High demand for dealership acquisitions is likely to continue in 2021, according to firms that broker buy-sells.
“We are well on pace to exceed our record activity in 2020 of the sale of 37 dealership franchises including the largest strategic transaction from a price perspective in history,” says George Karolis, president of the Presidio Group.
Karolis is referring to last year’s $735 million acquisition by Asbury Automotive Group of most of the Dallas-based Park Place Dealerships, representing additional annual revenue of about $1.7 billion. The Presidio Group, which has offices in Duluth, GA, and San Francisco, advised Park Place in the deal.
In 2021, Karolis and his competitors expect keen demand for dealerships to continue, led by publicly traded new-vehicle dealership groups such as Asbury and Lithia Motors, which have announced huge acquisition targets in the next few years.
“Our 2021 closings to date and pipeline are a leading indicator for Presidio of heightened buy-sell activity and another expected record year for our firm,” Karolis says in an email.
Erin Kerrigan, founder and managing director of Kerrigan Advisors, says in a recent presentation she expects another record year, too.
“Inertia is increasingly considered to be a bad strategy,” she says during a recent webinar hosted by the American International Automobile Dealers Assn.“Dealers feel they either need to commit to growth or sell their business.”
There were 289 buy-sell dealership transactions in 2020, up 24% from 2019, Kerrigan says in her quarterly Blue Sky Report summarizing the year and the fourth quarter of 2020.
Cliff Banks, president of Banks Media Enterprises and creator of The Banks Report on dealership buy-sells, agrees demand is high for dealerships. “Right now, Q1 is as active as we’ve seen the market, since the Great Recession,” says Banks, a former Wards editor, in a phone interview.
For all the talk about “disruptors” such as Tesla and Rivian supposedly shaking up auto retail, Banks says Wall Street investors seem to have latched onto the more traditional, franchised new-car networks. That’s driving stock prices higher for publicly traded new-car retailers, and in turn that generates the means for the public groups to make more acquisitions, he says.
However, Banks says he’s not convinced 2020 was a record year, statistically.
According to Banks, there were 226 transactions in 2020, representing 357 dealership “rooftops.” That’s an increase of just three transactions compared with 223 in 2019. And by Banks’ reckoning, 2019 was down from 251 transactions in 2018.
Kerrigan’s Blue Sky Report cites The Banks Report as a source, as well as Automotive News, plus Kerrigan’s own proprietary research.
Lithia Motors, in Medford, OR, is No.3 in the WardsAuto 2020 Megadealer 100, with total revenues of $12.7 billion. Asbury Automotive, in Duluth, GA, is No.7, at $7.2 billion total revenues.
Kerrigan Advisors is the premier sell-side advisor and thought partner to auto dealers nationwide. The firm advises the industry's leading dealership groups, enhancing value through the lifecycle of growing, operating and, when the time is right, selling their businesses. Kerrigan Advisors has represented some of auto retail's largest transactions and advised more of the largest dealership groups in the US than any other buy/sell firm in the industry. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, accounting, finance and real estate, the firm does not take listings, rather they develop a customized approach for each client to achieve their personal and financial goals. In addition to Kerrigan Advisors' sell-side advisory and capital raising services, the firm also provides a suite of consulting services including growth strategy, market valuation assessments, capital allocation, transactional due diligence, open point proposals, operational improvement and real estate due diligence.
Kerrigan Advisors monitors conditions in the buy/sell market and publishes an in-depth analysis each quarter in The Blue Sky Report®, which includes Kerrigan Advisors' signature blue sky charts, multiples, and analysis for each franchise in the luxury and non-luxury segments.—To download a preview of the report, click here.—The firm also releases monthly The Kerrigan Index™ composed of the seven publicly traded auto retail companies with operations focused on the US market. The Kerrigan Auto Retail Index is designed to track dealership valuation trends, while also providing key insights into factors influencing auto retail.—To access The Kerrigan Index™, click here.—To read the—2023 Kerrigan OEM Survey, click here.—Kerrigan Advisors also is the co-author of NADA's Guide to Buying and Selling a Dealership.
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