Sale of Earnhardt Kia and Rodeo Hyundai marks 11th Top 150 Dealership Group Kerrigan Advisors has advised since 2015

INCLINE VILLAGE, NV – September 2, 2021– Kerrigan Advisors represented Earnhardt Auto Centers in the sale of Earnhardt Kia in Phoenix, Arizona and Rodeo Hyundai in Surprise, Arizona to Ken Garff Automotive Group. These transactions are Ken Garff’s first dealership acquisitions in the Arizona market. A long-time fixture in the western US, Earnhardt Auto Centers was named by Automotive News as the 23rd Largest Dealership Group in the US by 2020 new unit sales.  Notably, this transaction marks the 11th top 150 dealership group advised by Kerrigan Advisors since 2015.   

The sale of Earnhardt Kia and Rodeo Hyundai are the 2nd and 3rd dealerships sold by Kerrigan Advisors in the Phoenix market in just the last 12 months, making the firm the most active sell-side advisor in the area today (Kerrigan Advisors sold Bell Road Toyota in October 2020 to Lithia).   

“We were pleased to advise Earnhardt Auto Centers, one of the nation’s leading dealership groups, in the sale of their valuable Kia and Hyundai franchises,” said Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors.  “Earnhardt has built one of the strongest names in the Arizona market based on a reputation of exceptional customer and employee service, instilled by its founder Tex Earnhardt.  It was important to find a buyer with the same family focus and one who would continue the Earnhardt’s legacy of caring for their customers and their employees.”

“Kerrigan Advisors identified the perfect buyer for our stores, one that appreciated the value of entering the Phoenix market with great import brands,” said Hal Earnhardt, Co-Owner of Earnhardt Auto Centers. “Kerrigan Advisors was critical to the success of this transaction.  We are very pleased to know these dealerships will be run by another family-owned and operated dealership group with the same customer service focus and appreciation for employees.”

“Kerrigan Advisors was instrumental to this transaction,” concurred Brett Hopkins, Chief Executive Officer of Ken Garff Automotive Group, one of the largest family-owned dealership groups in the US. “Erin and her team do an incredible job working with their clients to make sure the sale process runs smoothly.” 

“This transaction is a convergence of two important trends in the buy/sell market: overall demand for Kia/Hyundai franchises and a booming auto retail market in Arizona, where dealerships achieve some of the highest revenue per franchise in the country,” said Ryan Kerrigan, Managing Director of Kerrigan Advisors.  “These two dealerships represented an exceptional opportunity for Ken Garff to enter the high growth Phoenix market with some of the fastest growing brands in the industry,” noting that Kerrigan Advisors upgraded the multiple outlooks for both brands in Q4 2020 in its quarterly Blue Sky Report.

“The car business has been in our family for generations, going all the way back to our grandfather, Tex, who moved to Chandler as a young man in 1951,” said Dodge Earnhardt. “Tex was a legend, and he built a legendary business based on ‘no bull’ business practices that we still follow to this day. We were very appreciative of the high level of client service we received from Kerrigan Advisors because they share that same straightforward, personal approach to their work on behalf of their dealer clients.”

“Tex used to say, ‘Treat everyone the way you would treat your mama!’” said Derby Earnhardt. “That’s exactly what Kerrigan Advisors did for us during a complex transaction involving two dealerships and a buyer who was new to the Phoenix market.  We would recommend them to any dealer considering a sale in today’s active buy/sell market.”

Kerrigan Advisors is the most active sell-side advisor on larger transactions in the auto retail industry, achieving the highest sale price per client of any firm over the last five years. 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 valuation analysis, creating value at every stage of the auto retail lifecycle. 

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 2020 Kerrigan Dealer Survey, click here: https://www.kerriganadvisors.com/the-kerrigan-dealer-survey/. Kerrigan Advisors also is the co-author of NADA’s Guide to Buying and Selling a Dealership.

About Kerrigan Advisors

Kerrigan Advisors is a leading sell-side advisor and thought partner to auto dealers in the US.  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 11 Top 150 Dealership Groups in the US, more 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 nearly 10,000 industry participants in 35 countries.  To register to receive The Blue Sky Report®, click here (https://www.kerriganadvisors.com/the-blue-sky-report).  Kerrigan Advisors also publishes The Kerrigan Index™, the only monthly index tracking the seven publicly traded auto retail companies. To access The Kerrigan Index™, click here (http://www.kerriganadvisors.com/the-kerrigan-index/). To read the 2020 Kerrigan Dealer Survey, click here (https://www.kerriganadvisors.com/the-kerrigan-dealer-survey/).  Kerrigan Advisors also is the co-author of NADA’s Guide to Buying and Selling a Dealership.

