In the late 1990s major consolidation started in our industry. The consolidators were either public or going public. Wall Street wanted them to get big, fast. These companies did not just buy single stores; they bought whole groups and spent many millions on each transaction.
How times have changed! Since the “shock and awe” of initial consolidation, buy/sell activity has continued, but at a much slower pace. It’s been more like a marathon, than a race. A testament to this change is the relatively small number of large public acquisitions over the last 10 years. Since 2002, Presidio estimates the publics completed only 23 acquisitions between $50 million and $100 million, and six over $100 million (see Chart 1). Some larger private groups also did sizable acquisitions during this time, but not many.
Today, Presidio estimates there are at least 300 private dealership groups valued at over $45 million (blue sky, assets and real estate), see Chart 2. Many of these groups are led by dealers who are at, near or beyond retirement. Some are starting to think about their exit strategy. A few plan to pass along their businesses to the next generation; however, for many, these businesses have become too valuable to finance a generational buyout or too large to pass along. Few expect this to change in the near future.
For those dealers who plan to sell their group, most are hoping to receive top dollar from a single, large buyer. However, a single exit (as Chart 1 demonstrates) is no longer a likely outcome.
Given these challenges, Presidio recommends dealership groups form a strategic exit plan – one that may contemplate not only a potential single sale to a single buyer, but also several sales over time to multiple buyers, perhaps two or three transactions over a 10-year period. There are several benefits to this approach:
Preparing for the sale of a group is not fun. However, dealers should be honest with themselves about their own longevity. No one lives forever. Coach Wooden said, “Worthwhile results come from hard work and careful planning.” The hard work is done. You have built a valuable business. It’s time to start the careful planning.
Kerrigan Advisors is honored to work with auto retailers throughout the US to enhance the value of their enterprise. Learn more about our services below:
Customized and confidential sell-side services for higher value dealerships and dealership groups nationwide, with a proven record of achieving the highest sale price per transaction of any firm in the industry.
Capital raising and partnership structuring for growing dealership groups, supported by the largest investor database in the industry.
If you are a buyer in today’s market, Kerrigan Advisors welcomes the opportunity to learn about your acquisition criteria and include you in Kerrigan Advisors’ proprietary Buyer Database.
We welcome the chance to learn more about your acquisition criteria so that we can contact you in the event a client matches your investment profile.
Contact us to learn more about Kerrigan Advisors’ client services, or to have a conversation about the buy/sell market. All of our conversations are 100% confidential.