Kerrigan Blue Sky Report reveals key insights into dealership market trends and valuations – Erin Kerrigan

Written by:
Jaelyn Campbell
April 4, 2024

Erin Kerrigan, managing director at Kerrigan Advisors, conducted an electrifying interview on the latest episode of Inside Automotive, revealing the seismic shifts in the automotive industry. The discussion revealed that dealership transactions hit a record-breaking high and that the landscape is evolving due to capital abundance and strategic reinvestments.

Kerrigan unveils insights from the monumental 10th annual Kerrigan Blue Sky Report, shedding light on the nuances of dealership valuations, the burgeoning influence of electric vehicles, and regional market trends redefining the automotive retail sector.

Key Takeaways

1. According to the report, Kerrigan reveals that the automotive dealership buy-sell market in 2023 saw significant activity, with over 395 transactions and 680 franchises involved. This period included some of the highest-priced transactions in the industry’s history, like the sale of the Koons Automotive.

2. Dealers are not heavily relying on debt markets for acquisitions but are instead using their capital reserves. Despite a decrease in earnings from peak levels in 2021 and 2022, the industry still enjoys substantial capital, encouraging dealers to reinvest in the automotive sector.

3. Although there has been a slight decrease in dealership valuations, they have not fallen as much as one might expect. This reflects a cautious approach to valuation during the earnings spikes of 2021 and 2022. Moreover, analysts are valuing dealerships based on their projected earnings, which are now starting to stabilize.

4. High-growth markets like Texas and Florida have seen record valuations, especially for top franchises. Additionally, publicly traded dealership groups were less active in acquisitions compared to private dealers, possibly due to stock market volatility and challenges in achieving accretive transactions.

5. The transition to EVs and the accompanying regulatory requirements, especially in CARB states, impact dealership valuations and market dynamics. There is a growing focus on current earnings for valuation, with adjustments expected due to the EV market share and regulatory challenges.

"We had over 395 transactions completed for 680 franchises. That is the second highest rate we've ever seen in our industry" – Erin Kerrigan

About Kerrigan Advisors

Kerrigan Advisors is the premier sell-side advisor and thought partner to auto dealers nationwide. 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. Kerrigan Advisors has represented some of auto retail's largest transactions and advised more of the largest dealership groups in the US than any other buy/sell firm in the industry. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, accounting, finance and real estate, the firm does not take listings, rather they develop a customized approach for each client to achieve their personal and financial goals. In addition to Kerrigan Advisors' sell-side advisory and capital raising services, the firm also provides a suite of consulting 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 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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