Kerrigan Advisors’ Founder and Managing Director, Erin Kerrigan, is a recognized expert on dealership valuation, real estate, and buy/sells, and is a frequent speaker at leading auto retail events and conferences, including NADA, JD Power Automotive Roundtable, Automotive News’ Canadian World Congress, AICPA, and NADC. She has also been quoted numerous times by The Wall Street Journal, CNBC, Bloomberg and The Economist and has been a keynote speaker for events hosted by American Honda Motor Company, Audi of America, US Trust, Bank of America, Ohio Automobile Dealer Association, and SunTrust Bank. Erin Kerrigan was named by Auto Remarketing as one of the leading women in Automotive in 2020.  Kerrigan Advisors’ Managing Director Ryan Kerrigan is also a sought-after industry expert. He is featured in a monthly column for Dealer Magazine and has written Op-Eds for Automotive News.

Kerrigan Advisors Media Contact:
Melanie Webber (melanie@mwebbcom.com), mWEBB Communications, 949-307-1723

Florida dealership sold to Morgan Auto Group, marking the 121st Kerrigan-led dealership sale since 2014

Incline Village, NV - August 23, 2021 – Kerrigan Advisors, a leading sell-side advisory firm and thought leader to auto dealers in the US, represented and advised Fuccillo Automotive Group in its sale of Fuccillo Nissan of Clearwater to Florida’s Morgan Auto Group. With this transaction, Kerrigan Advisors has sold five Florida dealerships on behalf of the Fuccillo family since December 2019.  The sale of Nissan of Clearwater is the 121st dealership sale led by the Kerrigan Advisors team since 2015 and the firm’s 9th dealership sale in Florida in the last 28 months, cementing Kerrigan Advisors’ position as the most active advisor in the state.

Fuccillo’s dealerships have built a commanding reputation in the highly sought-after Florida car market. Fuccillo Nissan of Clearwater is located in the Tampa metropolitan area, one of the top 10 fastest growing markets in the US, and operates in a new, state-of-the-art facility in South Clearwater’s auto row on US Hwy19, a major retail thoroughfare. The acquirer, Morgan Auto Group, is one of the largest dealership groups in Florida with 46 retail locations in Tampa, Gainesville, Ocala, Lake City, Jacksonville, Sarasota, Naples, Fort Myers, Brandon, New Port Richey, Orlando, and the surrounding areas.

“This was a match that just made sense.  Our goal was to make sure that Nissan of Clearwater continued to serve the community with the highest of standards, and Morgan Auto Group’s deep roots in Florida, and superlative record, should ensure just that,” said Billy Fuccillo Jr., President of Fuccillo Automotive Group. “Once again, Kerrigan Advisors demonstrated their strategic expertise and comprehensive knowledge of our market with another seamless transaction.”

Previously, Kerrigan Advisors represented and advised Fuccillo Automotive Group in its sale of Fuccillo Kia of Cape Coral and Fuccillo Kia of Port Charlotte in Southwest Florida to LMP Motors, and of Fuccillo Nissan of Orange Park and Fuccillo Kia of Wesley Chapel to Morgan Automotive Group. 

“From our prior work with the Fuccillo group, we knew the importance of the relationship between the Fuccillos and the Florida communities they serve, as well as the significance of their legacy in the state. We are proud to have had the opportunity to preserve that legacy as we shepherded the group through another successful transaction in today’s dynamic auto retail buy/sell market,” said Gabe Robleto, Vice President of Kerrigan Advisors.  

Florida is a highly sought-after state by buyers due to its high population growth, thriving economy, lower taxes and high revenue per dealership - the 2nd highest in the US.

“The Florida auto retail market is incredible, and certainly among the best in the United States. As evidenced by this transaction, all franchises in Florida can generate significant profits, strong buyer demand and, ultimately, high valuations,” said Ryan Kerrigan, Managing Director of Kerrigan Advisors. “It has been our pleasure to work with the Fuccillo family over the last several years to monetize their decades of hard work. Working with dealer families, and helping them make generational planning and legacy decisions, is one of the most fulfilling parts of our work at Kerrigan Advisors. We have been honored to do this for the Fuccillo family.”

To contact Kerrigan Advisors, the most active sell-side advisor on larger transactions in the auto retail industry, click here.

Kerrigan Advisors Media Contact:
Melanie Webber, for Kerrigan Advisors, (melanie@mwebbcom.com), mWEBB Communications, 949-307-1723

Transaction marks 119th Kerrigan-led dealership sale since 2014

INCLINE VILLAGE, NV – July 28th, 2021– Kerrigan Advisors, a leading sell-side advisory firm to auto dealers in the U.S., represented owner Ron Bubar in the sale of Grand Junction Subaru and Grand Junction Volkswagen in Grand Junction, Colorado to Sonic Automotive (NYSE: SAH).

