Kerrigan Advisors determined dealerships not only are moving metal this year, but they’re also turning their entire operations at quite a clip, too.
The firm’s Blue Sky Report for Q3 2017 indicated the dealership buy/sell market is poised for its most active year ever with more than 200 transaction closings projected for 2017.
The report described a trio of factors driving market activity, including strong financial markets, well-funded investors and rising real estate values. The firm explained the pressures of a more challenging auto retail market, dropping margins and rising concerns about the impact of disruptive automotive technology on the traditional dealership business model are also having a major impact.
And, while blue sky values are slightly lower than their 2015 peak, and the overall industry is showing some stagnation, Kerrigan Advisors determined 2017 remains on track to be the third most profitable ever, driving more sellers to market and transaction values to record levels when including dealership real estate.
“Historic mega deals with complex ownership structures and multiple franchises are on the rise. These transactions are supported by a financial market that is willing and able to invest hundreds of millions of dollars in auto retail, despite some of the doomsday headlines about slowing sales,” said Erin Kerrigan, managing director of Kerrigan Advisors.
“Investors and financial institutions see an opportunity to participate in a decades-long auto retail consolidation game – one that they expect will produce winners and losers, particularly as technological innovations potentially change the dealership business model as we know it,” Kerrigan continued.
Other key data and analysis from the Q3 2017 Blue Sky Report includes:
“Our clients increasingly cite the risk factors associated with changes in auto retail as their single biggest reason for selling, with many believing auto retail will consolidate out of necessity, as only the largest, best-capitalized players will have the balance sheet to navigate auto retail’s evolution,” Kerrigan said.
“This is contributing to a very competitive buy/sell market, particularly for top franchises and attractive platforms and the growing population of well-funded buyers in the market,” she continued. “This creates a healthy market equilibrium — one where buyers and sellers agree on price and complete win/win transactions.
“Kerrigan Advisors believes this equilibrium will continue for the next several years and result in a highly active buy/sell market,” Kerrigan went on to say.
Kerrigan Advisors is deeply involved in the buy/sell market having advised on the sale of 60 dealerships, including four of the Top 100 dealership groups in the U.S. Most recently, Kerrigan advised on the sale of Puente Hills Chevrolet, in its recent sale to Pendragon PLC.
The Blue Sky Report, a Kerrigan Quarterly, is published four times a year and includes Kerrigan Advisors’ signature blue sky charts, multiples and analysis for each franchise in the luxury and non-luxury segments. To download the Blue Sky Report, go to this website.