Buy/sell transactions surged 10% YoY in 2024, with 697 franchises sold—highest since 2021; buyer confidence in valuations grew as earnings normalized; Blue Sky multiples strongest among most trusted franchises

Incline Village, NV – March 17, 2025 – The auto dealership buy/sell market delivered another record year of buy/sell activity with 438 completed dealership transactions, up 10% compared to 2023, according to the just-released 2024 Annual Blue Sky Report® by Kerrigan Advisors. For the year, 697 franchises were sold, the highest number since 2021 and a 2.5% increase from 2023. The strength of the buy/sell market in 2024 was largely driven by growing industry confidence in the future of auto retail sales and profitability.

According to the 2024 Annual Blue Sky Report, fourth quarter 2024 automotive sales remained strong, signaling a market with substantial growth potential, and positioning the industry to surpass the prior annual vehicle sales peak of 17.55 million set in 2016, providing trade policies remain favorable. With more than a quarter of a trillion dollars in pre-tax dealership earnings accumulated since the pandemic - much of it sitting idle on balance sheets - Kerrigan Advisors expects the consolidation trend to persist in 2025,

“With interest rates lower, inflation moderating, and vehicle affordability improving, new vehicle sales saw a significant uptick throughout the year, further boosting buyer confidence,” said Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors. “This confidence grew even stronger post-election, as dealers experienced a sharp rebound in new vehicle sales—clear evidence of pent-up consumer demand after years of constrained supply.”

Contributing to the strength of the buy/sell market is the fact that many dealers view 2024’s lower earnings as the market’s trough, from which future growth can, at last, be projected—an earnings baseline that remains 78% higher than pre-pandemic levels, even when adjusted for inflation. If gross profit per new vehicle retailed stabilizes at 2024 averages, and new vehicle volumes return to historical rates, industry earnings should normalize well above pre-pandemic levels, resulting in more than $40 billion of potential gross profit, projects The Blue Sky Report®. “Given this backdrop, buyers are factoring this growth potential into their dealership acquisitions, driving stronger motivation and greater conviction in blue sky valuations,” continued Kerrigan.

The report also reveals that franchise diversification was critical to a dealership group’s success in 2024 as the auto retail market bifurcated into “have” and “have not” franchises. Strong franchises thrived on low inventories and sustained high gross profit margins, while weaker franchises struggled with ballooning inventories, rising floorplan costs, and falling gross profits. This divergence created a marketplace of winners and losers, clearly reflected in days’ supply of vehicles. For instance, Lexus, Toyota, BMW and Honda who have amongst the highest valuations in the industry, maintained the lowest days’ supply—well below the industry average—whereas Lincoln, Nissan and CDJR, have amongst the highest days’ supply and lowest valuations.

 “Not surprisingly, valuations for underperforming/weaker franchises fell sharply in 2024 as dealer confidence in those OEMs declined,” continued Kerrigan. “Some dealers with struggling franchises faced financial distress for the first time since the Great Recession, leading to an increase in distressed sales and deeply discounted valuations compared to their pandemic highs. With the average dealer owning fewer than three stores, the impact of a weak franchise became harder to absorb.”

This market shift fueled record franchise divestitures, particularly among underperforming brands like CDJR, Nissan and Infiniti. As multi-dealership deals declined year over year, from 32% in 2023 to just 22% of 2024’s buy/sell activity - the lowest share on record – single-point transactions surged and the number of franchises sold per transaction declined to 1.59, a 7% drop from 2023. That said, multi-dealership transactions remained above pre-pandemic levels with 97 completed deals, the third highest on record and a 67% increase over the pre-pandemic average of 58.

Market Consolidation Shifts to Privates, the South Surges and Blue Sky Values are Historically High

The Blue Sky Report® underscores the continuation of the consolidation trend in 2024, with the largest private dealerships in the industry (Automotive News’ Top 150 Dealership Groups) growing at the fastest rates, even as the US public dealer groups remain net sellers of dealerships. In 2024, the Top 150 accounted for more than 30% of industry revenue, representing 28% of the franchises acquired, the highest level on record. These companies also continued to grow revenue per rooftop, which now exceeds the NADA average by 18% or $13.1 million.  

The Southern United States continued to be a stand-out in the regional consolidation trend in 2024 as buyer demand for its high growth, business-friendly markets surged to a new record, now representing the majority of transactions with a buy/sell market share of 51%, a 20% year-over-year increase.

Although they averaged 19% below their 2022 peak, overall, blue sky values remained historically high in 2024, supported by an active and liquid buy/sell market. “Many dealers see 2024 as a valuation inflection point, with blue sky values expected to rebound in 2025, alongside a recovery in industry earnings, and the public markets reflect this outlook,” said Ryan Kerrigan, Managing Director of Kerrigan Advisors.  “As we look ahead to 2025, strong buyer demand and an improving earnings environment suggest the buy/sell market will remain highly active.”

The 2024 Kerrigan Dealer Survey confirms this trend, showing a 258% increase in dealers seeking to sell a dealership compared to 2022, a 16% rise in those looking to grow, and a 12% decline in those planning for no change.

“With valuations poised to rise, we expect another robust year for dealership transactions. As dealers and their families plan for 2025 and beyond, the choice between growth and exit will be front and center—while inertia appears to be a less viable strategy in the evolving market,” continued Ryan Kerrigan.

2025 Buy/Sell Trends

In the 2024 Annual Blue Sky Report, Kerrigan Advisors identified the following three important trends that are expected to meaningfully impact the auto retail market in 2025.

-      Dealership Real Estate Values Remain High, Buoying Dealership Enterprise Values

-      OEMs Exercise Their Right of First Refusal at an Increasing Rate

-      Chinese OEMs’ Growing Global Market Share Could Eventually Impact US Blue Sky Values

Dealership Real Estate

Dealership real estate values are having a profound impact on the buy/sell landscape in 2025: strong retail sales and elevated construction costs are sustaining high dealership property valuations as demand outpaces supply. Kerrigan Advisors estimates that, since 2014, dealership real estate values have risen 51% to $13.9 million on average, increasing real estate’s share of total transaction values.

“While blue sky values have declined about 19% from their 2022 peak, rising real estate valuations have offset this drop, keeping total dealership enterprise values near record levels in 2024,” said Ryan Kerrigan. “This trend highlights the critical role of dealership real estate in a dealer’s decision to sell and their total after-tax proceeds.”

OEM ROFRs

OEMs record number of right of first refusals (ROFRs) in 2024 continues a trend that began in 2022 when blue sky values peaked. ROFR activity historically correlates with buy/sell volume—higher transaction levels boost OEM confidence in securing alternative buyers, prompting more frequent ROFR use. As ROFRs rise, dealer trust in OEMs is eroding. The 2024 Kerrigan Dealer Survey found that 25% of respondents reported “no trust” in their OEM, up 19% from 2023, while moderate and high trust levels declined. This growing disconnect highlights rising friction in the franchise system, as consolidation accelerates and OEMs exert greater control over dealership ownership and network composition.

Growing Chinese Global Market Share

China is redefining the global automotive landscape. It surpassed the US as the world’s largest auto market in 2009 by 3.1 million in annual light vehicle sales and has maintained the top position in vehicle sales ever since, with the variance growing to 13.9 million in 2024.

“Legacy OEMs are feeling the financial impact of losing market share in the world’s largest auto market. Volkswagen, General Motors, Nissan, BMW, and Mercedes-Benz—once reliant on China for 20% to 40% of global sales—are facing accelerating declines in 2024, hitting earnings hard,” said Erin Kerrigan, Highlighting the severity of the shifting competitive landscape, Kerrigan noted that General Motors took a $5 billion restructuring charge in Q4 2024 due to its weakening Chinese business—equivalent to ~70% of its 2024 net income.

Toyota, Kia, and Lexus Multiples Increased

“As OEM-dealer relations continue to evolve, trust will play a defining role in shaping franchise valuations and determining which brands retain their competitive edge in an increasingly complex automotive landscape,” said Erin Kerrigan.

“In fact, we uncovered a strong correlation between a franchise’s dealer trust level and its blue sky multiple. At one end, CDJR has a near-zero trust score and a blue sky multiple just above 3x, while Toyota, with a 83% trust score, has a blue sky multiple of approximately 8x. Franchises that inspire confidence have predictable earnings, making them highly desirable acquisitions for buyers, driving up price. Conversely, franchises plagued by distrust inject uncertainty into financial projections and increase perceived investment risk, resulting in lower valuations.”

For the fourth quarter of 2024, Kerrigan Advisors increased the multiple for Toyota to 7.0x on the low-end and 8.0x on the high-end, as the brand continues to reign supreme in the buy/sell market. Toyota’s strong franchise business model, high level of dealer trust and high franchise profitability, from strong consumer demand and exceptional inventory management, is driving ever higher blue sky multiples.    

Kerrigan Advisors also increased the multiple for Kia to a range of 4.5x to 5.5x due to increased demand for the franchise. This high demand results from its sustainably high dealership profitability post-pandemic and growing buyer demand (nearly a quarter of dealers surveyed in the 2024 Kerrigan Dealer Survey seek to add Kia, ranking 4th amongst all franchises). Kia also had the fourth highest trust level amongst non-luxury franchises in the 2024 Kerrigan Dealer Survey.

In the luxury segment, Kerrigan Advisors increased the high-end of Lexus’ blue sky multiple from 8.5x to 10x this quarter as demand for Lexus franchises continues and dealer relations strengthen, resulting in high trust with the OEM. Lexus commands the highest blue sky multiple of any franchise in the industry due to the scarcity of points available for purchase, coupled with the highest buyer demand in the luxury segment. 70% of dealers surveyed by Kerrigan Advisors have a high level of trust in Lexus due to its superior business model (high UIO count, high sales per franchise, superior gross profits).

CDJR, Nissan, Audi and Volvo Multiples Decreased, Volvo’s Outlook Reduced

In the fourth quarter, Kerrigan Advisors downgraded CJDR and Nissan. Both non-luxury franchises’ blue sky multiples have been reduced to 2.5x to 3.25x due to very weak franchise financial performance in 2024, a lack of trust in their OEMs and high buyer avoidance. Nissan’s economic future remains in question; however, the right business partner/merger could strategically launch the company into a prosperous and more predictable future, which would have a meaningful impact on future blue sky values. 

