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Texas’ ZT Automotive eyes dealership count of 50, 60

Texas’ ZT Automotive eyes dealership count of 50, 60

ZT Automotive, a unit of wealth management firm ZT Corporate, remains steadfast on aggressively growing its dealership holdings and now has a tweaked ownership structure, a former Group 1 Automotive Inc. veteran in a key leadership role and deals lined up that should help accomplish just that.

ZT Automotive, which was just rebranded from ZT Motors, entered automotive retail in 2015 when it bought three Fort Walton Beach, Fla., dealerships. It then went on to buy domestic stores across Georgia, Texas and Tennessee.

ZT Automotive owned a pair of Tennessee stores for less than a year, sellingthem in November 2022.

With nine dealerships, ZT Automotive of Houston is one of the largest private auto retailers in the country, having sold 5,683 new vehicles last year with total revenues of $535.6 million. ZT ranks No. 139 on Automotive News‘ list of the top 150 dealership groups based in the U.S.

But it wants to be significantly bigger.

“We are in growth mode,” Taseer Badar, the Pakistani American CEO of ZT Automotive and ZT Corporate, told Automotive News. “Our goal is to get to 50, 60 rooftops.”

Badar said the increase in store count will require controlled growth and he described it as a four- to six-year plan.

ZT Automotive, Badar said, has three deals in the works, adding that it has letters of intent on two acquisitions. He declined to share specifics but hinted the transactions could be sizable.

 

“These two to three deals we do could nearly double our revenue here in the next few months,” Badar said.

Zeeshan Shaikh, the newly minted operating partner at ZT Automotive, said the potential dealerships to be acquired are “not too far away from where we are.”

Badar said there still are a lot of deals on the market and that ZT Automotive has probably passed on 30 deals before it reached a letter of intent on one.

“We feel as though the next three years are a very big part of consolidation,” Badar said. “The succession plan kind of market is going to dry up in a few years. We’d like to really get into that market before our competitors buy them. We’d like to get a piece of that.”

“These two to three deals we do could nearly double our revenue here in the next few months,” Badar said.

Zeeshan Shaikh, the newly minted operating partner at ZT Automotive, said the potential dealerships to be acquired are “not too far away from where we are.”

Badar said there still are a lot of deals on the market and that ZT Automotive has probably passed on 30 deals before it reached a letter of intent on one.

“We feel as though the next three years are a very big part of consolidation,” Badar said. “The succession plan kind of market is going to dry up in a few years. We’d like to really get into that market before our competitors buy them. We’d like to get a piece of that.”

In the first quarter, Badar said the firm held what he called a liquidity event and bought all the common equity, though undisclosed, from its ZT Motors investors. As a result, the firm and Badar’s family office, which is separate from ZT Corporate, now own all of the common equity in ZT Automotive.

Badar said some investors had been with ZT Motors three to eight years.

Group 1 veteran joins

In addition to automotive retail, Badar said ZT Corporate has investments in health care and real estate. ZT still has outside investors in those industries.

 

Shaikh arrived at ZT Automotive in September having joined from Ibizi, a startup focused on customer retention for dealerships. Before that, he worked at Group 1 Automotive for 14 years.

Shaikh said he started at Group 1 in its audit department. His last position at Group 1 was pre-owned operations and finance and insurance compliance manager.

Shaikh said general managers at its dealerships report to him, and he reports to Badar.

Competition in Southeast

Badar said the group prefers the Southeast for acquisitions but added it has looked at the lower Midwest.

“Our net has widened from the Southeast to look at other opportunities,” Badar said.

ZT Automotive has competition for stores in the Southeast, however. While Stuart McCallum, national dealership practice leader for advisory and accounting firm Withum, doesn’t work with ZT Automotive, he said the Southeast, especially east of the Mississippi River, continues to be the premier market in terms of desirability by dealers nationwide.

“It depends on where you are at in the Southeast because we have some pretty prolific buyers that everybody knows the name of, that when a good asset comes up, they get first dibs,” McCallum said. “They get the first phone call. A lot of my clients are only seeing things that those prolific buyers are passing on.”

Brand interest

ZT Automotive has a mix of automakers represented in its portfolio and already has desirable brands in Toyota, Mercedes-Benz and BMW.

The group is looking to grow with Toyota in particular, but also has some other import brands on its wish list.

“You always buy a Toyota store,” Shaikh said. “We would like to expand in that territory, definitely. But we don’t have a Honda store; we would love to get into that. Hyundai and Kia have proven themselves that they are brands to be reckoned with.”

Shaikh pointed to Audi as a luxury brand ZT Automotive has interest in.

It’s also looking into adding ultraluxury brands such as Lamborghini, Bentley and Rolls-Royce either through acquisitions or open points, Badar said.

The ZT Automotive executives said they’re looking for dealerships in what they described as midsize to metro markets. Smaller dealerships, as long as they’re profitable, will get looked at, Shaikh said. Badar said the two Tennessee stores the group sold last year were in a small market that was inconvenient to get to.

Shaikh said ZT Automotive doesn’t want to buy dealerships just for the sake of buying or growth.

“We need to make sure we’re buying the right stores and having the right people on board,” Shaikh said.

To be sure, ZT Automotive has had ambitious growth plans that haven’t fully materialized.

Prior to the COVID-19 pandemic, Badar told Automotive News in a story published in January 2020 that ZT Motors was seeking to buy up to 20 Southeast dealerships by 2023 and aimed to double pretax earnings to $30 million or more. Badar said ZT Automotive already reached that earnings target but declined to share specifics. And if the acquisitions it has lined up go through, Badar said its store count could soon be 18 to 22 dealerships.

Further down the road, Badar said he could see going public via a “tightly run initial public offering” as a possible route for ZT Automotive, but he is focused on growing the group first.

“As far as going public, we’re not going anytime soon,” Badar said. “We really want to hit 50, 60 stores on our own.”

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