In separate reports, dealership buy-sell advisers Erin Kerrigan and Alan Haig predict their business will pick up in 2018, after two years of fewer transactions, because of the benefits from federal tax-law changes, dealers' desire to grow in scale and stable dealership profits.
"We see more public groups getting back into the acquisition game," said Kerrigan, managing director of Kerrigan Advisors in Irvine, Calif. "We continue to have family offices and high-net-worth investors looking to back growing dealership groups, so there's capital for those dealers who want to grow."
Many buyers and sellers believe the only way to survive as the industry embraces electric and selfdriving vehicles, ride-hailing and subscription car services, is to grow. If a dealer cannot expand fast enough, that dealer may choose to sell while prices are still healthy, Kerrigan said. Meanwhile, "There is a sense of urgency for some buyers to become $1 billion-plus dealership groups," she said.
The late-December changes to the U.S. tax code will ripple through the buy-sell market, predicted Haig, president of Haig Partners in Fort Lauderdale, Fla. "Tax reform really helps the publics the most because it reduced their tax rate, so they'll have a significant amount of capital they can use to acquire stores," said Haig.
There were 202 buy-sell transactions in 2017, Kerrigan wrote in her fourth-quarter Blue Sky Report, citing data from the Banks Report and Kerrigan Advisors Analysis. That's down 8.6 percent from 2016, and down a sharp 16 percent from 2015.
Excluding the GPB deal, though, the quarter would have been down 10 percent, making it two consecutive years of decline in sales of dealerships, he said.