Kerrigan Advisors also downgraded blue sky multiples for luxury franchises Audi and Volvo. Audi’s blue sky multiple range was reduced by 0.5 on the high end and 0.25 on the low end this quarter, to 6.5x – 7.0x as it experienced the steepest sales decline in the luxury segment in 2024. Likewise, Kerrigan Advisors reduced Volvo’s blue sky multiple on the high end from 4.0 to 3.5, and the brand’s outlook was changed to negative given Volvo’s rising inventories and declining dealer profitability. Volvo sales declined in 2024, with the OEM’s significant investment in EVs calling into question the franchise’s future product pipeline and its suitability to the US consumer.  

 “In the face of potential import tariffs if the Trump administration proceeds with its plans, 2025 blue sky multiple expectations face some uncertainty. Tariffs on all auto imports, including parts from Mexico and Canada, will drive up vehicle costs, impacting OEMs, dealers, and consumers. For dealers, higher costs, supply chain disruptions and reduced affordability would likely lead to margin compression. While the impact will vary by franchise, most dealers expect the risk to either not materialize or to be mitigated by OEMs who may absorb a significant portion of the cost,” concluded Ryan Kerrigan.

Highlights from the 2024 Annual Blue Sky Report® by Kerrigan Advisors include:

·        438 dealership transactions were completed for the full year 2024, a 10% increase over 2023’s previous record high. There were 234 transactions in the second half of 2024 alone – close to 2021’s record 239.

·        697 franchises were sold in 2024, the second highest number on record.

·        The number of multi-dealership transactions declined to 97 transactions representing 22% of all transactions completed, compared to 32% in 2023 and 126 transactions. This still represented the third highest number of multi-dealership transactions on record.

·        The domestics represented 41% of the buy/sell market in 2024, losing 7% share to the import luxury market and 6% share to the import non-luxury market.

·        In 2024, the US public dealer groups were net sellers of dealership, divesting a record 47 franchises, 18 more than they acquired, representing a 0.6 acquisition-to-divestiture ratio – the lowest ratio since 2015.

·        The US public dealer groups ended the year at a blue sky multiple 7.7x below the top luxury average multiple of ~8.5x, but above the top non-luxury average of ~6.5x, improving acquisition prospects and making them more accretive to EPS.  

·        51% of the acquisitions in 2024 were in the South, a 20% increase from 2023. Both the Midwest and Northeast regions saw their share shrink to 23% and 11%, respectively.

·        30% of the US public dealer groups total invested capital went to international and other acquisitions —the highest share recorded. Capital invested toward US acquisitions fell to 22% from 37% in 2023.

The Blue Sky Report®, published by Kerrigan Advisors, is the auto retail industry's most comprehensive and authoritative quarterly report on dealership M&A activity, as well as franchise values. The quarterly report, received by over 12,000 industry recipients in 35 countries, includes analysis of all dealership transaction activity for the year, and lays out the high, average and low blue sky multiples for each franchise in the luxury and non-luxury segments. For more details and to preview the report, click here. To sign up to receive the quarterly report, click here.

About Kerrigan Advisors

Kerrigan Advisors is the leading sell-side advisor and thought partner to auto dealers nationwide. Since its founding in 2014, the firm has led the industry with the sale of over 285 dealerships generating more than $9 billion in client proceeds, including two of the largest transactions in auto retail history – the sale of Jim Koons Automotive Companies to Asbury Automotive Group and Leith Automotive to Holman. The firm advises the industry’s leading dealership groups, enhancing value through the lifecycle of growing, operating and, when the time is right, selling their businesses. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, accounting, finance and real estate, Kerrigan Advisors is the only firm in auto retail exclusively dedicated to sell-side advisory, providing its clients the assurance of a conflict-free approach.   

Kerrigan Advisors monitors conditions in the buy/sell market and publishes an in-depth analysis each quarter in The Blue Sky Report®, which includes Kerrigan Advisors’ signature blue sky charts, multiples, and analysis for each franchise in the luxury and non-luxury segments. To download a preview of the report, click here. The firm also releases monthly The Kerrigan Index™ composed of the seven publicly traded auto retail companies with operations focused on the US market. The Kerrigan Auto Retail Index is designed to track dealership valuation trends, while also providing key insights into factors influencing auto retail. To read the 2024 Kerrigan Dealer Survey, click here. To read the 2024 Kerrigan OEM Survey, click here. Kerrigan Advisors also is the co-author of NADA’s Guide to Buying and Selling a Dealership.

Kerrigan Advisors Media Contact:

Melanie Webber (melanie@mwebbcom.com), mWEBB Communications, 949-307-1723

Transaction marks Kerrigan Advisors’ 286th dealership sold, 21st franchise sold in the Northeast region and 37th Toyota franchise sold since inception.

Sale of highest volume dealership in Greensburg, PA, underscores growing success of Pittsburgh market, where Toyota is the top volume import franchise.

Pittsburgh, PA – February 24, 2025 – Kerrigan Advisors, the premier sell-side advisor and thought partner to auto dealers nationwide, represented Ascent Automotive Group in the sale of its Toyota of Greensburg, Pennsylvania dealership, in the Pittsburgh metropolitan area, to Jim Shorkey Auto Group. Ascent Automotive Group is part of The Friedkin Group, a privately held and diverse family of brands and investments in the automotive, luxury, hospitality, and entertainment industries, including Gulf States Toyota. Pittsburgh-based Jim Shorkey Auto Group, founded in 1974, is a family-owned dealership group with 17 stores across the Northeast. The sale represents Kerrigan Advisors’ second Toyota franchise sold this year, and its 286th dealership, 37th Toyota franchise, and 21st franchise in the Northeast sold since inception.

"We are delighted to announce the successful completion of this transaction for Ascent Automotive, having identified the ideal buyer in Jim Shorkey Auto Group that is well-positioned to uphold the strong legacy that The Friedkin Group has built for Toyota of Greensburg,” said Ryan Kerrigan, Managing Director at Kerrigan Advisors. “Under their leadership, we have no doubt that Greensburg’s highest-volume dealership will continue to thrive and serve the community with the highest level of dedication to customer service."

Ascent Automotive Group, part of The Friedkin Group since 2004, operates six dealerships, including Toyota of Greensburg, and represents Lexus and Subaru dealerships in Nevada and Ohio. Ascent Automotive acquired Toyota of Greensburg in October 2011 and won the Toyota President’s Award for six consecutive years from 2017-2023. The dealership represents Toyota in the Pittsburgh metro area in the prosperous Southeast suburb of Greensburg.

Home to 2.4 million residents and the second-largest metro in Pennsylvania, Pittsburgh’s population has increased by 4.5% since 2019—125% above the national growth rate, fueled by $3.7 billion in investments from local and national corporations, 13 Fortune 1,000 companies, a highly skilled workforce, and over 145,000 students enrolled across 29 colleges and universities. Recognized for its quality of life, affordability, and pro-business climate, Pittsburgh ranked #2 for international business by the Financial Times in 2024 and was named the 9th best city for working parents by The Huffington Post in 2023. Additionally, Greensburg serves as a key retail hub for the region, featuring the Westmoreland Mall, a newly opened casino, 22 automotive franchises, and an affluent population that spends 4.2 times the U.S. average on retail sales annually.

Toyota is the top volume import franchise in the Pittsburgh market and continues to lead the automotive industry, achieving 15% sales growth in 2024, the highest among all volume import franchises. Toyota has led all brands—luxury and non-luxury—in sales per franchise for over 15 years, resulting in the highest number of units in operation per franchise at 30,000. Toyota significantly outperforms several global and domestic competitors and is, by far, the most-requested brand in Kerrigan’s Buyer Database and in the 2024 Kerrigan Dealer Survey.

"Not surprisingly, Toyota franchises are among the most sought after in the industry. Their effective inventory management, strong dealer-OEM partnerships, robust fixed operations, and consistent profitability make them extremely desirable in the current market," said Erin Kerrigan, Founder & Managing Director of Kerrigan Advisors. "This is borne out not only in our annual Kerrigan Dealer Surveys, but also by the number of Toyota franchises Kerrigan Advisors has represented since our inception. With 37 dealership sales – and two in just the last month – we are proud to be the most experienced Toyota franchise sell-side advisor in the industry. It has been a tremendous privilege to partner once again with The Friedkin Group to bring this transaction to such a successful close." 

About Kerrigan Advisors

Kerrigan Advisors is the leading sell-side advisor and thought partner to auto dealers nationwide. Since its founding in 2014, the firm has led the industry with the sale of over 280 dealerships representing over $9 billion in client proceeds, including the third largest transaction in auto retail history – the sale of Jim Koons Automotive Companies to Asbury Automotive Group. The firm advises the industry’s leading dealership groups, enhancing value through the lifecycle of growing, operating and, when the time is right, selling their businesses. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, accounting, finance and real estate, Kerrigan Advisors does not take listings, rather they develop a customized sales approach for each client to achieve their personal and financial goals. In addition to the firm’s sell-side advisory services, Kerrigan Advisors also provides a suite of consulting and investor services including growth strategy, market valuation assessments, capital allocation, transactional due diligence, open point proposals, operational improvement and real estate due diligence.

Kerrigan Advisors monitors conditions in the buy/sell market and publishes an in-depth analysis each quarter in The Blue Sky Report®, which includes Kerrigan Advisors’ signature blue sky charts, multiples, and analysis for each franchise in the luxury and non-luxury segments. To download a preview of the report, click here. The firm also releases monthly The Kerrigan Index™ composed of the seven publicly traded auto retail companies with operations focused on the US market. The Kerrigan Auto Retail 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. To read the 2024 Kerrigan Dealer Survey, click here. To read the 2024 Kerrigan OEM Survey, click here. Kerrigan Advisors also is the co-author of NADA’s Guide to Buying and Selling a Dealership.

Kerrigan Advisors Media Contact:

Melanie Webber (melanie@mwebbcom.com), mWEBB Communications, 949-307-1723

Sale of Houston's high volume Chevrolet dealership highlights strong buyer demand for dealerships in Texas, the nation's second fastest growing market; marks Kerrigan Advisors’ 280th dealership sale, and 19th Texas franchise sold since 2023

Houston, TX – November 25, 2024 – Kerrigan Advisors, the premier sell-side advisor and thought partner to auto dealers nationwide, represented Conroe, Texas-based Buckalew Chevrolet in its sale to Victoria, Texas-based Keating Auto Group, ranked 17th in Automotive News’ Top 150 Dealership Group list. The completion of this transaction represents Kerrigan Advisors’ 280th dealership transaction since the firm’s founding in 2014, and its 19th Texas franchise sold since 2023. Notably, Kerrigan Advisors leads the Houston buy/sell market, having represented on the sale of 11 franchises in the market in the last 18 months.

