Private dealers are partnering with outside capital to finance their growth plans and it’s being driven by fresh investment and capital from new players — including international buyers — entering the market, according to a report from Kerrigan Advisors released Wednesday.
Dealerships are seeking more outside financing to avoid the increase in consolidation seen across the industry. Although transactions declined quarter over quarter, the number of franchises represented in each transaction increased by 45%. As a result, the total number of franchises sold in 1Q remained on pace with 2017, according to the latest Blue Sky Report.
Based on this trend, Kerrigan Advisors have defined the market into two categories. First, buyers who have outside capital and the resources to embrace and drive change. The other represents sellers who are increasingly reliant on OEM incentives for profitability as they are “concerned about how coming changes will impact generational succession plans.”
Smaller dealers are unlikely to be able to acquire those funds and will seek out mergers and acquisitions, according to the report. Take, for example, AutoCanada’s acquisition of Grossinger Automotive Group. The report claims that it’s the “largest transaction ever made in auto retail by a non-U.S. company.”
Other data from the report includes:
To download the full report, click here.