Kerrigan: Dealership Buy/Sell Activity Up 38% in Q1

Written by:
Auto Dealer
June 7, 2019

Kerrigan Advisors analysts listed Chevrolet among the franchises drawing the most attention from dealership buyers in Q1 – 95% of whom brought privately held capital to the negotiating table.

IRVINE, Calif. — The 2019 auto dealership buy/sell market rocketed to a strong start in the first quarter of 2019, with 54 completed transactions, representing a 38.5% increase over Q1 2018, indicating that 2019 is on trend to be the sixth consecutive 200-plus transaction year, according to the latest Blue Sky Report by Kerrigan Advisors.

In spite of a 3.2% new-vehicle sales decline, continued profit stability and an increase in sellers coming to market are contributing to the robust outlook for the buy/sell market, said Erin Kerrigan, the firm’s founder and managing director.

“As Kerrigan Advisors predicted, 2019 is shaping up to be another solid year for buy/sells and valuations,” Kerrigan said. “In the face of a decline in new-vehicle sales, the diversity of the dealership business model continues to demonstrate its value through its ability to sustain profits. In addition, the influx of older generation sellers coming to market, coupled with private capital jumping into the void left by the publics, all add up to a promising buy/sell year.”

Analysts said buyers showed particular interest in high-performing dealerships representing strong franchises in growth markets. As older dealers become increasingly concerned over their ability to succeed in a consolidating, evolving auto retail industry, buyers are facing new opportunities, they added – although increasing industry debt poses a looming risk.

The report also found far more buyers among privately held dealer groups: Public groups sold 18 franchises and bought only five, decreasing their spending by 68.6% year-over-year, while private buyers accounted for 95% of all transaction in Q1.

According to the report, the healthy economy and strong financial markets means there continues to be a high rate of complex multidealership transactions. Among the franchises being acquired, domestics continued to grow their buy/sell market share, while import non-luxury franchises saw their market share decline, primarily driven by Hyundai, Kia, Mazda, Nissan, and Volkswagen.

Interest in top domestic franchises, such as Chevrolet and Ford, as well as top non-luxury imports, including Toyota, Honda, and Subaru, remain high.

Image upgrades required by OEMs are sending sellers to market, analysts noted, but because these sellers are unwilling to invest the capital required to become facility-compliant, their dealerships will sell at a lower blue-sky value in 2019.

“In the face of all these positives in the market, it must be noted that the outlook is less promising for some players, especially weaker, lower performing franchises with low buyer demand who are finding it more difficult to find a buyer, particularly at a strong price,” noted Ryan Kerrigan, managing director of Kerrigan Advisors. “Another factor to watch is that dealership rents appear to have peaked, with Q1 2019 showing a decline for the first time in 10 years. We expect that many dealers are realizing that their businesses can no longer support these high rent levels and, as rents fall, real estate values often follow.”

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.

Share this post
In The News

We look forward to connecting with you.

Contact us to learn more about Kerrigan Advisors’ sell-side services.
All of our conversations are 100% confidential.