Buckalew Chevrolet was founded by Don A. Buckalew and his partner in 1965 and has been a cornerstone of the Conroe community for nearly 60 years. The dealership is known for supporting numerous local organizations, including schools (the local elementary school is named Buckalew Elementary), sports leagues, churches and non-profits throughout Montgomery County. Don’s sons, Donnie and Denny Buckalew, took over management and ownership of the dealership over the last decade, growing operations to become the 17th highest volume Chevrolet dealership in the state of Texas.  

“The Kerrigan Advisors team managed every step of the sale process for us to ensure all of our goals were achieved in this once-in-a-generation milestone for our family,” said Donnie Buckalew, Co-Owner of Buckalew Chevrolet. “Kerrigan’s guidance and deep knowledge of the Texas buyer community were invaluable to me and my brother. We could not have done it without them.” Denny Buckalew, Co-Owner, continued, “Finding a buyer who prioritized community involvement and customer and employee satisfaction was a top priority for us. We are pleased that Kerrigan identified a buyer in Keating that shares our value system, laying the foundation for the dealership’s continued success.”

“It was a great privilege and honor to represent the Buckalew family in the sale of their highly valuable dealership. Buckalew Chevrolet is a pillar of the Conroe community, so it was imperative that we found a buyer who would ensure the Buckalew family’s legacy of community service and impeccable customer relations would continue,” said Erin Kerrigan, Founder & Managing Director of Kerrigan Advisors. “The Keating Auto Group met all of our expectations for an ideal buyer. We are grateful for the opportunity to support Donnie and Denny in this important family milestone."

Chevrolet ranks as the top domestic brand, leading in quality and dealer relations. In 2024, J.D. Power ranked Chevrolet #2 overall and #1 among domestic brands in its Initial Quality Study, outperforming its domestic peers by 20%. Chevrolet’s U.S. light vehicle sales surged 19.5% in 2023, further widening Chevrolet’s lead over domestic competitors. Thanks to its practical approach to facility and EV requirements, Chevrolet also ranks high in dealer relations, topping the 2023 Kerrigan Dealer Survey for valuation expectations in 2024.  

Houston is one of the most sought-after car markets by today’s dealership buyers, largely driven by its ranking as one of the largest and fastest growing U.S. metro areas. Houston is anchored by sizeable corporations and deep roots in the trade, technology, healthcare, defense, energy and space industries, and home to approximately 50% of Texas’ 55 Fortune 500 companies. It has the fifth largest population in the US, growing 23% since 2010, the second fastest rate of the 10 largest metro areas. Of the five largest counties in Houston, Montgomery County, where Buckalew is based, is the fastest growing since 2020. Additionally, Houston has been named the #1 Best Big City to Live by US News & World Report in 2024, and the #1 Best Place for Foreign Businesses by the Financial Times in 2023.

“This transaction is another example of the power of a valuable brand, in a rapidly growing metro area, in a state, Texas, that is at the forefront of dealership buyer demand,” said Ryan Kerrigan, Managing Director at Kerrigan Advisors. “The sale of Buckalew Chevrolet marks the 19th transaction Kerrigan Advisors has shepherded to completion in Texas since May of 2023, solidifying our position as the leading sell-side advisor to Texas dealers. It was an honor and a privilege for our team to work with the Buckalew family and their team in bringing this transaction to such a successful conclusion.”

Kerrigan Advisors leads the Texas dealership buy/sell market, having represented Kinsel Motors (Toyota, Ford, Mazda and Lincoln in Beaumont), Beck & Masten Auto Group (Buick GMC & Kia in Houston and Corpus Christi), Alamo Toyota in San Antonio, Tejas Toyota in Houston, Northwest CDJR in Houston, Cowboy Toyota in Dallas and now Buckalew in Houston.

About Kerrigan Advisors

Kerrigan Advisors is the leading sell-side advisor and thought partner to auto dealers nationwide. Since its founding in 2014, the firm has led the industry with the sale of 280 dealerships representing $9 billion in client proceeds, including the third largest transaction in auto retail history – the sale of Jim Koons Automotive Companies to Asbury Automotive Group. The firm advises the industry’s leading dealership groups, enhancing value through the lifecycle of growing, operating and, when the time is right, selling their businesses. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, accounting, finance and real estate, Kerrigan Advisors does not take listings, rather they develop a customized sales approach for each client to achieve their personal and financial goals. In addition to the firm’s sell-side advisory services, Kerrigan Advisors also provides a suite of consulting and investor services including growth strategy, market valuation assessments, capital allocation, transactional due diligence, open point proposals, operational improvement and real estate due diligence.

Kerrigan Advisors monitors conditions in the buy/sell market and publishes an in-depth analysis each quarter in The Blue Sky Report®, which includes Kerrigan Advisors’ signature blue sky charts, multiples, and analysis for each franchise in the luxury and non-luxury segments. To download a preview of the report, click here. The firm also releases monthly The Kerrigan Index™ composed of the seven publicly traded auto retail companies with operations focused on the US market. The Kerrigan Auto Retail 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. To read the 2023 Kerrigan Dealer Survey, click here. To read the 2024 Kerrigan OEM Survey, click here. Kerrigan Advisors also is the co-author of NADA’s Guide to Buying and Selling a Dealership.

Kerrigan Advisors Media Contact:

Melanie Webber (melanie@mwebbcom.com), mWEBB Communications, 949-307-1723

2024 Kerrigan OEM Survey finds OEMs expect sales to increase and earnings to normalize at higher levels over the next 12 months, despite high interest rates and affordability challenges; majority of OEMs developing ICE production contingency plans as electric vehicle (“EV”) demand softens and EV sales expectations wane

Incline Village, NV – July 29, 2024 – Automotive OEMs are generally optimistic about the health of the automotive industry over the next 12 months, with the vast majority expecting new vehicle sales to increase or remain the same versus 2023, according to the just-released 2024 Kerrigan OEM Survey.

The survey, gathered from Kerrigan Advisors’ annual survey of automotive OEM executives in conjunction with the issuance of The Blue Sky Report®, is designed to gauge OEM executives’ perspectives on the franchise system, dealer profitability and electric vehicle sales. The 2024 results indicate that despite high interest rates and consumer affordability challenges, the industry is amid a normalization period, in which dealership sales, profits and inventories are moderating, likely at more attractive levels than the pre-pandemic period. Strikingly, the survey reveals significant challenges with the industry’s transition to EVs, with 81% of OEMs expecting the transition to be slower than originally forecast.

“Our second annual survey of OEM executives provides a critical window into their unique perspectives of the automotive industry. The survey offers a candid, on-the-ground view of auto retail’s opportunities and challenges in the near and medium term,” said Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors. “The results underscore the continuing evolution of the auto retail marketplace, particularly regarding the demand challenges associated with EVs. It is interesting to see that most OEMs are making contingency plans for increased ICE production and admitting their EV sales projections will not be met. Even with the EV miscalculations, we are pleased to see that executives have a largely positive outlook on the auto retail industry, expecting rebounding new vehicle sales and gross margins to remain above pre-pandemic levels for the foreseeable future.”

Dealership Profits, Sales, Margins and Inventories Reflect Improving Outlook

Only 54% of OEM executives surveyed expect dealership profitability to decline in the next 12 months, compared with 69% in 2023. Consistent with this improved outlook, 41% of OEMs expect profits to remain the same over the next 12 months, versus just 24% who had that expectation last year. As with 2023, a slim minority project dealership earnings to increase in the near-term. These results are an indication that auto retail profits are beginning to normalize for many franchises.

Despite high interest rates and consumer affordability challenges, 44% of OEMs expect new vehicle sales to increase over the next 12 months, while 48% project sales will remain at 2023 levels, only 8% expect a decline. This sales optimism is likely a byproduct of rising new vehicle inventory expectations, with 70% projecting days’ supply to normalize between 60 and 90 days, up from 38% in 2023.  

“We are in the midst of auto retail’s great normalization. After years of historically high dealership profits, new vehicle inventories are rebounding and gross profit margins are on the decline,” continued Erin Kerrigan. “That said, we are pleased to see the majority of OEM executives do not expect a return to pre-pandemic gross profit margins. In fact, an increasing number of executives predict dealership earnings will flatten in 2024 - an indication OEMs do not intend to return to a period of overproduction and excess inventories.”

EV Transition Remains Slow, Impacting OEM Decisions

In addition to the vast majority who anticipate a slower transition to EVs, over two-thirds of OEMs surveyed project that they will not meet their proposed EV sales goals, with 86% reporting they are developing contingency ICE production plans if EVs do not penetrate the market as successfully as expected. These results are consistent with the declining sales growth in EVs – through June 2024, EV sales growth is down 84% compared to 2023.

The failure of OEMs to meet their projected EV sales is also driving substantial modifications to their expected changes to the auto retail model: over half of OEM respondents do not expect the agency model to be introduced in the US in the next five years, a dramatic shift from the only 24% who were skeptical in 2023. The survey also reveals a major change related to anticipated increases in facility requirements, with 60% expecting no increase in requirements over the next five years, and only 18% projecting an increase, compared to 32% in 2023. Additionally, while OEMs are more supportive of the dealership legacy sales model, a rising number expect to take a leading role in the customer relationship and data ownership. The majority (67%) expect the customer relationship and data will be shared by OEMs and dealers in the future, though 19% (a 16% increase from 2023) believe the OEM will exclusively own the customer relationship and data. Just 14% of respondents project the legacy model, in which the dealer is the primary owner of the customer relationship, will remain. These results demonstrate the OEMs’ continued desire to have more direct management of the customer relationship.

“As our survey makes clear, the industry’s transition to EVs will be much slower than originally projected and OEMs are preparing necessary contingency plans for increased ICE and hybrid production to meet consumer demand,” said Ryan Kerrigan, Managing Director of Kerrigan Advisors. “This has also led to a pullback in OEMs’ changes to the retail sales model and facility requirements, with some, such as Ford, abandoning their plans to take a more active role in retailing and recognizing the dealer network is the most economic and efficient sales model. That being said, as our survey indicates, executives still believe the customer relationship and data is squarely in their future domain. The 2024 Kerrigan OEM Survey cements the industry’s expectation that change is the only constant.”

