 Months

37 Months

78 Months

63 Months

New Used

2005 2015

Average Length of Car Ownership

Source: HIS Automotive, George Petras, USA Today

50% Increase in Length of New Car Ownership Since 2005

New Car Loans by Term 2015

29.5%

39.7%

21.3%

9.5%

73-84 Months

61-72 Months

49-60 Months

Other

70% of New Car Loans Longer Than 5 Years

“Let’s Do

the

Numbers”

Blue Sky Multiple Drivers

Average

Blue Sky

Multiple

Adjusted

Blue Sky

Multiple

Lower Multiple

Higher Multiple

High

GrowthHigh

Demand

Franchise

Highly

Suitable

Low Rent/

Image

Low

Growth

Low

Demand

Franchise

Unsuitable

High Rent/

Building

Project

Earnings

Growth

Expectations

Buyer

Demand

Market

Vehicle

Preference

Real

Estate

Kerrigan Advisors Luxury Blue Sky Multiples – June 2016

Luxury Franchise Blue Sky Multiple

Source: Kerrigan Advisors Analysis and Automotive News

8.75 8.75 8.75

8.0 8.0 7.5

3.5 3.5 3.5 3.5

7.0 7.0 7.0

6.0 6.0

4.0

3.0 3.0 3.0 3.0

1

2

3

4

5

6

7

8

9

10

Lexus BMW Mercedes Audi Porsche LandRover -Jaguar*

Acura Infiniti Cadillac Volvo

Sales per Franchise

Kerrigan Advisors Franchises Analysis - Luxury

Franchise Buyer Demand

High

High

High

High

High

High (LR)

Low

Low

Low

Low

Sales Per

Franchise

1,263

833

907

593

259

498 LR

122 Jag

555

631

154

221

Kerrigan Advisors Franchises Analysis - Luxury

Franchise Buyer Demand

High

High

High

High

High

High (LR)

Low

Low

Low

Low

19%

15%

12%

4% 1%

(4%)(7%) (7%) (7%) (8%)

(13%)LR Volvo Jaguar Porsche Audi MB Infiniti Lexus Cadillac Acura BMW

Market Share

Change Q1 2016

vs Q1 2015

-7%

-13%

-4%

+1%

+4%

+19% LR

+12% Jag

-8%

-7%

-7%

+15%

Market Share Change

Kerrigan Advisors Non-Luxury Blue Sky Multiples

Non-Luxury Franchise Blue Sky Multiple

5.0 5.0

4.5

4.0 4.0 4.0

3.0 3.0 3.0 3.0

2.0 2.0

6.5 6.5

6.0

5.0 5.0 5.0

4.0 4.0 4.0 4.0

3.0 3.0

1

2

3

4

5

6

7

1,542

1,373 1,225

915 847 836 794 760

625

426 404 401

Sales per Franchise

Kerrigan Advisors Franchise Analysis – Non Luxury

Franchise Buyer Demand

High

High

High

Increasing

Increasing

Average

Average

Average

Average

Average

Low

Low

Sales Per

Franchise

1,542

1,225

847

625

794

915

401

1,373

836

760

426

404

7% 5% 5% 5%

0%

(0%)(2%) (2%)

(4%)(5%)

(15%)

(20%)

Market Share Change

Kerrigan Advisors Franchise Analysis – Non Luxury

Market Share

Change Q1 2016

vs Q1 2015

-5%

+5%

-2%

-4%

+5%

+5%

-0%

+7%

-2%

+0%

-15%

-20%

Franchise Buyer Demand

High

High

High

Increasing

Increasing

Average

Average

Average

Average

Average

Low

Low

Balancing Act of the Current Buy/Sell Market

New Buyers New Sellers

What does the

Future Hold?

Share of New Light

Vehicle Buyers by Age

Source: JD Power, Wall Street Journal

Population Size

Millennials – The Future of Auto Retail Growth

Over $400 Million in Transaction Proceeds in 2015

Sold To

AMSI

Sold To

KDW Automotive, Inc.

Sold To

AutoNation

Sold To

CarPros

Sold To

McManes Auto Group

MERCEDES-BENZ OF EDMONTON

WESTSold To

Victory Auto Group