The transaction marks the 118th and 119th dealership sale that Kerrigan Advisors has advised on in just the last six years, making the firm today’s most active sell-side advisor to the highest value transactions in auto retail. This transaction illustrates Kerrigan Advisors’ success in representing the highest quality clients nationwide, extending from individual dealerships to Top 150 dealership groups and the firm’s ability to leverage its robust, proprietary buyer database to identify the best buyer for each client. 

“Having the opportunity to represent quality dealerships like Grand Junction Subaru and Grand Junction Volkswagen was an honor for our team,” said Ryan Kerrigan, Managing Director of Kerrigan Advisors. “Grand Junction Subaru has been the largest volume dealership by new unit sales, in Mesa County, Colorado for six consecutive years. Finding a buyer who appreciated the strength of two award-winning dealerships with proven best practices was our goal in this engagement. It was a pleasure to work with Ron Bubar and navigate through today’s active, and competitive, auto dealership buy/sell market.”

A key part of Kerrigan Advisors’ approach to representing Grand Junction Subaru and Grand Junction Volkswagen was to provide insight into this attractive Colorado market, particularly in discussion with out-of-market buyers.  Grand Junction is one of the fastest growing cities in Colorado, one of the most affordable places to live in the state, and Subarus and Volkswagens have significant market share: Volkswagen’s market share in Colorado is 30% higher than the US average, and Subaru is the second highest-selling brand in the state.

“We never took the popularity of our cars for granted, and made customer service our top priority every day,” said Ron Bubar, Owner of Grand Junction Subaru and Grand Junction Volkswagen. “The success we’ve had over the years is a direct reflection of our tireless efforts to keep the customer experience front and center – no matter what challenges came our way. Kerrigan Advisors brought that same sense of commitment and dedication to the way they represented my dealerships. As a result, they were able to reflect to the marketplace an accurate picture of the dealerships’ value, both in terms of the quality of the assets and the importance of our people.” 

“In today’s record-breaking buy/sell market, it was important to identify a buyer who recognized the value of what Ron and his team created in Grand Junction and the tremendous benefits of operating in the Grand Junction market,” said Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors. “Sonic Automotive really understood the unique position these dealerships held in their community and also has a powerful commitment to customer service that will ensure Grand Junction’s legacy continues.”

The Grand Junction dealerships have a strong track record of award-winning performances. In 2019, Grand Junction Subaru received the Subaru Love Promise Gold Award, and Grand Junction Volkswagen was named a Gold Pin Winner in 2019. Both awards recognize customer satisfaction and community involvement. The dealerships are also highly regarded online by JD Power, DealerRater and CarGurus. Notably, Grand Junction Volkswagen has won DealerRater’s Consumer Satisfaction Award for all dealerships in the state of Colorado for four consecutive years.

Kerrigan Advisors is the most active sell-side advisor on larger transactions in the auto retail industry, achieving the highest sale price per client of any firm over the last five years. 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 valuation analysis, creating value at every stage of the auto retail lifecycle. 

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 2020 Kerrigan Dealer Survey, click here (https://www.kerriganadvisors.com/the-kerrigan-dealer-survey/).

About Kerrigan Advisors

Kerrigan Advisors is a leading sell-side advisor and thought partner to auto dealers in the US.  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, including seven of the Top 150 Dealership Groups in the US, more than any other 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 nearly 10,000 industry participants in 35 countries.  To register to receive The Blue Sky Report®, click here: https://www.kerriganadvisors.com/the-blue-sky-report.  Kerrigan Advisors also publishes The Kerrigan Index™, the only monthly index tracking the seven publicly traded auto retail companies. To access The Kerrigan Index™, click here: http://www.kerriganadvisors.com/the-kerrigan-index/. To read the 2020 Kerrigan Dealer Survey, click here: https://www.kerriganadvisors.com/the-kerrigan-dealer-survey/.  Kerrigan Advisors also is the co-author of NADA’s Guide to Buying and Selling a Dealership.

Kerrigan Advisors’ Founder and Managing Director, Erin Kerrigan, is a recognized expert on dealership valuation, real estate, and buy/sells, and is a frequent speaker at leading auto retail events and conferences, including NADA, JD Power Automotive Roundtable, Automotive News’ Canadian World Congress, AICPA, and NADC. She has also been quoted numerous times by The Wall Street Journal, CNBC, Bloomberg and The Economist and has been a keynote speaker for events hosted by American Honda Motor Company, Audi of America, US Trust, Bank of America, Ohio Automobile Dealer Association, and SunTrust Bank. Erin Kerrigan was named by Auto Remarketing as one of the leading women in Automotive in 2020.  Kerrigan Advisors’ Managing Director Ryan Kerrigan is also a sought-after industry expert. He is featured in a monthly column for Dealer Magazine and has written Op-Eds for Automotive News.