Key OEM Survey Data

·        46% project profits will stay the same or increase in the next 12 months, while 54% expect a decline in the next 12 months an improvement from 69% in 2023.

·        62% expect new car margins to normalize above 2019 levels, while only 38% believe they will return to 2019 levels,

·        44% say new vehicle sales will increase over the next 12 months, 48% project sales will remain at 2023’s levels and 8% expect a decline.

·        Days’ supply of new vehicles is expected to normalize at 60-90 days in the next 12 months say 70% of respondents, up from 38% in 2023. 22% project days’ supply to remain within 30-60 days in the next 12 months, down from 59% in 2023.

·        81% of OEM executives believe the transition to EVs will be slower than originally planned.

·        64% do not expect to meet their EV sales goals, prompting 86% of respondents to reveal their organizations are developing contingency ICE production plans if EVs do not penetrate the market as expected. 

·        67% expect customer relationship/data will be shared by OEMs and dealers in the future, although 19% (a 16% increase from 2023) believe OEMs will exclusively own the data. 14% of respondents say the dealer will be the primary owner.

·        Only 18% of respondents projected an increase in facility requirements over the next 5 years, while 60% believe they will remain the same, and 22% anticipate a decline.

Methodology

The data for The Kerrigan OEM Survey was gathered from Kerrigan Advisors’ annual survey of automotive OEM executives in conjunction with the issuance of The Blue Sky Report®. The survey is based on over 110 responses from OEM executives in Kerrigan Advisors’ proprietary database. Responses were collected from December 2023 to June 2024.

·        To download the full Kerrigan OEM Survey report, click here.

·        To download a preview of The Blue Sky Report®, published by Kerrigan Advisors, click here. 

·        To access The Kerrigan Index™, click here.

·        To access results from the latest Kerrigan Dealer Survey, click here.

About Kerrigan Advisors

Kerrigan Advisors is the leading sell-side advisor and thought partner to auto dealers nationwide. Since its founding in 2014, the firm has led the industry with the sale of over 275 dealerships representing more than $9 billion in client proceeds, including the third largest transaction in auto retail history – the sale of Jim Koons Automotive Companies to Asbury Automotive Group. The firm advises the industry’s leading dealership groups, enhancing value through the lifecycle of growing, operating and, when the time is right, selling their businesses. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, accounting, finance and real estate, Kerrigan Advisors does not take listings, rather they develop a customized sales approach for each client to achieve their personal and financial goals. In addition to the firm’s sell-side advisory services, Kerrigan Advisors also provides a suite of consulting and investor services including growth strategy, market valuation assessments, capital allocation, transactional due diligence, open point proposals, operational improvement and real estate due diligence.

Kerrigan Advisors monitors conditions in the buy/sell market and publishes an in-depth analysis each quarter in The Blue Sky Report®, which includes Kerrigan Advisors’ signature blue sky charts, multiples, and analysis for each franchise in the luxury and non-luxury segments. To download a preview of the report, click here. The firm also releases monthly The Kerrigan Index™ composed of the seven publicly traded auto retail companies with operations focused on the US market. The Kerrigan Auto Retail 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. To read the 2023 Kerrigan Dealer Survey, click here.  Kerrigan Advisors also is the co-author of NADA’s Guide to Buying and Selling a Dealership.

Kerrigan Advisors Media Contact:

Melanie Webber (melanie@mwebbcom.com), mWEBB Communications, 949-307-1723

Sale of Inland Empire Toyota dealership underscores strength of the industry’s most in-demand franchise in California’s fastest growing region; transaction marks Kerrigan Advisors’ 264th dealership and 31st Toyota franchise sale

INCLINE VILLAGE, NV – May 22, 2024 – Kerrigan Advisors, the premier sell-side advisor and thought partner to auto dealers nationwide, represented California-based Gosch Auto Group in the sale of Gosch Toyota to Kevin Naderi. Gosch Toyota dealership is located in the Hemet Auto Mall, a high-volume, non-luxury car market in California’s fastest growing region, the Inland Empire. This transaction represents Kerrigan Advisors’ 264th dealership and 348th franchise sold since its founding.

“I want to congratulate the Gosch family and thank them for entrusting Kerrigan Advisors with the sale of this very high-value Toyota dealership in this fast growing market,” said Gabe Robleto, Senior Vice President, Sell-Side Advisory at Kerrigan Advisors. “It was a pleasure to support the Gosch family in this sale, which also marks our 31st Toyota franchise sold since our firm’s founding.”

Gosch Auto Group, a family-run dealership group that currently owns auto dealerships in Hemet and Temecula, was founded in 1964 by Jack Gosch following his 11 years at the Ford Motor Company. He opened Gosch Ford in downtown Hemet just three months after the Ford Mustang was introduced. Recognizing the potential of the area, Jack joined with six other dealers and the city of Hemet to develop and build the Hemet Auto Mall in the mid-80s, shortly after his sons Eric and Marc joined the family business. Over the years, their team grew to more than 620 employees; collectively they have sold over 400,000 vehicles to local customers and serviced millions of cars.

“After 60 years of doing business in this incredible community, it was important to our family to transition the dealership to the right buyer for our valuable Toyota franchise, and we thank Kerrigan Advisors for helping us to do just that,” said Marc Gosch, Co-Owner of Gosch Auto Group. “In 1972, following the success we saw with our Ford dealership, we added Gosch Toyota to our group and over the years, we’ve created a long and successful relationship with Toyota. While it is difficult to part with a dealership that has been a part of our family for decades, we are pleased to continue serving the Hemet community with our Ford, Chevrolet and Hyundai brands.” 

"Having worked very successfully with Kerrigan Advisors previously, we knew we’d get the value and results in selling this desirable franchise. And, of importance, we knew that Kerrigan Advisors had a proven track record of maximizing franchise value,” said Eric Gosch, Co-Owner of Gosch Auto Group. “Not only did they ensure a smooth transition, the Kerrigan Advisors team displayed exemplary professionalism, expertise and guidance throughout our sale process, delivering results beyond our expectations.”

Toyota dominates the Inland Empire car market, capturing 24% market share in the non-luxury segment, exceeding California and US averages by 5% and 60%, respectively. Given its superior dealer-OEM relations, #1 ranking in trust, judicious approach to electric and hybrid vehicles, and high-volume business model, Toyota remains the most in-demand franchise in the industry, as evidenced by the success of this transaction.

“Toyota is in-demand in virtually every market, especially high-volume ones like the Inland Empire. We see very high buyer demand for the Toyota franchise nationwide, given dealers’ tremendous trust in the brand and the franchise’s high levels of profitability and earnings growth, which are the best in the business,” said Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors. “It was such an honor to work with the Gosch family, whom I have known for well over a decade, and to bring this transaction to a successful and beneficial outcome for all involved parties.”

About Kerrigan Advisors

Kerrigan Advisors is the leading sell-side advisor and thought partner to auto dealers nationwide. Since its founding in 2014, the firm has led the industry with the sale of over 260 dealerships representing more than $8 billion in client proceeds, including the third largest transaction in auto retail history – the sale of Jim Koons Automotive Companies to Asbury Automotive Group. The firm advises the industry’s leading dealership groups, enhancing value through the lifecycle of growing, operating and, when the time is right, selling their businesses. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, accounting, finance and real estate, Kerrigan Advisors does not take listings, rather they develop a customized sales approach for each client to achieve their personal and financial goals. In addition to the firm’s sell-side advisory services, Kerrigan Advisors also provides a suite of consulting and investor services including growth strategy, market valuation assessments, capital allocation, transactional due diligence, open point proposals, operational improvement and real estate due diligence.

Kerrigan Advisors monitors conditions in the buy/sell market and publishes an in-depth analysis each quarter in The Blue Sky Report®, which includes Kerrigan Advisors’ signature blue sky charts, multiples, and analysis for each franchise in the luxury and non-luxury segments. To download a preview of the report, click here. The firm also releases monthly The Kerrigan Index™ composed of the seven publicly traded auto retail companies with operations focused on the US market. The Kerrigan Auto Retail 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. To read the 2023 Kerrigan Dealer Survey, click here. To read the 2023 Kerrigan OEM Survey, click here. Kerrigan Advisors also is the co-author of NADA’s Guide to Buying and Selling a Dealership.

Kerrigan Advisors Media Contact:

Melanie Webber (melanie@mwebbcom.com), mWEBB Communications, 949-307-1723

Dealership buy/sell transactions increased 6% YoY according to the Annual 2023 Blue Sky Report by Kerrigan Advisors; 680 franchises sold in 2023, an increase of 5.4% compared to 2022, defying broader corporate M&A trends

Incline Village, NV – April 9, 2024 – The auto dealership buy/sell market experienced a record year of buy/sell activity with 397 completed dealership transactions, up 6% compared to 2022, according to the just-released 2023 Blue Sky Report® by Kerrigan Advisors. This activity included the third largest transaction in auto retail history – the sale of Kerrigan Advisors’ client, Jim Koons Automotive Companies representing 20 dealerships and the addition of $3 billion of revenue to Asbury Automotive Group. Fueled by significant access to capital, auto retail defied the broader corporate mergers and acquisitions (M&A) market, which declined 30% in 2023. In 2023, 680 franchises were sold, an increase of 5.4% compared to 2022.

“Despite negative headwinds of higher interest rates and declining profit margins, dealers continued to seek acquisitions, powered by their belief that scale is not only critical to future success, but essential to sustaining their businesses in the face of an evolving industry,” said Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors. “We expect the consolidation trend, ignited by the pandemic-induced surge in industry earnings, to continue in 2024 as the industry has amassed nearly a quarter of a trillion dollars of pre-tax earnings since the pandemic.”

To underscore this, Kerrigan noted that nearly half of the dealers surveyed by Kerrigan Advisors in November 2023 said they planned to acquire one or more dealerships in the next twelve months, while only 6% expected to sell dealerships in the same period. The Kerrigan Dealer Survey has the highest level of respondents of any survey in the industry at over 650.

The auto dealership buy/sell market’s outperformance relative to the broader corporate M&A market is, according to the report, a result of its distinctly private structure. The majority of dealerships are owned by private dealers, who on average own three dealerships, which minimizes the impact of the public capital markets on transaction fundamentals. “The private, fragmented composition of auto retail translates into a very insular buy/sell market, driven primarily by its own internal dynamics often unrelated to the broader public financial markets,” continued Erin Kerrigan.    

