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For dealers looking to sell their business, the time is now

For Canadian car dealers, there may never be a better time to sell. Franchise values are high and buyers with deep pockets are plentiful.
But there's an equally compelling reason to stay on, says dealership sales expert Erin Kerrigan.

The head of U.S.-based Kerrigan Advisors told the Automotive News Canada Congress on Thursday that the high yearly earnings most shops are enjoying mean a dealer can come out head even with a lower sales price down the road.

And most dealers appear to understand this, despite fears of a sales downturn and the disruptive effects of autonomous transportation and shared car ownership.

"One thing for sure – there are fewer sellers in Canada than there are buyers," said Kerrigan, lead-off speaker for the 2018 edition of the annual conference.

Those who are selling should expect more interest from American buyers, she said, just as Canadian groups are stepping up investment in U.S. dealerships. Cross-border shopping is picking up as Americans take advantage of their stronger dollar while Canadians are lured by lower prices south of the border.
Other trends:

  • More dealers are willing to take on equity investors, either as minority or majority partners, to help with the high costs of growth;
  • The changing commercial real estate market means dealers are less likely to want to hold on to property when selling a franchise;
  • Large, publicly owned groups will become bigger players in the Canadian market – which now has just one such group, Alberta-based AutoCanada -- because they have more resources. "For a long time in auto retailing, there weren't often buyers with deep enough pockets to do these kind of deals," Kerrigan said.

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