Kerrigan Advisors identified a trio of reasons why the dealership buy/sell market surpassed 200 transactions for the fourth consecutive year in 2017.
According to the firm’s latest Blue Sky Report released on Monday, the factors driving market activity included dealership consolidation, profitability, and the growing number of sellers coming to market. Kerrigan Advisors determined many dealers reassessed succession plans in light of disruptive projections about the changing nature of auto retail, and the belief that only large groups will be able to successfully navigate the industry’s evolution. Sellers also cited concern over reliance on OEM incentives to support dealership profitability, as well as manufacturer facility requirements.
“The economic benefits of consolidation continued to bring new buyers to market in 2017, and these new entrants included a growing number of international auto retailers,” said Erin Kerrigan, managing director of Kerrigan Advisors.
“These international buyers are primarily motivated by the tremendous consolidation opportunity in the US auto retail market, considered by many to be the most fragmented in the developed world,” Kerrigan continued. “High net worth individuals and family offices also sought investments in auto retail in 2017. All of these new entrants are highly attracted to the economies of scale available in US auto retail through meaningful consolidation.”
The Blue Sky Report, published by Kerrigan Advisors, includes analysis of all transaction activity in 2017 and lays out the high, average and low blue sky multiples for each franchise in the luxury and non-luxury segments for the quarter.
Blue Sky Report data and analysis from the 2017 full-year report also includes:
Over 60 dealership groups now report over $1 billion in sales. That number is expected to grow considerably in the next five years, as the largest groups consolidate the industry.
The report also identified three key trends shaping this year buy/sell market, including:
“We expect 2018 to be a very active year for buy/sells with more private and public buyers eager to put their capital to work. These buyers believe growth is the answer to a changing auto retail environment and are eager to capitalize on economies of scale and scope,” added Ryan Kerrigan, managing director of Kerrigan Advisors. “We also expect more sellers coming to market in 2018, particularly given the drumbeat of change reverberating throughout the industry.”
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 (Sam Swope Auto Group, the Carbone Auto Group, the Tonkin Family of Dealerships, and Downtown LA Auto Group) since 2015. Kerrigan Advisors’ extensive experience representing the largest dealership groups in the country provides the firm with a unique perspective on the trends shaping the industry and today’s franchise values.
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.
Kerrigan Advisors also releases a monthly index, The Kerrigan Index, composed of the seven publicly traded auto retail companies with operations focused on the U.S. market. The Kerrigan Index is designed to track dealership valuation trends, while also providing key insights into factors influencing auto retail. To access The Kerrigan Index, go to this website.
Kerrigan Advisors is honored to work with auto retailers throughout the US to enhance the value of their enterprise. Learn more about our services below:
Customized and confidential sell-side services for higher value dealerships and dealership groups nationwide, with a proven record of achieving the highest sale price per transaction of any firm in the industry.
Capital raising and partnership structuring for growing dealership groups, supported by the largest investor database in the industry.
If you are a buyer in today’s market, Kerrigan Advisors welcomes the opportunity to learn about your acquisition criteria and include you in Kerrigan Advisors’ proprietary Buyer Database.
We welcome the chance to learn more about your acquisition criteria so that we can contact you in the event a client matches your investment profile.
Contact us to learn more about Kerrigan Advisors’ client services, or to have a conversation about the buy/sell market. All of our conversations are 100% confidential.