Dealership Valuations Decline Slightly, Publics’ Mark Second Highest Acquisition Spend

With an active buy/sell market driven by strong buyer demand, dealership valuations sustained historically high blue sky values in 2023, albeit lower, on average, than their peak in 2022. Kerrigan Advisors estimates that blue sky values declined on average 8% in 2023, far less than the estimated 26% reduction in industry earnings. The modest decline in blue sky is driven by buyers’ expected future earnings, not past performance.

“When earnings soared in 2021, buyers correctly projected that pandemic earnings were unsustainable and normalized earnings for valuation purposes. When earnings declined in 2023, these normalized expectations were already accounted for in most valuations and thus had less of an impact on blue sky,” said Kerrigan.   

The public dealership groups acquired 61 franchises for $2.7 billion in 2023, the second highest US acquisition spending level on record. Of note, Kerrigan Advisors was the only firm to represent sellers of dealerships acquired by the publics in 2023, selling 30 dealerships to the publics for total proceeds of $1.94 billion, representing 71% of the total public acquisition spending for the year.

The South Rises, Domestics Dominate Buy/Sell

Notably, there continues to be a clear regional bias towards business-friendly, high growth markets in the South. This region, which has led the buy/sell market for multiple years, saw its share rise to 42% in 2023, more than double that of the West and Northeast regions. Kerrigan Advisors finds buyer demand for dealerships in the Southern states to be very high, particularly those markets with the highest population growth, strong franchise laws and business-friendly climates. This trend is consistent with the record valuations Kerrigan Advisors continues to observe in many of these markets. 

Additionally, Detroit Three franchises represented the majority of the buy/sell market in 2023, taking significant share during the year. Kerrigan Advisors attributes the rise in domestics market share to an increase in the number of domestic sellers coming to market, as well as buyers’ attraction to their lower multiples. Many domestic sellers are concerned by their OEM’s electrification plans and are choosing to sell rather than manage through the EV transition.

Honda and Mazda Multiples Increased; Mazda and BMW Multiple Outlooks Upgraded to Positive

For the fourth quarter of 2023, Kerrigan Advisors increased the multiples for Honda and Mazda to reflect continued improvement in sales performance and stronger buyer demand for these franchises. Honda is regaining market share lost in 2022, resulting in its sales per franchise increasing at the fastest rate of any OEM, to second place behind Toyota.  

“Honda is the fourth most trusted brand in the industry and third most amongst non-luxury brands,” said Ryan Kerrigan, Managing Director at Kerrigan Advisors. “In our 2023 Dealer Survey, 83% of dealers expect the Honda franchise to increase in value or stay the same in 2024, above the non-luxury industry average of 78%.”

Mazda increased sales by 23% in 2023, nearly double the market rate and continues to benefit from its captive partnership with Toyota Financial Services, which was extended for another five years, resulting in an upgrade of Mazda’s blue sky multiple and outlook.

Kerrigan Advisors also upgraded BMW’s multiple outlook to positive to reflect the franchise’s outperformance in 2023, particularly with its successful EV product introductions. Kerrigan Advisors expects a future increase in the BMW blue sky multiple if buyer demand continues to rise. 

Mercedes, Nissan and Lincoln Multiples Reduced

Kerrigan Advisors reduced the multiples for Mercedes, Nissan and Lincoln. Mercedes faltered in its EV rollout, resulting in a rise in inventories and a steep reduction in gross profit margins. A softening in buyer demand for Mercedes franchises is reflected in the results of Kerrigan Advisors 2023 Annual Dealer Survey in which 14% of dealers surveyed had zero trust in the brand. Buyer demand also continues to wane for Nissan and Lincoln franchises as dealers report a lack of trust in the future of the franchise and concern about the OEM’s EV plans and ballooning inventories (140 days for Lincoln and 106 days for Nissan as of December 2023).

Kerrigan Advisors is also maintaining a negative outlook on the current blue sky multiples of Nissan, Ford, CJDR, Volvo, Lincoln and Infiniti. These franchises have the highest risk of future declines to their blue sky multiples, particularly as the auto retail market becomes more competitive and the success or failure of EV sales determines franchise profitability.  

2024 Buy/Sell Trends

In the 2023 Annual Blue Sky Report, Kerrigan Advisors identified the following three important trends that are expected to meaningfully impact the market in 2024.

·       Buyers increasingly focus on last twelve months’ financial performance to determine blue sky value

·       Top import and luxury franchises in growth markets continue to achieve record valuations

·      State electric vehicle (EV) mandates, if left unchecked, will have negative implications for blue sky values

2023 was the start of a shift in valuation methodology for blue sky as buyers are becoming increasingly focused on the last twelve months’ financial performance to determine blue sky value, according to the report.  “Going forward, active buyers are increasingly of the belief that current earnings reflect the “new normal” for our industry, so most buyers are starting to apply adjusted blue sky multiples to the most recent earnings when determining blue sky pricing, largely ignoring pandemic-period profits,” said Ryan Kerrigan. “In this regard, the second half of 2023 will serve as a significant driver of dealership valuation in 2024. The trend of emphasizing the most recent profitability will likely continue as we move through 2024.”

While valuations are trending down for most franchises, top import and luxury franchises in high growth markets continue to hit record valuations in part because many are retaining pandemic-level earnings due to growth dynamics in their markets. In addition to strong earnings performance, they have much more attractive investment characteristics. In 2023, import and luxury franchises outperformed the broader market in new vehicle sales growth, achieving 14% and 20% growth rates respectively, as compared to 11% for non-luxury and 7.6% for domestics.

Given a more challenging EV marketplace, dealers operating in CARB states will increasingly find their OEMs tested to meet the CARB EV sales thresholds required by state regulators. As currently planned, EV demand will determine total vehicle sales in CARB states starting in 2026 when 35% of vehicles sold must be electric.  “This target is aggressive given EV sales in 2023 are not near the threshold required in less than two years. A government-imposed limit on ICE sales by 2026 will impact the revenue and profits of dealerships located in CARB states, reducing a buyer’s projected earnings for those franchises,” said Ryan Kerrigan. “We believe that this decline in projected future earnings will negatively impact the blue sky values of these franchises, perhaps as early as this year.”

Highlights from the 2023 Annual Blue Sky Report® by Kerrigan Advisors include:

·       397 dealership transactions were completed for the full year 2023, a 3.7% increase over 2021’s prior record and a 6.1% increase over last year. The increase in buy/sell activity was primarily driven by the first half of the year, when a record 211 transactions were completed.

·       The number of franchises sold rose to 680 in 2023, the second highest level on record.

·       The number of multi-dealership transactions increased in 2023, matching 2021’s record. 32% of transactions completed during the year were multi-dealership transactions, resulting in 126 multiple dealership transactions.

·       The industry saw a significant increase in the percentage of dealers with 11 or more dealerships in 2023 and those with 5 or fewer dealerships continued to decline, reflecting an industry in the early innings of regional consolidation as a precursor to eventual national consolidation of the major metro centers.

·       The domestics represented 54% of the buy/sell market in 2023 taking 4% share from the import luxury market and 1% share from the import non-luxury market.

·      In 2023, public dealer groups acquired 61 franchises for $2.7 billion, the second highest US acquisition spending level on record (albeit 70% below 2021’s record of $9 billion). The only mega transaction completed in 2023 was the acquisition of Koons Automotive by Asbury for $1.5 billion.

·      US public dealer groups ended the year at a blue sky multiple below the 7.3x average of the top franchises, and mostly in line with the 3.75x average of domestic franchises, often leaving them priced out of the buy/sell market for top assets.

·      87% of the acquisitions made by the publics in 2023 were in the South, with just 11% in the West and 1% in the Northeast, consistent with the broader market bias towards business-friendly, higher growth markets.  

The Blue Sky Report®, published by Kerrigan Advisors, is the auto retail industry's most comprehensive and authoritative quarterly report on dealership M&A activity, as well as franchise values. The quarterly report, received by over 10,000 industry recipients in 35 countries, includes analysis of all dealership transaction activity for the year, and lays out the high, average and low blue sky multiples for each franchise in the luxury and non-luxury segments. For more details and to preview the report, click here. To sign up to receive the quarterly report, click here.

Kerrigan Advisors also releases monthly The Kerrigan Index™ composed of the seven publicly traded auto retail companies with operations focused on the US market. The Kerrigan Auto Retail 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.

About Kerrigan Advisors

Kerrigan Advisors is the leading sell-side advisor and thought partner to auto dealers nationwide. Since its founding in 2014, the firm has led the industry with the sale of over 260 dealerships generating more than $8 billion in client proceeds, including two of the largest transactions in auto retail history – the sale of Jim Koons Automotive Companies to Asbury Automotive Group and Leith Automotive to Holman. The firm advises the industry’s leading dealership groups, enhancing value through the lifecycle of growing, operating and, when the time is right, selling their businesses. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, accounting, finance and real estate, Kerrigan Advisors does not take listings, rather they develop a customized sales approach for each client to achieve their personal and financial goals. In addition to the firm’s sell-side advisory services, Kerrigan Advisors also provides a suite of consulting and investor services including acquisition and expansion strategies, valuation assessments and benchmarking, open point proposals and real estate advisory.

Kerrigan Advisors monitors conditions in the buy/sell market and publishes an in-depth analysis each quarter in The Blue Sky Report®, which includes Kerrigan Advisors’ signature blue sky charts, multiples, and analysis for each franchise in the luxury and non-luxury segments. To download a preview of the report, click here. The firm also releases monthly The Kerrigan Index™ composed of the seven publicly traded auto retail companies with operations focused on the US market. The Kerrigan Auto Retail 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. To read the 2023 Kerrigan Dealer Survey, click here. To read the 2023 Kerrigan OEM Survey, click here. Kerrigan Advisors also is the co-author of NADA’s Guide to Buying and Selling a Dealership.

