On today’s edition of Inside Automotive, Ryan Kerrigan, Managing Director of Kerrigan Advisors, gives an update on the buy/sell market and breaks down some of the auto industry’s most interesting headlines. In part one of this conversation, Kerrigan and anchor Jim Fitzpatrick discuss the unprecedented levels of M&A activity and electric vehicle adoption.
These are extraordinary days in automotive retail, and the public companies demonstrate that, says Kerrigan. Year-end announcements have made the rounds in the last couple of weeks, and profits are incredible. Most posted profits up 50% to 60% year over year in Q4. AutoNation was up two and a half times year-over-year and Sonic Automotive, which had been running at some lower margins prior, experienced a 700% profit increase year-over-year.
2021 ended up being a very big year for M&A activity as well. According to Kerrigan Advisors, there were 383 distinct transactions last year; a 35% increase over the prior year. Some states, like Colorado, are seeing dealerships trade hands even more frequently. Kerrigan says there are two primary issues that determine this: population growth and business environment.
In regards to electric vehicles, Kerrigan says, so far, he does not see the EV phenomenon really impacting buy/sells or valuations today. Buyers remain somewhat skeptical as to when and how EVs will be brought to dealerships. There are price constraints on the raw materials needed for batteries. There’s also no consensus on how this impacts the business model. Will EVs fundamentally change the retailing experience? Time will tell.