Dealership buy-sells fell during the first three months of the year, driven by a decline in acquisitions by private dealers.
At the same time, spending on U.S. dealerships by public retailers surged, led largely by Lithia Motors Inc., which has been on a buying spree.
Those patterns are revealed in two separate reports tracking dealership buy-sell activity. Both reports — the Haig Report and the Blue Sky Report by Kerrigan Advisors — show the number of acquisition deals declining during the first quarter, though their transaction counts differ.
The Haig Report tracks total transactions as dropping 14 percent during the quarter, while the deals between private buyers and sellers fell 33 percent.
"That's a pretty big drop. That surprised us," said Alan Haig, president of Haig Partners in Fort Lauderdale, Fla., of the 33 percent figure "We were expecting the same as last year because of the tax cuts, because profits are pretty good. That has us a little concerned."
More dealerships are coming to market, Haig said, but buyers are getting choosier.
The Blue Sky Report says transactions fell 35 percent during the quarter to 39 deals, the lowest first-quarter number of the last five years. The private buyers' share of franchises included in those deals was down, at 78 percent, said Erin Kerrigan, managing director of Kerrigan Advisors in Irvine, Calif. Private buyers have more typically represented 90 percent.
"I don't think private buyers are being more cautious per se," Kerrigan said. "Private buyers are in some cases identifying their capital sources that are going to allow them to do transactions, and transactions are sizable now. I do believe they will continue to be a huge source for transactions, but more of them are realizing they have to marry up with capital sources to be a consolidator in the future."
Among public dealership groups, spending on U.S. dealerships rose 41 percent to $403 million during the first quarter, Haig said. Kerrigan's report puts the publics' expenditures in the U.S. at $385 million.
Lithia finalized several deals during the quarter: six dealerships from Prestige Family of Fine Cars in Bergen County, N.J.; seven Day Automotive Group dealerships in suburban Pittsburgh; and Honda and Acura stores in Buffalo, N.Y. Lithia says the acquisitions will add $1.4 billion in annualized revenue. Lithia also sold a Mazda-Volvo store in Fresno, Calif., during the period.
"Lithia is skewing the numbers a little bit," Haig said.
But almost all of the other publics — AutoNation Inc., Penske Automotive Group Inc., Group 1 Automotive Inc. and Asbury Automotive Group Inc. — are also looking for stores to buy, he said. Group 1 and Asbury also did deals in the first quarter.