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Dealership Transaction Values Hit Record Levels

November 30, 2017

Threats to the traditional retail model has made retirement a more attractive prospect for many auto dealers, helping to fuel the feverish buy/sell market tracked by Kerrigan Advisors’ most recent Blue Sky Report. Photo by sailin1
Threats to the traditional retail model has made retirement a more attractive prospect for many auto dealers, helping to fuel the feverish buy/sell market tracked by Kerrigan Advisors’ most recent Blue Sky Report. Photo by sailin1

IRVINE, Calif. The auto dealership buy/sell market is poised to complete its most active year ever, with over 200 transaction closings projected for 2017, according to Kerrigan Advisors’ third-quarter Blue Sky Report. 

Among the factors driving market activity are strong financial markets, well-funded investors and rising real estate values. The pressures of a more challenging auto retail market, dropping margins and rising concerns about the impact of disruptive automotive technology on the traditional dealership business model are also having a major impact.

Blue sky values remain slightly lower than their 2015 peak, and the overall industry is showing some stagnation, but 2017 remains on track to be the third most profitable ever, driving more sellers to market and transaction values to record levels when including dealership real estate, according to the report.

“Historic megadeals with complex ownership structures and multiple franchises are on the rise. These transactions are supported by a financial market that is willing and able to invest hundreds of millions of dollars in auto retail, despite some of the doomsday headlines about slowing sales,” said Erin Kerrigan, Managing Director of Kerrigan Advisors. “Investors and financial institutions see an opportunity to participate in a decades-long auto retail consolidation game — one that they expect will produce winners and losers, particularly as technological innovations potentially change the dealership business model as we know it.” 

Key data and analysis from the Q3 2017 Blue Sky Report includes:

  • The Kerrigan Index is up 4.24% year to date and 608% from its 2009 recession lows.
  • 149 dealership buy/sell transactions were completed in the first nine months of 2017, according to Kerrigan Advisors’ research and The Banks Report, compared to 172 transactions in the first nine months of 2016. After hitting a plateau in 2015, buy/sell activity declined slightly in the first nine months of 2017, but is still tracking to be one of the most active years on record.
  • Multi-dealership transactions represented one quarter of the completed sales in the first nine months of 2017. Kerrigan Advisors expects at least 51 multi-dealership transactions will close this year.
  • Year to date, domestics’ share of the buy/sell market increased to 49%, up 18% from 2015.
  • Non-luxury and luxury import franchises’ buy/sell market share declined.
  • Public retailers’ US acquisition spending increased 61% in the first nine months of 2017 compared to the first nine months of 2016.
  • Private dealership groups represent the largest share of dealership acquirers. Of the estimated 236 franchises which changed hands in the first nine months of the year, only 23 were acquired by public companies.

To read the report in its entirety, click here.

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