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Icahn Buys Franchisors AAMCO and Cottman

AAMCO TransmissionsIcahn Enterprises (NASDAQ: IEP) announced Monday that it has acquired American Driveline Systems (ADS) from private equity firm Transom Capital Group. ADS is the franchisor of troubled AAMCO and Cottman Transmission & Total Auto Care service centers. Those two systems add nearly 680 company-owned and franchised service centers to Icahn Automotive to now give it approximately 1,900 locations.

AAMCO's shrinking outletsWith an increase in electric cars, which have fewer working parts than the traditional combustion automobile, the promise of self-driving cars and technological improvements in the traditional combustion car, there has been considerable buzz about change in the automotive car service sector. There are outward signs of stress. AAMCO has been shrinking in its number of outlets for years (see chart), according to its Franchise Disclosure Document that it provides to franchise buyers. Cottman Transmission stopped registering to sell franchises in certain states, such as Minnesota, back in 2008. A few years ago, AAAMCO and Cottman were on Blue MauMau’s list of franchisees that failed the most to pay back their Small Business Administration loans, which is a measure of a the financial feasability of franchises by brand.

Now those two systems are consolidated into Icahn Enterprises.

“The acquisition of American Driveline Systems is the next step in building out our national automotive service network,” said Carl C. Icahn, chairman of IEP. “I believe that the automotive aftermarket service industry is undergoing secular change driven by increased vehicle complexity, advances in technology, as well as the growth of automotive fleets, including ride-sharing and car-sharing networks. These changes will continue to offer, in my opinion, extremely attractive and unique investment opportunities. With our presence throughout the automotive aftermarket value chain, Icahn Enterprises is positioned to capitalize on these trends.”

“Icahn Automotive Group continues to pursue an aggressive strategy of strengthening our full-service automotive repair capabilities, with the ability to leverage a broad national footprint and what we believe will be the most efficient operating model in the industry,” said Daniel A. Ninivaggi, CEO of Icahn Automotive Group LLC. “We are excited to work with the ADS management team as well as the AAMCO and Cottman franchisees to capitalize on the many growth opportunities we see ahead.”

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Don Sniegowski is editor of Blue MauMau, the daily news journal for franchise & small business owners. Call him at +1 (270) 321-1268, tweet @bluemaumau or email don@bluemaumau.org.