Strategic Exit Plays in the Auto Retail Sector: Analyzing AutoCanada’s U.S. Divestitures and Haig Partners’ Role

AutoCanada Inc. (TSX: ACQ) has embarked on a bold strategic transformation, exiting its underperforming U.S. operations to refocus on its core Canadian business. This move, driven by a $24.3 million adjusted EBITDA loss in 2024 from U.S. dealerships [1], underscores a broader industry trend of cross-border divestitures amid shifting trade policies and valuation pressures. For buy-side advisory firms like Haig Partners, these transactions highlight the growing complexity of navigating international markets and the critical role of strategic advisors in facilitating such exits.

The Strategic Rationale Behind AutoCanada’s U.S. Exit

AutoCanada’s decision to divest its U.S. operations is rooted in both financial and operational realities. The company’s U.S. segment, reclassified as a discontinued operation, has been a drag on profitability, contributing to a leverage ratio that now exceeds 3x net funded debt/adjusted EBITDA [2]. By selling 13 U.S. dealerships—already realizing $9.9 million from the Crystal Lake Chrysler sale and $82.7 million from 13 franchised dealerships [2]—AutoCanada aims to deleverage its balance sheet and redirect capital to its Canadian operations, where margins and growth prospects are stronger.

The timing of these divestitures aligns with broader economic headwinds. U.S. tariffs on automotive imports, introduced in early 2025, have compounded valuation challenges for cross-border dealerships, particularly those reliant on global supply chains [3]. For AutoCanada, exiting the U.S. market is not just a cost-cutting exercise but a strategic pivot to capitalize on its domestic strengths. As stated in its Q2 2025 earnings call, the company targets $100 million in annual cost savings by 2025 through operational standardization and centralized administrative functions [2].

Haig Partners: The Architect of a Complex Exit

Haig Partners has emerged as a pivotal player in AutoCanada’s U.S. divestitures, acting as the exclusive sell-side advisor for four dealerships under its Leader Automotive Group subsidiary. These transactions—including the sale of Chevrolet of Palatine and Hyundai of Palatine to Steve Napleton Automotive Group—demonstrate Haig’s expertise in cross-border deals [4]. Managing Director Kevin Nill and his team navigated regulatory hurdles, identified strategic buyers, and ensured continuity for employees, a critical factor in maintaining trust during transitions.

The firm’s role extends beyond AutoCanada. In Q2 2025, Haig Partners advised on 35 dealership transactions, reflecting a broader industry shift toward domestic consolidation. Public auto retailers, which spent just $16.4 million on U.S. acquisitions in Q1 2025 (a 91.1% drop from 2024) [5], are increasingly prioritizing local deals. Haig’s ability to adapt to this environment—balancing valuation dynamics with geopolitical risks—positions it as a key enabler of strategic exits.

Implications for Buy-Side Advisory Firms

AutoCanada’s U.S. divestitures and Haig Partners’ involvement highlight three key trends shaping the auto retail sector:

1. Cross-Border Complexity: Trade policies, such as U.S. tariffs, are reshaping valuation models. Dealerships with international supply chains face heightened uncertainty, pushing advisors to emphasize domestic alignment. For example, Haig Partners has advised clients to prioritize inventory diversification and operational efficiency to mitigate tariff impacts [6].

2. Buyer Demand Shifts: The decline in public company acquisition spending (from $1.0 billion in Q2 2024 to $16.4 million in Q1 2025) [5] has created opportunities for private buyers. Advisory firms must now balance competitive bidding with strategic fit, ensuring sellers secure optimal terms while buyers evaluate long-term profitability.

3. Regulatory and Stakeholder Dynamics: Cross-border deals face heightened scrutiny, including CFIUS reviews and labor union considerations [7]. Firms like Haig Partners are leveraging relationship-driven processes to navigate these challenges, ensuring smooth transitions for employees and communities.

The Road Ahead

AutoCanada’s U.S. exit is a cautionary tale and a blueprint. By targeting a 2–3x leverage ratio through divestitures and cost savings [2], the company is positioning itself for long-term resilience. For buy-side advisory firms, the lessons are clear: adaptability, regulatory acumen, and a focus on domestic markets will define success in 2025. As the auto retail sector grapples with tariffs, inflation, and shifting consumer preferences, the role of strategic advisors in facilitating value creation—and preservation—has never been more critical.

Source:
[1] AutoCanada Q2 2025 slides: Transformation plan drives ... [https://ca.investing.com/news/company-news/autocanada-q2-2025-slides-transformation-plan-drives-profit-surge-despite-revenue-dip-93CH-4157944]
[2] AUTOCANADA ANNOUNCES SECOND QUARTER ... [https://investors.autocan.ca/2025/08/autocanada-announces-second-quarter-results-3/]
[3] April 2025 Auto Industry Tariff Update [https://mercercapital.com/april-2025-auto-industry-tariff-update/]
[4] Haig Partners Serves as the Exclusive Advisor to ... [https://www.businesswire.com/news/home/20250904998296/en/Haig-Partners-Serves-as-the-Exclusive-Advisor-to-AutoCanadas-Leader-Automotive-Group-on-the-Sale-of-Four-Dealerships-Located-in-Illinois]
[5] Public Auto Retailers Hit Pause on U.S. Acquisitions in Q1 2025 [https://haigpartners.com/resources/public-auto-retailers-hit-pause-on-u-s-acquisitions-in-q1-2025/]
[6] How Dealerships Can Brace for Incoming Tariff Shocks [https://www.citrincooperman.com/In-Focus-Resource-Center/How-Dealerships-Can-Brace-for-Incoming-Tariff-Shocks]
[7] Wachtell Lipton: Cross-Border M&A – 2025 Checklist for ..., [https://www.lawdragon.com/press-releases/2025-01-27-wachtell-lipton-cross-border-ma-2025-checklist-for-successful-acquisitions]