Dealership buy/sell activity during the first half of 2017 reveals a notable willingness by auto dealers to take on minority and majority equity partners, according to analysis from the Blue Sky Report®, a Kerrigan Quarterly. Released today, the report also shows that buy/sell activity through the first half of 2017 remained high. Kerrigan Advisors expects activity in the second half of the year to surpass the first half, resulting in the 4th year of over 200 buy/sells.
“2017 is on pace to be a record year for equity partner investment structures,” said Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors. “We think this shift in buy/sell activity is mostly due to the increasing size and complexity of the dealership groups coming to market. In addition, dealers are attracted to the opportunity to remain involved in the business post-transaction, while also taking some chips off the table.”
The Blue Sky Report, published by Kerrigan Advisors, is the auto industry's most comprehensive and authoritative quarterly report and analysis of dealership M&A activity, as well as franchise values. It includes analysis of the first half of 2017 - laying out the high, average and low blue sky multiples for each franchise in the luxury and non-luxury segments for the quarter - and offers a detailed view of public and private company dealership acquisition activity.
Key data and analysis from the first half of 2017 includes:
“We see resilience in the buy/sell market,” continued Kerrigan. “Even though SAAR is down, it remains within a historically high range. Auto sales in the first half of 2017 were actually 5% higher than the trailing five-year average, and dealerships remain highly profitable.”
The report identifies three key trends moving forward into Q3 and Q4 of 2017:
“One of the more interesting trends we see moving into Q3 and Q4 of 2017 is retirement-driven transactions, but not necessarily in the way you think,” said Ryan Kerrigan, Managing Director of Kerrigan Advisors. “When a key lieutenant retires, that’s prompting some older dealers to sell, versus finding a replacement. As a result, the retirement of key management, in combination with the aging of the dealer body, is increasingly prompting older dealers to sell.”
Kerrigan Advisors is deeply involved in the Buy/Sell Market, having advised on the sale of 59 dealerships, including four of the Top 100 Dealership Groups in the US. Most recently, Kerrigan advised on the sale of Downtown LA Auto Group to Lithia Motors. Kerrigan Advisors’ extensive experience representing the largest dealership groups in the country provides the firm with a unique perspective on the trends shaping the industry and today’s franchise values.
The Blue Sky Report®, a Kerrigan Quarterly, is published four times a year and includes Kerrigan Advisor’s signature blue sky charts, multiples and analysis for each franchise in the luxury and non-luxury segments. The multiples are based on Kerrigan Advisors’ view of franchise values in the current buy/sell market and can be applied to adjusted pre-tax dealership earnings to estimate blue sky value. To download the report, click here.
Kerrigan Advisors also releases a monthly index, The Kerrigan Index, composed of the seven publicly traded auto retail companies with operations focused on the US market. The KAR 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.
Erin Kerrigan is Founder and Managing Director of Kerrigan Advisors, and is a recognized industry expert on dealership valuation, real estate and buy/sells. A sought-after commentator on automotive retailing topics ranging from consumer auto buying trends to auto retail consolidation to private equity in auto retail, she has keynoted numerous automotive conferences and her analysis has appeared in publications such as Automotive News and the Wall Street Journal. For a recent video of Erin’s commentary on the market, click here.
Ryan Kerrigan is Managing Director of Kerrigan Advisors and an expert on US auto retail buy-sell transaction work. Prior, Ryan served as Managing Director at Serent Capital, a $250MM private equity fund investing in middle market companies and served as General Manager of the family’s auto dealership. Mr. Kerrigan began his career as a management consultant at McKinsey & Company, where he advised Fortune 500 companies on growth strategies, organizational issues, pricing and business valuation.