Despite lots of speculation about the health of the U.S. economy, dealers are in an incredibly strong financial position to weather any storm, which, in many ways, is underscored by the current strength of mergers and acquisitions. Recently, at the 2023 NADA Show, CBT News anchor, Jim Fitzpatrick spoke with Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors, to hear her expert insight into today’s automotive buy/sell market.
1. From Kerrigan’s perspective, dealer groups are still looking to expand, but economic uncertainty has made buyers more selective. Right now, buyers are seeking brands that have the highest sales per franchise, like Toyota, Mercedes-Benz, BMW, Lexus, and Subaru. However, demand for Hyundai and Kia stores increased significantly.
2. Regarding the publicly traded dealership groups, there was a significant difference in transactions between 2022 and 2021. $9 billion was spent in 2021, and while there isn’t complete data for 2022 yet, Kerrigan Advisors estimates that $2 billion will be the final tally for 2022. However, the automotive retailing business model is resilient and could beat these estimates.
3. Even though the public groups pulled back their M&A activity, private dealer groups more than made up for it. Private dealers, in many cases, are sitting on more cash than they ever have before, and they are bullish on the buy/sell market.
4. Kerrigan Advisors facilitated the sale of 33 dealerships in 2022, and Kerrigan expects to sell the same number or more in 2023.
5. The biggest issue with vehicle affordability is the growing negative equity. While that might be a headwind for dealers, they have plenty of tailwinds to keep them flying high.
“I EXPECT THAT ‘S REALLY AN INDICATION OF THE FUTURE—THAT YOU’RE GOING TO SEE PRIVATE CONSOLIDATORS REALLY DOUBLE DOWN WITH THEIR OWN CAPITAL AND, IN SOME CASES, PARTNER UP WITH A FAMILY OFFICE.” — ERIN KERRIGAN
— In the last five years, Kerrigan Advisors has sold six of the Top 100 Dealership Groups, more than any other firm in the industry.
Click here for more 2023 NADA Show coverage on CBT News.
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