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INTANGIBLE FRANCHISE RIGHTS AND GOODWILL
 12 Months Ended
Dec. 31, 2024
Goodwill and Intangible Assets Disclosure [Abstract]  
INTANGIBLE FRANCHISE RIGHTS AND GOODWILL INTANGIBLE FRANCHISE RIGHTS AND GOODWILL
The Company evaluates its intangible assets, including goodwill, for impairment annually, or more frequently if events or circumstances indicate possible impairment. Refer to Note 1. Basis of Presentation, Consolidation and Summary of Accounting Policies for further discussion of the Company’s accounting policies relating to impairment testing.
For the October 31, 2024 annual goodwill impairment testing, the Company elected to perform a quantitative assessment on the U.K. reporting unit and a qualitative assessment on the U.S. reporting unit to determine whether the fair values of the Company’s reporting units were less than their carrying values. Based on the results of the assessments, the Company did not record a goodwill impairment charge.
When a quantitative impairment assessment is performed, the Company estimates the fair value of goodwill using a combination of the market approach, and the discounted cash flow, or income approach. The Company weights the market approach and the income approach 50% and 50%, respectively, in the fair value model. For the market approach, the Company utilizes recent market multiples of guideline companies for both revenue and pre-tax net income weighted as appropriate by reporting unit. For intangible franchise rights, the fair value of the respective franchise right is also estimated using a discounted cash flow, or income approach. The income approach measures fair value by discounting expected future cash flows at a weighted average cost of capital (“WACC”) that proportionately weights the cost of debt and equity. Significant assumptions in the model include revenue growth rates, future EBITDA margins, the WACC and terminal growth rates. The Company applies a five-year projection period which aligns with the Company’s strategic plan. Key considerations in the assumed growth rates include industry seasonally adjusted annual rate of vehicle sales projections, macroeconomic conditions including consumer confidence levels, unemployment rates and gross domestic product growth, and internal measures such as historical financial performance, cost control and planned capital expenditures.
Beyond the five forecasted years, the terminal value is determined using a perpetuity growth rate based on long-term inflation projections for each reporting unit. Significant inputs to the WACC include the risk-free rate, an adjustment for stock market risk, an adjustment for company size risk and country risk adjustments for the U.K.
Each of the significant assumptions to the fair value model are considered level 3 inputs within the fair value hierarchy described further in Note 8. Financial Instruments and Fair Value Measurements. Developing these assumptions requires applying management’s knowledge of the industry, recent transactions and reasonable performance expectations for its operations.
For the October 31, 2024 annual intangible franchise rights assessment, the Company elected to perform a qualitative assessment. Based on the results of the qualitative assessment, certain dealerships required a quantitative assessment based on their actual results through October 31, 2024 and an update of the annual budget in the fourth quarter of 2024. To perform the intangible franchise rights quantitative assessment, the Company estimated the fair values of the respective franchise rights using a discounted cash flow, or income approach, following the income approach as described for Goodwill. This resulted in franchise rights impairment charges of $28.2 million in the U.S. segment and none in the U.K. segment for the year ended December 31, 2024. The impairment charges were recognized within Asset impairments in the Company’s Consolidated Statements of Operations.
During the year ended December 31, 2023, the Company recorded impairment charges of $25.1 million in the U.S. segment and none in the U.K. segment on intangible franchise rights. During the year ended December 31, 2022, the Company recorded impairment charges of $1.3 million in the U.S. segment and none in the U.K. segment on intangible franchise rights. The impairment charges were recognized within Asset impairments in the Company’s Consolidated Statements of Operations.
During the year ended December 31, 2024, the Company recorded additional indefinite-lived intangible franchise rights acquired through business combinations of $178.1 million in the U.S. segment and $121.8 million in the U.K. segment. During the year ended December 31, 2023, the Company recorded additional intangible franchise rights acquired through business combinations of $215.1 million in the U.S. segment and none in the U.K. segment.
Refer to Note 3. Acquisitions for further discussion of the Company’s acquisitions.
The following table presents the Company’s intangible franchise rights balances by segment as of December 31, 2024 and 2023 (in millions):
Intangible Franchise Rights
U.S.U.K.Total
Balance, December 31, 2023$682.0 $19.2 $701.2 
Balance, December 31, 2024$809.8 $138.3 $948.1 
The following is a roll-forward of the Company’s goodwill accounts by reporting unit (in millions):
Goodwill
U.S.U.K.Total
Balance, December 31, 2022 (1)
$1,549.9 $111.9 $1,661.8 
Additions through acquisitions49.7 — 49.7 
Purchase price allocation adjustments9.1 1.9 11.0 
Disposals(52.9)— (52.9)
Reclassified from (to) assets held for sale, net(23.6)— (23.6)
Currency translation— 6.0 6.0 
Balance, December 31, 2023 (1)
$1,532.1 $119.8 $1,651.9 
Additions through acquisitions288.3 161.1 449.4 
Purchase price allocation adjustments— — — 
Disposals(66.4)(0.1)(66.5)
Reclassified from (to) assets held for sale, net28.3 — 28.3 
Currency translation— (5.2)(5.2)
Balance, December 31, 2024(1)
$1,782.2 $275.7 $2,057.9 
(1) Net of accumulated impairments of $40.6 million in the U.S. reporting unit.