Kerrigan Advisors Media Contact:

Melanie Webber (melanie@mwebbcom.com), mWEBB Communications, 949-307-1723

Dealership buy/sells increased 11% YoY, with trailing twelve-month transactions surpassing 2021’s prior peak, according to the Third Quarter 2023 Blue Sky Report® by Kerrigan Advisors; consolidation sparked by the pandemic has yet to abate, blue sky values remain high and acquisition growth, fueled by tremendous access to capital from operations, remains impervious to interest rates

Incline Village, NV – December 18, 2023 – The auto dealership buy/sell market hit another impressive record through the third quarter of 2023 with 313 transactions completed — an 11% increase over the same period in 2022, according to the just-released Third Quarter 2023 Blue Sky Report® by Kerrigan Advisors, and is on track for another record year. For the trailing 12 months ending September 2023, the buy/sell market recorded 406 completed transactions, surpassing 2021’s prior peak.

“The buy/sell market continues to show its strength in the third quarter, impervious to the rise in borrowing costs and declines in dealership earnings which, nevertheless, remain historically high, and well above pre-pandemic averages,” said Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors.

Through the third quarter of 2023, Kerrigan Advisors estimates auto retail generated $235 billion in pre-tax profit since 2020, much of which has yet to be reinvested in dealership acquisitions.

“The continuing uptick in buy/sell activity is attributable to more sellers coming to market, strong blue sky values and buyers’ robust pool of capital generated over the last four years from record earnings. As profits remain elevated, growing dealership groups are allocating that capital toward acquisitions,” continued Kerrigan. “Most are investing equity, rather than raising debt, and thus are less impacted by higher borrowing costs due to the rise in interest rates.”

While the number of sellers coming to market has risen, the buy/sell market remains largely a seller’s market given the substantial amount of capital still on balance sheets of dealers who are seeking to acquire dealerships, particularly high-demand franchises in growth markets. As a result, dealership valuations remain near peak levels in 2023, on average about two times pre-pandemic values, although slightly lower than 2022.

“It is important to keep in mind that dealership valuations do not rise and fall in lockstep with industry earnings. When earnings soared in 2021, buyers assumed they would come back down to earth and took that into account when buying stores,” noted Kerrigan. “As earnings start to normalize in 2023 and 2024, the impact has already been baked into valuations and thus the decline in current earnings is not having a meaningful impact on valuations, as the decline has long been assumed.”

Notably, according to the report, through the third quarter of 2023, multi-dealership transactions tracked to record levels, surging to 99, and representing nearly one third of the buy/sell market, further evidence of the industry’s focus on the importance of consolidation and scale. “The strength of this trend is reflective of the auto retail’s adaptation to the evolving marketplace where size will be an imperative to future success both on a market and group level,” said Kerrigan.

According to the 5th annual Kerrigan Dealer Survey, the percentage of dealers seeking to sell dealerships rose more than 200% in 2023 compared to 2022, while the percentage seeking to acquire declined 18%. Kerrigan Advisors believes the rise in dealerships available for sale is a byproduct of expected changes to auto retail in the coming years, which will likely require larger balance sheets and significant investments in digital retailing technology and infrastructure to support electric vehicle sales. The survey also found that 27% of dealers expect the value of their business to decline in the next 12 months. This is the highest rate since the pandemic and nearly double 2019 and 2020’s rate of 14%.

“In an evolving auto retail environment, dealers are facing a crossroads to either grow their enterprise or exit,” continued Kerrigan. “With franchise valuations still above pre-pandemic levels, and dealers concerned that blue sky could decline if profit margins normalize, more are capitalizing on today’s blue sky rather than assuming the risks associated with growth, particularly in an industry facing tremendous change due to government mandated EVs.”

US public auto retailers’ acquisition spending on US dealerships through the third quarter of 2023 declined 26% to $1.1 billion, from the same period in 2022, but their spending on international and other business acquisitions increased 165%, resulting in an overall rise in capital allocated to investments for the year. This is the first time since Kerrigan Advisors started tracking these companies that their collective capital allocation to US dealership acquisitions was in line with both their allocation to capital expenditures and international & other investments.

“This is a clear sign that the publics are assessing their growth strategy, not only through US dealership acquisitions but also in relation to the evolving global auto retail marketplace,” said Kerrigan. “Their allocation to alternative investments, such as foreign dealership groups, financial services companies and technology solutions is a reminder of the multiple options available to the largest groups in the industry. The publics can, and will, invest in the most economically attractive opportunities for their shareholders and are making these investments with the changing auto retail marketplace in mind.”

Third Quarter 2023 Buy/Sell Trends

Kerrigan Advisors has identified the following three important trends that we believe will meaningfully impact the buy/sell market over the next 12 months:

• 2019 financial performance increasingly irrelevant to valuation
• Leasing dealership real estate (versus buying) becomes more economic
• OEMs’ EV strategies impact future franchise profitability and blue sky value

“Pre-pandemic performance is increasingly irrelevant when assessing franchise value - 2019’s dealership financial performance is not only almost four years old, but also a reflection of a very different retailing environment,” said Ryan Kerrigan, Managing Director of Kerrigan Advisors. “Buyers who seek to superimpose 2019 earnings as a replacement for projecting normalized earnings are overlooking the substantial and evolving differences between the pre- and post-pandemic auto retail business model.” 

The pandemic motivated dealers to heavily scrutinize operating expenses, particularly employee productivity, which ultimately resulted in significant improvements in operational efficiencies.  

In addition to fewer employees producing more revenue, the industry continues to evolve significantly as auto retail has become increasingly reliant on big data and technology to optimize sales. Perhaps the best most recent example of this changing dynamic is Hyundai’s November announcement of its Amazon partnership for the sale of new vehicles. With the AI revolution, auto retailing will undoubtedly continue to change, making 2019, and the historical way of retailing, a vestige of the past.

EVs continue to impact the buy/sell market as dealership buyers are increasingly limiting the number of Evs they are willing to purchase, concerned about exposure to low-demand devaluing inventory. Today, many dealerships are sitting on over 100 EV days’ supply as consumers are unattracted to the high price tags and logistical challenges associated with EV ownership, driving a low demand environment for EVs, with a resulting increase in EV discounting at the dealer level, led by Tesla, which has reduced prices 22% year-over-year per KBB.

“In the next two years, Kerrigan Advisors sees the auto retail industry approaching a challenging tipping point in EV sales,” continued Ryan Kerrigan. “The government mandated transition to EVs will likely have major implications for franchise values, depending not only on the success of an OEM’s sales strategy, but also on location. With CARB states currently mandating that 35% of OEM sales be zero emissions by 2026, OEMs will have a financial incentive to send the majority of their EV vehicles to those states (currently 15 states), resulting in greater disparities in EV and ICE availability from state to state. This disparity could lead to monumental differences in dealership profitability based on location and, ultimately, greater gaps in franchise value, adding a new variable to blue sky valuation.”

Toyota, Honda, Subaru, Porsche and Lexus Multiples Increased; Ford Sees Reduced Multiple; Ford, Nissan, CDJR and Lincoln Multiple Outlooks Downgraded

For the third quarter of 2023, Kerrigan Advisors increased the multiple outlooks for five franchises namely Toyota, Honda, Subaru, Porsche, and Lexus. These franchises join Kia as those most likely to see improvements in valuation in the coming year. Toyota continues to outperform on every level.

“Toyota is the most trusted franchise by dealers, with an incredible 72% of dealers surveyed having a high level of trust in the franchise,” said Erin Kerrigan. “This monumental lead in the trust equation has resulted in the franchise having the highest expected increase in profits as a result of the OEM's retailing changes and the highest buyer demand in Kerrigan Advisors’ buyer database.”

Ford’s multiple was reduced by 0.25 on the high-end, resulting in a revised blue sky multiple range of 3.25 to 4.0, in line with CJDR. Ford remains the franchise most expected to see a decline in value because of the OEM’s changes to its retail model. Consistent with this negative sentiment, Ford is the non-luxury franchise least expected to see a rise in valuation in the next 12 months. These results reflect dealers’ lack of trust in the OEM with Ford ranking as the least trusted franchise. With this lack of trust, Kerrigan Advisors has seen a notable rise in Ford dealers seeking a sale.

Kerrigan Advisors also downgraded the outlook for four franchises, including Ford, Nissan, CDJR and Lincoln. The negative outlook for these franchises is driven by their poor results in the 2023 Kerrigan Dealer Survey, particularly on the question of trust. Most notably in the survey, CDJR saw a significant increase in dealers expecting the franchise to decline in value, from 24% in 2022 to 53% in 2023 – a 29-percentage point increase. Kerrigan Advisors expects this negative dealer sentiment reflects CDJR’s rising inventory levels and lack of incentive spending. Also, 39% of dealers have no trust in CDJR, placing the OEM as the 4th least trusted franchise.

Highlights from the Q3 2023 Blue Sky Report® by Kerrigan Advisors include:

·       313 dealership buy/sell transactions were completed through the third quarter of 2023, an 11% increase, resulting in 406 transactions for the 12 months ending September 2023.

·       99 multi-dealership transactions were completed through the third quarter, representing nearly one third of the buy/sell market.

·       Among the franchises being acquired, domestic franchises increased their buy/sell market share five percentage points to 54%, taking share from import non-luxury franchises.

·       Domestics retained their majority share of the buy/sell market in 2023; however, more than 30 Kia and Hyundai franchises sold in third quarter alone resulting in those franchises leading import buy/sell market share and overtaking Toyota and Honda for the first time this year.

·       94% of the franchises sold through the third quarter of 2023 were to private buyers who are leading industry consolidation. The largest private groups represented 20% of the buy/sell market, while smaller private groups remained the largest buyers pool at 74%. The US public dealer groups acquired 6% of franchises sold through the third quarter of 2023.

·       US public auto retailers’ acquisition spending on US dealerships through the third quarter of 2023 was $1.1 billion, a decline of 26% from the same period in 2022. On a trailing twelve-month basis, the publics spent $2.7 billion on investments, the second highest level since 2021, with nearly half of their investments going to non-US dealerships.

·       During the quarter, Asbury announced the $1.2 billion acquisition of Jim Koons Automotive Companies, a Kerrigan Advisors’ client, which closed on December 11, 2023. The Koons acquisition is the third largest in auto retail history in terms of purchase price and the highest price ever paid for a regional dealership group. AutoNation, Lithia and Penske also completed US acquisitions during the third quarter.

·       Through the third quarter of 2023, the US public dealer groups’ new vehicle gross profit margins were 145% higher than pre-pandemic averages.

·       Kerrigan Advisors’ 2023 Dealer Survey found that 27% of dealers expect the value of their business to decline in the next 12 months, the highest rate since the pandemic and more than double 2019 and 2020’s rate of 14%.