Kerrigan Advisors Media Contact:
Melanie Webber (melanie@mwebbcom.com), mWEBB Communications, 949-307-1723

Auto Dealership Buy/Sell Market Sets Another Record in Q1 2021, as Dealership Earnings, Revenue, Blue Sky Values, and Market Caps Hit Unprecedented Highs  

A perfect, and unique, combination of market factors - record auto sales and grosses, soaring valuations, waning pandemic crisis and potential new tax laws - fueled acquisition activity to 66 completed transactions in Q1, and an unprecedented 300 completed over the past 12 month period, according to the First Quarter 2021 Blue Sky Report® by Kerrigan Advisors

Incline Village, NV - June 21, 2021 – The auto dealership buy/sell market once again set records in 2021, a result of a unique confluence of market factors that resulted in 66 completed transactions, up 20% quarter over quarter, according to the First Quarter 2021 Blue Sky Report® by Kerrigan Advisors.  This capped 12 months of consolidation activity that resulted in an unprecedented 300 completed transactions.  In Q1, most dealerships, regardless of location, franchise and facility, continued to achieve historic profit levels, lifting the valuations of all franchises to new highs. Kerrigan Advisors’ estimate of the average dealership’s blue sky value is now $8.5M, a 10% increase as compared to 2020, and a rise of 33% from 2019.

“The once-in-a-lifetime environment that made 2020 a record year for the automotive buy/sell market was extended, and amplified, by auto retail’s tremendous profitability in Q1, fueling a historic level of acquisition activity,” said Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors.  “As COVID cases diminished, US consumers emerged from the pandemic with a tremendous amount of capital from savings and government stimulus, as well as great demand for personal mobility.  This demand, coupled with limited supply, drove dealership profitability to new heights in the first quarter, topping what many thought was an unsurpassable fourth quarter.” 

Through March, dealership profits were up 82% as compared to the six-year pre-pandemic average, resulting in a historic 4.1% net-to-sales margin.  Low inventory resulting from the chip crisis did not appear to dampen consumer demand.  Consumers flush with cash and spurred by low interest rates, bought vehicles right off the transport truck. As a result, consumer spending on new vehicles in the first quarter of 2021 surpassed pre-pandemic levels for the first time since 2020.

“We see no sign of consumer demand, high dealership profits and accelerated buy/sell activity abating any time soon, especially as dealers continue to leverage, and pay-forward, the operational efficiencies and digital strategies they adopted during the pandemic,” continued Kerrigan. “While new vehicle inventory levels will be historically low during the critical summer selling season, rebounding fixed operations, as well as higher margin used vehicle sales, will help to offset these short-term challenges.” 

Not surprisingly, according to the Blue Sky Report, record earnings by the publics led to record market capitalizations, resulting in higher blue sky multiples as compared to the end of 2020.  The publics’ spend on acquisitions increased by 220% versus Q1 2020. Lithia continued to lead that charge, closing on the purchase of 10 dealerships during the quarter working closer to the company’s stated goal to add $50 billion in revenue over the next 5 years.

Capital market support contributed to a 53.3% rise in multi-dealership transactions, which represented over one third of all completed transactions in the first quarter of 2021.  Import non-luxury franchises also saw their share of the buy/sell market rise by seven percentage points to 37%, with Toyota leading all imports at 8.3% of the buy/sell market.

2021 Buy/Sell Trends

The First Quarter 2021 Blue Sky Report® by Kerrigan Advisors identified the following three important trends that are expected to meaningfully impact the buy/sell market for the remainder of 2021:

- A growing number of dealers will sell in 2021 hoping to lock in current tax rates

- Buyers finance growth with low interest rate debt, rather than expensive private equity

- An alternative dealership valuation model emerges based on revenue instead of earnings

“The disruption associated with digital retailing, accelerated by COVID-19, may be the catalyst for change to auto retail’s historic valuation paradigm,” said Ryan Kerrigan, managing director of Kerrigan Advisors.   Rather than focusing on a multiple of earnings, Lithia, for example, introduced the concept of a percentage of revenue, reporting that most of its transactions are valued between 15% and 25% of revenue.   

“This revenue valuation methodology, which is highly accretive based on Lithia’s current blue sky multiple and above market profit margins, is designed to feed Wall Street’s appetite for high revenue growth companies,” continued Kerrigan.

Blue Sky Multiples and Outlook – Kia, Hyundai, Toyota and Subaru Increase

According to the Kerrigan Advisors’ report, buyers have revised the way they apply blue sky multiples, with most applying them to an average of pre-pandemic and post-pandemic performance.  Buyers are hedging their bets, giving equal weight to the potential for 2021’s profitability to sustain in the near term, while considering the possibility of an eventual return to pre-pandemic earnings in the future.

The report made two adjustments to blue sky multiples in the non-luxury segment, increasing Hyundai’s and Kia’s high-end multiple and upgrading their multiple outlooks to positive. 

“Kia and Hyundai are producing exceptionally designed vehicles, meeting consumers demand for trucks over cars, and not only outperforming the market in unit sales in 2020 and 2021, but also effectively managing the chip crisis, with fewer inventory delays,” said Erin Kerrigan.

