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Buy/Sell Transactions Crush Previous Record

The auto dealership buy/sell market is on track for another record year as it continued its momentous pace in the third quarter according to the just-released Third Quarter 2021 Blue Sky Report by Kerrigan Advisors, an industry authority on dealership valuation and buy/sell trends. In the third quarter, there were 81 dealership buy/sell transactions completed for a total of 225 transactions for the first three quarters of the year, a 21% increase over 2020’s previous record. Kerrigan Advisors projects that 2021 will finish with over 350 transactions, a new industry high.

The increases in the Q3 buy/sell market were directly related to the industry’s continued historic record profits and revenue: in the last four quarters, the average dealership saw revenue rise to new highs and earnings increase 168% higher than 2019.

“Month after month of record profits is driving the velocity of this historic buy/sell market, increasing valuations and fueling an unprecedented rise in capital availability,” said Erin Kerrigan, founder and managing director of Kerrigan Advisors. “Today, most dealers’ cash accounts are awash in more profit than they could have dreamed of in a single year. This, combined with low inventory levels and minimal floorplan, is resulting in a tremendous deleveraging of dealers’ balance sheets enabling them to access larger amounts of debt to finance major expansion on attractive terms.”

Kerrigan pointed out that despite 2021’s record profits, the vast majority of dealers expect profits to rise even further over the next 12 months, as inventory remains constrained and consumer demand remains high. This has made dealers bullish on growth with 77% planning to acquire one or more dealerships over the next 12 months.

“Dealers have re-engineered their business model, accomplishing record profits with fewer employees and less operating expense. As quarter after quarter proves the advantages of today’s more efficient model, dealers are shifting from a ‘more is more’ mentality to a ‘less is more’ perspective for both employees and inventories, distancing themselves from auto retails’ antiquated pre-Covid economic architecture of less productive employees and an oversupply of inventory,” said Kerrigan.

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