The Blue Sky Report®, published by Kerrigan Advisors, is the auto retail industry's most comprehensive and authoritative quarterly report on dealership M&A activity, as well as franchise values. The quarterly report, received by nearly 10,000 industry recipients in 35 countries, includes analysis of all dealership transaction activity for the year, and lays out the high, average and low blue sky multiples for each franchise in the luxury and non-luxury segments. For more details and to preview the report, click here. To sign up to receive the quarterly report, click here.

Kerrigan Advisors also releases monthly The Kerrigan Index™ composed of the seven publicly traded auto retail companies with operations focused on the US market. The Kerrigan Auto Retail 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.

About Kerrigan Advisors 

Kerrigan Advisors is the premier sell-side advisor and thought partner to auto dealers in the US. The firm advises auto dealers nationwide, enhancing value through the lifecycle of growing, operating and monetizing their businesses, as well as offering restructuring and turnaround consulting services. Since the firm’s founding, Kerrigan Advisors has had the honor of representing the industry’s largest transactions, including more Top 150 Dealership Groups than any other firm in the industry. Led by a team of veteran industry experts, the firm does not take listings, rather Kerrigan Advisors develops a customized approach for each client to achieve their personal and financial goals. In addition to Kerrigan Advisors’ sell-side advisory and capital-raising services, the firm also provides a suite of consulting services including growth strategies, capital allocation, transactional due diligence, open point proposals, operational improvement and real estate analysis.

Kerrigan Advisors publishes The Blue Sky Report®, which is the auto industry's most comprehensive and authoritative quarterly report of dealership buy/sell activity and franchise values, received by nearly 10,000 industry participants in 35 countries. To register to receive The Blue Sky Report®, click here. Kerrigan Advisors also publishes The Kerrigan Index™, the only monthly report tracking the seven publicly traded auto retail companies. To access The Kerrigan Index™, click here.

Kerrigan Advisors Media Contact:

Melanie Webber (melanie@mwebbcom.com), mWEBB Communications, 949-307-1723

Sale underscores buyer demand for high growth markets; represents 207th dealership sold by Kerrigan Advisors, the leading buy/sell advisor in Phoenix 

PHOENIX, AZ – October 31, 2023 – Kerrigan Advisors, the premier sell-side advisor and thought partner to auto dealers nationwide, represented Mesa, Arizona-based East Valley Nissan, owned and operated by Greg Burk, in its sale to Phoenix, Arizona-based Courtesy Automotive Group. This marks the 207th dealership sale led by Kerrigan Advisors since 2015. It is the sixth Phoenix dealership Kerrigan Advisors has advised on, making the firm the leading sell-side advisor in the market having represented 2/3 of all buy/sell transactions in Phoenix since Q4 2020.

“We were proud to work with Greg Burk on the sale of this high-performing dealership in such an important auto retail market,” said Gabe Robleto, Vice President of Sell-Side Advisory. “We applied our extensive experience in Arizona to finding a buyer who not only understood the value of this retail market, but who also could continue East Valley Nissan’s success in sales and customer service and its position as a valued part of the Mesa community. We were pleased to identify the perfect match in Scott Gruwell and his aptly named Courtesy Automotive Group.”  

East Valley Nissan is located in the Superstition Auto Mall in Mesa, one of Phoenix’s fastest growing cities and home to several universities and significant real estate developments. Phoenix is one of the top Nissan markets in the country by volume, market share, profitability and fixed operations as well as being the 3rd fastest growing metro in the US: in 2022, Phoenix’s population growth outperformed the US by 381%, and the metro is expected to reach more than 7.6 million residents by 2055.

“I am grateful to Kerrigan Advisors for their tremendous work on this transaction; they exceeded my expectations in every regard,” said Greg Burk, owner of East Valley Nissan. “Selling an import franchise in a high-demand market is a complex undertaking. Bringing on Kerrigan Advisors to help complete the sale was a stellar value-add, and it is why I am confident that the East Valley Nissan team and its current, and future, customers are in excellent hands.”

In addition to being a top Nissan market, Arizona is a top auto retail market and its dealerships are some of the most profitable in the US, with one of the highest revenue-per-dealership in the country. Nissan, which is in the midst of tremendous sales growth fueled by production improvements and a refreshed product pipeline, boasts cost-friendly vehicles, including the #1, #8 and #10 most affordable vehicles in the US, an ideal lineup for Mesa’s young and rapidly growing residential population.  

“Arizona truly represents the sweet spot when it comes to buy/sell demand and dealership valuations – a top auto retail market fueled by population growth and a business-friendly environment. This, coupled with Nissan being a high-performing franchise in Phoenix, typifies where the buy/sell market is today with buyers exhibiting a deep focus on the top franchises and the top markets” said Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors. “We were honored to be back in a market we know well to help Greg navigate this transaction and bring it to a successful conclusion that benefitted seller, buyer, franchise and community. Kerrigan Advisors is honored to be the leading sell-side advisor in the Phoenix market and expects to see continued buyer demand for franchises in the area.”

Kerrigan Advisors is the most active sell-side advisor on larger transactions in the auto retail industry. In 2023, the firm is on track to sell 52 dealerships representing over $2.6 billion in client proceeds, more than any buy/sell advisor in the industry. The firm attributes its success to its team’s laser focus on fulfilling each client’s personal and professional goals. In addition to its sell-side advisory work, the firm offers strategic consulting services to dealers and their families, including growth planning, capital raising, and acquisition valuation analysis, creating value for their clients at every stage of the auto retail lifecycle.

John Norling of Gallagher & Kennedy served as legal counsel to the seller. Christine Smith of Crowe LLP was the seller’s accountant. Michael Smalley of Bergin, Frakes, Smalley & Oberholtzer served as legal counsel to the buyer.

About Kerrigan Advisors

Kerrigan Advisors is the leading sell-side advisor and thought partner to auto dealers nationwide. Since its founding in 2014, the firm has led the industry with the sale of over 225 dealerships representing more than $7 billion in client proceeds, including the third largest transaction in auto retail history – the sale of Jim Koons Automotive Companies to Asbury Automotive Group. The firm advises the industry’s leading dealership groups, enhancing value through the lifecycle of growing, operating and, when the time is right, selling their businesses. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, accounting, finance and real estate, Kerrigan Advisors does not take listings, rather they develop a customized sales approach for each client to achieve their personal and financial goals. In addition to the firm’s sell-side advisory services, Kerrigan Advisors also provides a suite of consulting and investor services including growth strategy, market valuation assessments, capital allocation, transactional due diligence, open point proposals, operational improvement and real estate due diligence.

Kerrigan Advisors monitors conditions in the buy/sell market and publishes an in-depth analysis each quarter in The Blue Sky Report®, which includes Kerrigan Advisors’ signature blue sky charts, multiples, and analysis for each franchise in the luxury and non-luxury segments. To download a preview of the report, click here. The firm also releases monthly The Kerrigan Index™ composed of the seven publicly traded auto retail companies with operations focused on the US market. The Kerrigan Auto Retail 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. To read the 2022 Kerrigan Dealer Survey, click here. To read the 2023 Kerrigan OEM Survey, click here. Kerrigan Advisors also is the co-author of NADA’s Guide to Buying and Selling a Dealership.

Kerrigan Advisors Media Contact:

Melanie Webber (melanie@mwebbcom.com), mWEBB Communications, 949-307-1723

Sale of seven dealerships underscores strong buyer demand for growth markets like South Carolina, one of the top 10 markets requested in Kerrigan Advisors’ proprietary Buyer Database

Greeneville, SC – August 23, 2023 – Kerrigan Advisors, the premier sell-side advisor and thought partner to auto dealers nationwide, represented Greenville, South Carolina-based MCE Automotive Group, owned and operated by the Escude family, in the sale of their seven dealerships to North Carolina-based Anderson Automotive Group, ranked 71st largest US dealership group in the US by 2022 new unit sales. The transaction includes Toyota of Greer, Kia of Greenville, Kia of Greer, Hyundai of Greer, Genesis of Greer, Nissan of Greer and Mike Hovart Chevrolet and represents nearly $500 million in revenue. This marks the 200th dealership sale led by Kerrigan Advisors since 2015 and the 22nd Toyota dealership sold, making Kerrigan Advisors the most active sell-side advisor to Toyota dealers in the US.  With the sale of MCE Automotive Group, Kerrigan Advisors has completed transactions representing over $4 billion in client proceeds since 2020.

“It was a true honor to represent the Escude family in the sale of their highly valuable, premier dealerships in the thriving Greenville, South Carolina market. The MCE transaction is indicative of the tremendous demand for dealerships located in South Carolina, one of the top 10 markets requested by buyers,” said Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors. “The Escude family’s dealerships, anchored by the best import franchises - Toyota, Kia, and Hyundai - represent some of the highest volume franchises in the Greenville market and are housed in state-of-the-art facilities. We are so pleased to see these sought-after dealerships transfer to another multi-generation Carolina family, ensuring the Escude’s legacy of top customer service and community engagement lives on in Greenville.”

Greenville serves as the economic anchor of Upstate South Carolina, with over 60% of the Upstate population residing in an area that touts a low cost of living and a high quality of life (#2 Best Place to Live in the state and #15 Lowest Cost Place to Live in the US). It is one of the three largest metro areas in South Carolina and has the fastest growing population (67% rise in population since 2000). MCE Automotive Group captures 14% market share of Greenville’s new units sold, with a 45% share in Greer, a thriving Greenville suburb. The sale includes seven recently built or renovated dealerships, and over 39 acres of property. The dealerships operate in three Greenville markets: Greer (Toyota, Hyundai, Kia, Nissan, and Genesis), Greenville (Kia), and Easley (Chevrolet). MCE Automotive is also the exclusive Kia dealer for the Greenville MSA.

“Toyota, Kia and Hyundai are some of the industry’s strongest import brands, with the highest valuation growth expectations according to our recent Dealer Survey,” continued Erin Kerrigan. “Not surprisingly, there was tremendous buyer demand for the MCE Automotive Group, given the group’s tremendous financial performance and the fact that MCE is anchored by top import franchises.” Kerrigan noted that since 2019, the valuation expectations for Kia and Hyundai have shifted upward over 26 percentage points, while Toyota, the most valuable non-luxury import franchise, continues to outperform most franchises in valuation growth expectations.