As Toyota exceeded Ford’s market share in 2020, with Q1 sales outpacing the industry by 73% and that share expected to grow, Kerrigan Advisors upgraded its multiple outlook to positive from steady. Subaru’s multiple outlook was also increased as it continues to make significant sales gains.

“Overall, we anticipate a thriving buy/sell market throughout 2021. We estimate that over 50% of the industry is in the midst of some form of generational transition, spurred by the economic roller-coaster of the last 12 months.  Increasingly, 2021 is viewed as a unique opportunity to exit at peak values and potentially lower capital gains tax rates, particularly given the challenge in assessing the impact of industry change on future valuations,” concluded Erin Kerrigan.

Highlights from the Q1 2021 Blue Sky Report® by Kerrigan Advisors include:

- 66 transactions were completed in the first quarter – a 20% increase over the first quarter of 2020

- 300 transactions were completed over the last 12 months (since the second quarter of 2020), more than any 12-month period in recent history

- Of the 66 completed dealership transactions, 23 were multi-dealership transactions, up 53.3% from 2020

- Average dealership blue sky values rose to another peak in the first quarter: to $8.5M, a 10% increase as compared to 2020, and a rise of 33% from 2019

- The Kerrigan Index hit new heights:  year-to-date through April, the Kerrigan Index is up 37.4%, outperforming the S&P 500 by over 230%

- Today, the publics’ average blue sky multiple is 8.1x, 76% higher than the average private dealership

- The publics spending on acquisitions increased 220% as compared to the first quarter of 2020

- Import non-luxury franchises took share from the luxury and domestic franchise buy/sell market, rising to a 37% share, driven in part by more top import franchises coming to market

- Auto dealership profits were up 82% in the first quarter compared to the six-year, pre-pandemic average, with a historic 4.1% net-to-sales margin

- Consumer spending on new vehicles was $118 billion in the first quarter, surpassing pre-pandemic spending in 2019 and 2020’s first and second quarters

- Consumers  ‘miles driven’ are  nearing normal levels, benefitting high margin fixed operations, which has fully recovered from pandemic lows

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: http://www.kerriganadvisors.com/the-kerrigan-index/.

About Kerrigan Advisors 

Kerrigan Advisors is a leading 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.  Kerrigan Advisors has represented on auto retail’s largest transactions, including seven of the Top 150 Dealership Groups in the US, more 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: https://www.kerriganadvisors.com/the-blue-sky-report.  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: http://www.kerriganadvisors.com/the-kerrigan-index/.

Kerrigan Advisors Media Contact:
Melanie Webber (melanie@mwebbcom.com), mWEBB Communications, 949-307-1723

Auto Dealership Buy/Sell Market Sets Record for Transactions with Dealer Earnings and Blue Sky Values Hitting New Heights in 2020, Particularly in Business Friendly States with High Population Growth

The 2020 Annual Blue Sky Report® by Kerrigan Advisors reveals a red-hot market, with blue sky values up 20% and over 100 transactions in the fourth quarter alone; Toyota’s blue sky multiples increase

Incline Village, NV, - March 22, 2021–The auto dealership buy/sell market set new records in 2020, despite starting the year with pandemic closures and lockdowns, and swept past 2015’s previous high-water mark, redefining the value of the auto retail market, according to the 2020 Q4 and Full Year Blue Sky Report® by Kerrigan Advisors. Overcoming the standstill at the end of the first quarter, the buy/sell market came back with a vengeance in the second half: Over 176 transactions were completed after July 1, with a total of 289 completed for the year – a 24% increase over 2019 and 47 more transactions than in 2015[1]. In the fourth quarter alone, 103 transactions were completed – another record. 

“This record-breaking market was driven by a resurgence in dealership profitability,” said Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors. “This happened even with a dip in revenue, thanks to improvements in new and used vehicle gross profits and floorplan and SG&A expense reductions. Most impressive of all is that the source of improved profitability was not from high-margin fixed operations which actually declined.”  

“Importantly, the numbers of multi-dealership transactions continued to rise through the end of the year, setting another record (74 transactions), which is over a quarter of all buy/sells,” continued Kerrigan. “That reflects auto retail’s significant consolidation trend.” 

Increasingly, according to the report, owners of large dealership groups are choosing to sell their businesses at today’s high valuations rather than accommodate the changes and investments required in terms of electric vehicles and digital retail sales. This resilient – and resurgent – auto retail performance of 2020 has increased demand for dealerships and has continued to fuel valuations. For the year, average dealership blue sky values rose to $7.7 million, up 20.7% thanks to a combination of higher earnings and rising multiples.  Valuation multiples rose even higher in high growth, business friendly states such as Texas, Florida, Arizona, Colorado, Georgia, Nevada, North Carolina, South Carolina, Tennessee and Utah.

