Automotive M&A deals have been very active over the last 12 months as major retailers expand their footprint into new markets. Lithia Motors has been one of the most aggressive retailers on the market, as the company recently acquired dealerships in the Southeast and Midwest regions of the country. We recently spoke with automotive buy/sell expert, and Managing Director of Kerrigan Advisors, Ryan Kerrigan, about Lithia’s recent growth and what it could mean for the industry.
Throughout the second half of 2020, the firm’s Kerrigan Index kept hitting high after high, after high. Despite facing some uncertainty early on in 2021, the Index continued to hit an all-time high of 892.83 as of market closing on January 29. In fact, each component of the Index hit all-time highs as well. This means that valuations have never been stronger in automotive retail.
Lithia Motors has been the most aggressive in the M&A market. They announced that they had put $3.5 billion in new, annualized revenue. According to Kerrigan, they have a growth plan of having $4 billion a year in acquisitions. All of the public retailers are now looking at these substantial valuations. They have good Blue Sky valuations, and they’re all leaning in.
All of the trends in retail automotive point towards personal mobility. Pre-pandemic, younger generations were not fast to purchase their own vehicle. Instead, they were relying more on ride-sharing and ride-hailing services. The past year has watched that reverse entirely.
Kerrigan believes that the business model will undergo an evolution process to new types of profitability. Whether that process is lead by electrification, remains to be seen.
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