“As a family, we’re forever grateful to our employees and the community of Greenville for choosing our dealerships. For us it’s always been about taking care of our customers and employees, as well as being good stewards of our resources on behalf of the community,” said Mark Escude, Sr., President of MCE Automotive Group. “Whether through our lasting commitment to the March of Dimes, or our investment in local charities, we care about the people of Greenville. This is why our choice of Kerrigan Advisors to manage our sale process and achieve our goals in a transaction was so important to me and my family. Only Kerrigan has the deep knowledge and expertise to identify the right buyers for the largest groups in the industry along with the proven track record to ensure the sale goes smoothly and is run professionally.”

“In choosing Kerrigan Advisors, we knew we were in good hands,” continued Escude. “The Kerrigan team, particularly Mercedes Hendricks and Marie Brashears, went above and beyond when managing the sale process, from accurately reflecting our historical earnings to overseeing the buyer’s due diligence process and the closing. Erin Kerrigan’s personal relationships with top OEM executives also ensured our sale process ran on schedule, even with seven required OEM approvals. We are very grateful for the thoughtful advice and hard work of the entire Kerrigan team to ensure our sale was a tremendous success.”

“We were proud to advise the Escude family with this complex transaction,” said Ryan Kerrigan, Managing Director of Kerrigan Advisors. “Greenville, South Carolina is a dynamic market with an increasing population, driven by a high quality of life and low cost of living, making MCE highly desirable. Our data, and the trends we are seeing, demonstrate the Carolinas are one of the top areas for growing dealership groups, resulting in price premiums. This transaction proved out that trend.”  

Kerrigan Advisors has facilitated 28 multi-dealership transactions since 2020, making the firm the most active sell-side advisor on larger, more complex transactions in the auto retail industry. The firm attributes its success to the team’s laser focus on fulfilling each client’s personal and professional goals, as well as their commitment to managing every step of the transaction through closing. In addition to its sell-side advisory work, the firm offers strategic consulting services to dealers and their families, including growth planning, capital raising, and acquisition valuation analysis, creating value for clients at every stage of the auto retail lifecycle.

For MCE Automotive Group, Sai Ireland and Barry Cannada of Butler Snow LLP served as legal counsel and John Bishop Jr. of Bishop and Draper, CPAs was MCE’s accountant. For the buyer, Jeff Roberts of Underwood & Roberts, PLLC served as legal counsel and Travis Horton of Henderson Hutcherson & McCullough, PLLC was Anderson’s accountant.

About Kerrigan Advisors

Kerrigan Advisors is the premier sell-side advisor and thought partner to auto dealers nationwide. The firm advises the industry’s leading dealership groups, enhancing value through the lifecycle of growing, operating and, when the time is right, selling their businesses. Kerrigan Advisors has represented some of auto retail’s largest transactions and advised more of the largest dealership groups in the US than any other buy/sell firm in the industry. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, accounting, finance and real estate, the firm does not take listings, rather they develop a customized approach for each client to achieve their personal and financial goals. In addition to Kerrigan Advisors’ sell-side advisory and capital raising services, the firm also provides a suite of consulting services including growth strategy, market valuation assessments, capital allocation, transactional due diligence, open point proposals, operational improvement and real estate due diligence.

Kerrigan Advisors monitors conditions in the buy/sell market and publishes an in-depth analysis each quarter in The Blue Sky Report®, which includes Kerrigan Advisors’ signature blue sky charts, multiples, and analysis for each franchise in the luxury and non-luxury segments. To download a preview of the report, click here. The firm also releases monthly The Kerrigan Index™ composed of the seven publicly traded auto retail companies with operations focused on the US market. The Kerrigan Auto Retail 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. To read the 2023 Kerrigan OEM Survey, click here. Kerrigan Advisors also is the co-author of NADA’s Guide to Buying and Selling a Dealership.

Kerrigan Advisors Media Contact:

Melanie Webber (melanie@mwebbcom.com), mWEBB Communications, 949-307-1723

Majority of Automakers Expect New Vehicle Gross Margins to Remain Above Pre-Covid Levels, Though Dealership Profits Are Projected to Decline

New survey from Kerrigan Advisors reveals that OEMs are looking at a new normal when it comes to dealership profitability, lower inventory levels and more OEM involvement in pricing; 68% expect some form of non-negotiable pricing to be part of future EV retail model

Incline Village, NV – August 7, 2023 – Dealership new vehicle gross margins to remain above pre-Covid levels say 90% of automotive OEMS, according to the just-released annual Kerrigan OEM Survey, but the majority believe dealership earnings will still decline over the next 12 months. The survey, gathered from Kerrigan Advisors’ annual survey of automotive OEM executives in conjunction with the issuance of The Blue Sky Report®, indicates that automakers are looking at a ‘new normal’ when it comes to dealership profitability, inventory levels and customer data sharing. The survey also offers a window into how OEMs view the future of electric vehicle pricing, with 68% expecting some change to pricing methodology.

“This survey was designed to gauge OEM executives’ perspectives on the franchise system, dealer profitability and expected changes to the retail model with the rollout of new drivetrains. It offers an important window into the perspectives of OEM executives whose views are not often shared publicly in the industry,” said Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors. “The results also demonstrate the value OEM executives place in their dealer networks, even as the auto retail model evolves.”

Profits and Days Supply

While only seven percent of OEMs surveyed expect dealership profits to increase in the next 12 months, three-out-of-four expect new car margins to land somewhere between current and pre-Covid levels. This view is supported by the fact that respondents expect inventory levels to remain low, with 59% expecting days’ supply of 30 days over the next 12 months, and 82% expecting the ‘new normal’ for days’ supply will remain lower than pre-pandemic averages.

EV Pricing Model

A key OEM/dealership relationship issue addressed by the survey is the future pricing model for electric vehicles, which revealed that nearly one-half (48%) believe some form of non-negotiable pricing will be a part of the retail model of the future, with 20% expecting non-negotiable pricing to be the exclusive means for selling electric vehicles. Only 32% of respondents believe the traditional MSRP pricing model will continue for electric vehicles.

“The data on EV pricing was enlightening, as was data that showed few see the much-discussed EV agency model coming to the US, with just 22% projecting that change, likely due to the strength of state franchise laws in the US,” continued Erin Kerrigan. “The OEM/dealer relationship will continue to evolve as electric vehicles gain market share and alternative retailing models, such as the agency model, are tested. While there will be inevitable conflict, Kerrigan Advisors believes the relationship between the OEMs and their dealers is largely on solid ground and well positioned to manage the evolution of US auto retail.”

Customer Data and Real Estate

Another key topic related to the evolving retail model investigated by the survey is customer data and relationship retention, with the majority of OEMs (66%) expecting both the dealer and OEMs to share the customer data over the next five years, a change from the past when dealers almost exclusively owned the customer data and relationship.  

With regard to dealership real estate, the survey reveals that the majority of OEM executive respondents predict facility requirements will either stay the same (52%) or increase (32%), which is surprising given their expectation for reduced inventory and likely fewer employees with a more streamlined, non-negotiable sales process.

“The results of the 2023 Kerrigan OEM Survey are indicative of a business model that is in transition, with OEM views that are not always internally consistent with their proposed retailing changes which are clearly evolving as more data becomes available,” said Ryan Kerrigan, Managing Director of Kerrigan Advisors. “While OEMs and dealers will definitely have differing views on the path forward for electric vehicles, customer data and facility requirements, for the most part, OEMs expect the dealer to remain a key and profitable piece of the auto retail puzzle.”

Key Survey Data

·       69% expect dealership profitability to decline in the next 12 months, while 31% project profits will stay the same or increase. 

·       10% believe new car margins will return to pre-Covid levels, while 74% expect them to settle between pre-Covid and current levels in the next 12 months. 16% of respondents project high margins will continue through 2023.  

·       59% project days’ supply to be 30 days in the next 12 months; just 3% project a rate of 90 days or more.

·       60% expect the ‘new normal’ for new vehicle days’ supply to settle in at 30 to 60 days, below the pre-Covid average of 60 to 90 days.

·       68% believe some form of non-negotiable pricing will be a part of the retail model of the future with 20% expecting it to be the exclusive means for selling electric vehicles. Only 32% believe the traditional MSRP pricing model will continue for electric vehicles.

·       35% do not believe an agency model will materialize in the US auto retail marketplace, while 43% remain unsure and 22% think it will be introduced to the US in the next five years.

·       66% believe the customer relationship/data will be owned both by the OEM and dealer in five years. 16% expect the OEMs to have exclusive ownership, while 17% believe the dealer will.

·       52% believe facility requirements will largely remain the same over the next 5 years. 32% believe facility requirements will increase and 16% anticipate a decrease. 

To download the full 2023 Kerrigan OEM Survey results, click here.

Methodology

The data for The Kerrigan OEM Survey was gathered from Kerrigan Advisors’ annual survey of automotive OEM executives in conjunction with the issuance of The Blue Sky Report®. The Kerrigan OEM Survey is based on over 115 responses from OEM executives in Kerrigan Advisors’ proprietary database. Responses were collected from December 2022 to May 2023.

About Kerrigan Advisors

Kerrigan Advisors is the premier sell-side advisor and thought partner to auto dealers nationwide. The firm advises the industry’s leading dealership groups, enhancing value through the lifecycle of growing, operating and, when the time is right, selling their businesses. Kerrigan Advisors has represented on some of auto retail’s largest transactions and advised on the sale of more top 150 Dealership Groups, than any other buy/sell firm in the industry. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, accounting, finance and real estate, the firm does not take listings, rather they develop a customized approach for each client to achieve their personal and financial goals. In addition to Kerrigan Advisors’ sell-side advisory and capital raising services, the firm also provides a suite of consulting services including growth strategy, market valuation assessments, capital allocation, transactional due diligence, open point proposals, operational improvement and real estate due diligence.

Kerrigan Advisors publishes The Blue Sky Report®, which is the auto industry’s most comprehensive and authoritative quarterly report of dealership buy/sell activity and franchise values, received by over 11,000 industry participants in 35 countries. To register to receive The Blue Sky Report®, click here. Kerrigan Advisors also publishes The Kerrigan Index™, the only monthly report tracking the seven publicly traded auto retail companies. To access The Kerrigan Index™, click here.

Kerrigan Advisors Media Contact:

Melanie Webber (melanie@mwebbcom.com), mWEBB Communications, 949-307-1723