“The combination of today’s low yield investment environment, and access to low-cost financing, has driven dealership valuations upward,” said Ryan Kerrigan, managing director of Kerrigan Advisors. “Even as buyers adjust 2020 profits to offset the impact of one-time events, earnings for 2020 reached record levels – and that drove valuations to greater heights.”

Like private dealership valuations, publicly-traded dealerships also enjoyed a record year. The Kerrigan Index™, comprised of the seven publicly-traded dealership groups, reached a record level of 1,006 in March 2021, up 238.6% from the March 2020 low.  The publics are shifting their messaging to focus on their distinct digital retailing strategies, and to embrace the industry’s move to electrification. Armed with strong valuations, many are committing to growth through accretive acquisitions; their advantage in the buy/sell market is their access to lower cost capital.

In the report’s analysis of specific brand valuations, Toyota’s blue sky multiple was increased to a range of 6-7 times, reflecting the value of Toyota’s partnership model with its dealer network, especially as the industry shifts to electric vehicle fleets and online direct sales.

“As the future unfolds, OEMs who value their dealer network’s contribution to their success are likely to thrive,” said Erin Kerrigan. “We increased Toyota’s blue sky multiple because we see a true partnership with its retailers. That relationship will ensure Toyota’s franchise values remain high, even as the industry evolves toward a digital and electric future.”  This is important, according to the report as, in the fourth quarter of 2020, there was a dramatic shift toward electrification, with nearly every OEM presenting plans to develop an electrified vehicle fleet as a result of political pressure, as well as in reaction to Tesla’s success on Wall St. and at gaining 79% electric vehicle market share.

“Manufacturers that consider mimicking Tesla’s retailing strategy should keep in mind that 2020’s record earnings were driven in large part by auto retailers’ ability to adjust pricing,” said Ryan Kerrigan. “In a one-price, online arena, dealers’ ability to do so will be significantly curtailed, as will future fixed operations income.”

“How OEMs shift to electric and online sales will determine future franchise value,” continued Kerrigan. “Plans that are supportive of their dealer networks, and value the auto retailer contribution, will likely see their franchise values rise.”

The report also identified the following four market trends, which will meaningfully impact the buy/sell market in 2021 and beyond:

- Buyers’ tremendous access to capital leads to increased competition for dealership acquisitions

- Buyer demand in Texas and Florida drives multiples and valuations higher in those states

- Sellers increasingly expect valuations that recognize 2020’s improved profitability

- Facility investments factor into dealers’ transaction decisions

Highlights from the Q4 2020 and Full Year 2020 Blue Sky Report® by Kerrigan Advisors include:

• - Average blue sky values rose 20.7% by the end of 2020, driven by an increase in dealership earnings and rising buyer demand.
• - The Kerrigan Index has risen 238.6% since March 18, 2020 and outperformed the S&P 500 by 232.7%. It passed an important milestone on March 5th 2021, surpassing 1,000 for the first time in its history.
• - 2020 was a record year for buy/sells with 289 transactions completed, up 24% from 2019
• 103 transactions were completed in the fourth quarter.
• - Import luxury franchises increased their buy/sell market share in 2020, achieving an impressive 20% of buy/sells, up more than 50% from 2019’s level. 
• - Average dealership pre-tax profits rose 48.3% in 2020, despite a 4.2% decline in revenue.
• - Fixed operations represented just 44.6% of the average dealership’s gross profit in the fourth quarter of 2020, down 11.5% from 2019. Dealers increased gross profit margins on new and used vehicles by 32.0% and 8.2%, respectively.
• - More owners of large, multi-dealership groups are choosing to sell rather than compete with consolidators who rely on corporate, rather than personal, balance sheets to expand their business and invest in auto retail’s evolving future.

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 9,000 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: http://www.kerriganadvisors.com/the-kerrigan-index/.

About Kerrigan Advisors 

Kerrigan Advisors is a leading 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.  Kerrigan Advisors has represented on auto retail’s largest transactions, including seven of the Top 150 Dealership Groups in the US, more 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 over 9,000 industry participants in 35 countries.  To register to receive The Blue Sky Report®, click here: https://www.kerriganadvisors.com/the-blue-sky-report.  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: http://www.kerriganadvisors.com/the-kerrigan-index/.

Kerrigan Advisors Media Contact:
Melanie Webber (melanie@mwebbcom.com), mWEBB Communications, 949-307-1723

Angela Jacobsen, (angela@mwebbcom.com) mWEBB Communications, 714-454-8776

After a volatile start to 2020, The Kerrigan Index out-performed the S&P and rose to all-time highs;  all seven component companies hit record market capitalizations in 2020  

INCLINE VILLAGE, NV – January 13, 2021 – Kerrigan Advisors, a leading sell-side advisory firm and thought leader to auto dealers in the U.S., has released The Kerrigan Index™ for December 2020/Year in Review. Comprised of the seven publicly-traded auto retailers, the report demonstrates how a resilient auto retail industry weathered the uncertainty of COVID-19 and emerged stronger than ever with record-breaking stock valuations, profitability and sales increases. In December, The Kerrigan Index™ increased 5.22%, outpacing the S&P’s increase of 3.71% for the month. For the year, The Kerrigan Index™ increased almost 30%, handily outperforming the broader US stock market and hitting all-time highs in 2020.

