IRVINE, Calif.--(BUSINESS WIRE)--Dealership buy/sell activity during the first half of 2017 reveals a notable willingness by auto dealers to take on minority and majority equity partners, according to analysis from the Blue Sky Report®, a Kerrigan Quarterly. Released today, the report also shows that buy/sell activity through the first half of 2017 remained high. Kerrigan Advisors expects activity in the second half of the year to surpass the first half, resulting in the 4th year of over 200 buy/sells.
“2017 is on pace to be a record year for equity partner investment structures,” said Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors. “We think this shift in buy/sell activity is mostly due to the increasing size and complexity of the dealership groups coming to market. In addition, dealers are attracted to the opportunity to remain involved in the business post-transaction, while also taking some chips off the table.”
The Blue Sky Report, published by Kerrigan Advisors, is the auto industry's most comprehensive and authoritative quarterly report and analysis of dealership M&A activity, as well as franchise values. It includes analysis of the first half of 2017 - laying out the high, average and low blue sky multiples for each franchise in the luxury and non-luxury segments for the quarter - and offers a detailed view of public and private company dealership acquisition activity.
Key data and analysis from the first half of 2017 includes:
- 101 dealership buy/sell transactions completed in the first half of 2017, compared to 106 transactions during the first half of 2016.1
- Multi-dealership transactions represented 25% of completed transactions in the first half of 2017. Those transactions saw a 23% rise in the number of franchises represented per transaction.
- Public retailers increased spending 61% in the first half of 2017, compared to the first half of 2016.
- Domestics’ share of the buy/sell market remained at 44%, while non-luxury imports saw their share of the buy/sell market increase to 39%.
- Toyota, Honda and Subaru dealerships enjoy high buyer interest, with consistently high profitability
- Amongst the publics, Lithia and Penske have acquired 21 US dealerships
- The private sector acquired 93% of the franchises sold
- Dealership real estate prices and rents rose slightly as compared to 2016
“We see resilience in the buy/sell market,” continued Kerrigan. “Even though SAAR is down, it remains within a historically high range. Auto sales in the first half of 2017 were actually 5% higher than the trailing five-year average, and dealerships remain highly profitable.”
The report identifies three key trends moving forward into Q3 and Q4 of 2017:
- Dealers take on majority and minority capital partners
- Reinsurance profits increasingly factor into buy/sells
- Retiring key operators prompt some dealers to sell
“One of the more interesting trends we see moving into Q3 and Q4 of 2017 is retirement-driven transactions, but not necessarily in the way you think,” said Ryan Kerrigan, Managing Director of Kerrigan Advisors. “When a key lieutenant retires, that’s prompting some older dealers to sell, versus finding a replacement. As a result, the retirement of key management, in combination with the aging of the dealer body, is increasingly prompting older dealers to sell.”
Kerrigan Advisors is deeply involved in the Buy/Sell Market, having advised on the sale of 59 dealerships, including four of the Top 100 Dealership Groups in the US. Most recently, Kerrigan advised on the sale of Downtown LA Auto Group to Lithia Motors. Kerrigan Advisors’ extensive experience representing the largest dealership groups in the country provides the firm with a unique perspective on the trends shaping the industry and today’s franchise values.
The Blue Sky Report®, a Kerrigan Quarterly, is published four times a year and includes Kerrigan Advisor’s signature blue sky charts, multiples and analysis for each franchise in the luxury and non-luxury segments. The multiples are based on Kerrigan Advisors’ view of franchise values in the current buy/sell market and can be applied to adjusted pre-tax dealership earnings to estimate blue sky value. To download the report, click here.
Kerrigan Advisors also releases a monthly index, The Kerrigan Index, composed of the seven publicly traded auto retail companies with operations focused on the US market. The KAR 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.
Erin Kerrigan is Founder and Managing Director of Kerrigan Advisors, and is a recognized industry expert on dealership valuation, real estate and buy/sells. A sought-after commentator on automotive retailing topics ranging from consumer auto buying trends to auto retail consolidation to private equity in auto retail, she has keynoted numerous automotive conferences and her analysis has appeared in publications such as Automotive News and the Wall Street Journal. For a recent video of Erin’s commentary on the market, click here.
Ryan Kerrigan is Managing Director of Kerrigan Advisors and an expert on US auto retail buy-sell transaction work. Prior, Ryan served as Managing Director at Serent Capital, a $250MM private equity fund investing in middle market companies and served as General Manager of the family’s auto dealership. Mr. Kerrigan began his career as a management consultant at McKinsey & Company, where he advised Fortune 500 companies on growth strategies, organizational issues, pricing and business valuation.
About Kerrigan Advisors
Kerrigan Advisors is a national dealership buy/sell advisory firm focused on providing a high level of client service for dealership sellers. Led by a team of veteran advisors who have represented transactions totaling over $3.0 billion dollars in automotive, private equity and investment banking, Kerrigan Advisors customizes each sale process to maximize the seller’s transaction proceeds. With the most comprehensive buyer database in the industry, Kerrigan Advisors has the industry context and expertise to match each seller with the right buyer.
In addition to the monthly Kerrigan Auto Retail Index, each quarter, Kerrigan Advisors publishes The Blue Sky Report®, a Kerrigan Quarterly, which is the auto industry's most comprehensive and authoritative quarterly report and analysis of dealership buy/sell activity and franchise values. Kerrigan Advisors’ Managing Director Erin Kerrigan is a recognized industry expert on dealership valuation, real estate and buy/sells, and is a frequent speaker at leading auto retail events and conferences, including NADA, JD Power Automotive Roundtable, AICPA, NADC and Driving Sales’ President’s Club. She has also been a keynote speaker for events hosted by American Honda Motor Company, Audi of America, US Trust, Ohio Automobile Dealer Association, and SunTrust Bank and has led webinars for NADA and Automotive News. Her expertise is also featured in a monthly column for Dealer Magazine.
1 Source: The Banks Report and Kerrigan Advisors’ Analysis