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.
Kerrigan Advisors is the leading sell-side advisor and thought partner to auto dealers nationwide. Since its founding in 2014, the firm has led the industry with the sale of over 275 dealerships representing $9 billion in client proceeds, including the third largest transaction in auto retail history – the sale of Jim Koons Automotive Companies to Asbury Automotive Group. The firm advises the industry’s leading dealership groups, enhancing value through the lifecycle of growing, operating and, when the time is right, selling their businesses. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, accounting, finance and real estate, Kerrigan Advisors does not take listings, rather they develop a customized sales approach for each client to achieve their personal and financial goals. In addition to the firm’s sell-side advisory services, Kerrigan Advisors also provides a suite of consulting and investor services including growth strategy, market valuation assessments, capital allocation, transactional due diligence, open point proposals, operational improvement and real estate due diligence.
Kerrigan Advisors monitors conditions in the buy/sell market and publishes an in-depth analysis each quarter in The Blue Sky Report®, which includes Kerrigan Advisors’ signature blue sky charts, multiples, and analysis for each franchise in the luxury and non-luxury segments. To download a preview of the report, click here. The firm also releases monthly The Kerrigan Index™ composed of the seven publicly traded auto retail companies with operations focused on the US market. The Kerrigan Auto Retail 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. To read the 2023 Kerrigan Dealer Survey, click here. To read the 2024 Kerrigan OEM Survey, click here. Kerrigan Advisors also is the co-author of NADA’s Guide to Buying and Selling a Dealership.
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