“What’s really notable is that the auto retail stocks, and The Kerrigan Index™, have traded at all-time highs throughout the final months of 2020. In spite of a historically crisis-driven and volatile year, the stocks are valued higher than ever before,” said Ryan Kerrigan, Managing Director of Kerrigan Advisors. “Clearly, Wall Street is bullish on auto retail, and comfortable that it will continue to evolve on pace with technology and consumer behavior.”

December 2020: Retail Valuations Stay Resilient As Sales Trend Back to 2019 Levels

US auto sales were down approximately 5% year over year in December, with the monthly SAAR estimated at 16.4 million – compared to 17.1 million in December 2019. That continues a steady climb back to prior year levels after dropping to a low of 8.74 million in April, as dealers faced closures and struggled to source inventory. In December, six of the seven Kerrigan Index stocks posted increases in December, led by Asbury Automotive Group (+29.23%) and AutoNation (+13.87%).

“For all the talk of auto industry disruption – and with some of the disruptors being valued at crazy multiples –  confidence in the traditional automotive retail model was profoundly reinforced in December,” said Ryan Kerrigan.

2020 Year in Review: Unanticipated Volatility, Outstanding Performance

The year 2020 was comprised of three distinct segments: a strong start to the year, a challenging downturn, and a subsequent rebound that brought the industry back to record-setting performance. After the wild ride, The Kerrigan Index™ increased 29.65%, significantly outperforming the S&P 500 Index which increased only 16.26%, and all seven component stocks posted increases for the year, led by Lithia Motors (+127.18%), and AutoNation (+41.34%).

“This was the ultimate comeback year, and auto dealerships were its comeback kids,” said Erin Kerrigan, Founder & Managing Director of Kerrigan Advisors. “In a year of raging unpredictability– from smooth sailing to collapsing financial markets, closed doors to critical inventory supply shortages – auto retail stayed resilient, and continued to prosper.”

From a low point on March 18th, when The Kerrigan Index dropped 51.8% from the start of the year, values began to rebound in the second quarter of 2020 and started to trade in all-time record territory in the third quarter. As reported in the Third Quarter 2020 Blue Sky Report® by Kerrigan Advisors, there was a 94% year-over-year rise in dealership earnings in the third quarter, driven by higher vehicle gross profit margins, increased operational efficiency, and price increases due to limited inventory.

“The rise in earnings helped to create an active buy/sell environment, with 186 transactions in the first nine months of 2020,” said Erin Kerrigan. “COVID-19 or not, that’s a 15.5% increase over the first nine months of 2019[1]. Throughout the year, the market has rewarded retail competence, confidence, and proven retail processes. Despite being one of the toughest years in auto retail history, 2020 ultimately ended as the most profitable year on record for dealers.”

The Kerrigan Index™ Highlights

The December 2020/Year in Review Kerrigan Index provides a succinct overview of the auto retail industry as it moves beyond the volatility of this past year, and trends back to prior norms. The Kerrigan Index examines valuation trends of the seven public auto retailers, including CarMax, AutoNation, Penske Automotive Group, Lithia Motors, Group 1 Automotive, Asbury Automotive Group and Sonic Automotive, as well as reviews monthly performance data and retail sales trends. 

Notable points include:

- Each of the component stocks hit their all-time records in 2020: CarMax on 8/24/2020; Lithia Motors on 11/24/2020; AutoNation on 12/31/2020; Penske Automotive Group on 11/16/2020; Asbury Automotive Group on 12/17/2020; Group 1 Automotive on 10/21/2020; and Sonic Automotive on 8/12/2020.

• - The average new vehicle retail transaction price in December was a record $38,077, driven by demand for SUVs and trucks. (JD Power)
• - Consumer spending on new vehicles is expected to be $53.3 billion in December, up $10 billion from December 2019 – an all-time industry high. (JD Power)
• - Fleet sales are estimated to have declined 31% from December 2019 and are expected to represent 14% of total light vehicle sales, down from 19% a year ago.  (JD Power)
• - Trucks and SUVs accounted for 79.1% of December’s new vehicle retail sales. (JD Power)
• - Average incentive spending per unit in December is expected to fall 12.7% to $4,014.  (JD Power)
• - December incentive spending as a percentage of the average MSRP was 9.2%, down two percentage points from a year ago.   (JD Power)
• - CarMax announced third quarter earnings were up 36% year-over-year on revenue which was up 8.2%.

• - The low-end blue sky multiple for Kia and Hyundai increased to 3.0 from 2.5, primarily due to increased buyer demand
•  
•  
•  
• - Nissan’s high-end multiple decreased from 3.25 to 3.0. The franchise continues to struggle resulting in more Nissan franchises available for sale than buyers interested in acquiring them

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 9,000 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 (http://www.kerriganadvisors.com/the-kerrigan-index/).

About Kerrigan Advisors

Kerrigan Advisors is a leading 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.  Kerrigan Advisors has represented on auto retail’s largest transactions, including five of the Top 100 Dealership Groups in the US, more 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 over 9,000 industry recipients in 35 countries.  To register to receive The Blue Sky Report®, click here (https://www.kerriganadvisors.com/the-blue-sky-report).  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 (http://www.kerriganadvisors.com/the-kerrigan-index/).

Kerrigan Advisors Media Contact:
Melanie Webber (melanie@mwebbcom.com), mWEBB Communications, 949-307-1723

Auto Dealership Buy/Sell Market Declines 9% in First Quarter 2020, as COVID-19 Brings Activity to a Standstill After a Strong Start

According to The Blue Sky Report® by Kerrigan Advisors, the pandemic’s impact on the first and second quarter will not result in dramatic changes to blue sky values, with a buy/sell rebound projected in the second half

Irvine, CA – June 8, 2020 – The 2020 auto dealership buy/sell market declined in the first quarter, falling 9.3% off 2019’s transactions pace as the COVID-19 pandemic took its toll on auto retail, according to the just-released First Quarter 2020 Blue Sky Report® by Kerrigan Advisors.  Transactions slated to close at the end of the quarter were postponed, renegotiated or, in the worst case, terminated.   However, the report indicates that blue sky values are not dramatically impacted and, with auto sales due for an uptick, a buy/sell rebound in the second half of 2020 is anticipated.

A bright start to the year was not enough to avoid severe financial whiplash as US dealerships shuttered in mid-March and consumers were told to stay home.  As a result, auto sales plummeted in March and April, resulting in one of the sharpest declines in dealership earnings on record, and the buy/sell market followed suit: Kerrigan Advisors expects the second quarter of 2020 to be the slowest buy/sell market in recent history.

“As a result of the coronavirus, auto dealers had to refocus their energy on internal operations and cash preservation in March and April,” said Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors. “And while, at present, the industry is still managing through the economic effects of the health crisis, we see better days ahead thanks to the resilience of the dealer model that’s likely to thrive as dealerships reopen. In fact, with industry cost cuts and improved efficiencies, we expect auto retail will see significant improvements in profitability, making more money on less revenue, in the second half of 2020.”

Given strong buyer demand and today’s low cost of capital, The Blue Sky Report® by Kerrigan Advisors does not forecast dramatic changes in blue sky values in the foreseeable future, despite the economic impact of COVID-19 in the first and second quarter. Once again, says the report, many dealers have shown the ability to maintain profits, even during the worst of times (in the depths of the Great Recession, auto retailers remained profitable); and sellers choose to patiently wait for a buyer to reach their valuation expectations, rather than sell at a discounted valuation.  This means that the most likely impact of COVID-19 will be a slower buy/sell market in the second quarter of 2020, rather than a decline in dealership valuations. 

As auto sales rise, and buyers seek to put a substantial amount of capital to work, the report sees potential for a rebound in buy/sell activity in the second half of the year, and notes that the capital markets are experiencing a surge in auto retail valuations.  Since bottoming on March 18th, The Kerrigan Index™ has risen 81.2% through the end of May.  Also, the industry is seeing improved profits from an increased utilization of technology to cut costs as digital retailing becomes the order of the day.

“While the coronavirus will undoubtedly force some distressed dealership sales, those one-off valuations are not a reflection of the overall market,” said Ryan Kerrigan, Managing Director of Kerrigan Advisors. “In fact, while this global health crisis is impacting auto retail in many different ways, industry partners, vendors, lenders and OEMS have provided dealers with tremendous financial and administrative support to ensure they weather the financial impact of lost sales and avoid closure. And, auto retailers have the most flexible cost structures within the supply chain, so they are best able to adjust to unforeseen events.  Given that, the health crisis has caused few distressed transactions.”

Kerrigan Advisors made one valuation upgrade in the First Quarter 2020 Blue Sky Report, increasing Toyota’s low-end multiple from 5.25 to 5.5. This increase reflects rising buyer demand for one of the highest quality franchises in the market and a belief that Toyota is best prepared amongst all OEMs to weather the economic impact of COVID-19. “Toyota had one of the lowest sales declines in the first quarter of any franchise and maintains the highest credit rating of the OEMs,” said Erin Kerrigan. “With a flight to quality assets, Toyota franchises are expected to command even higher multiples as buyers seek safe investments during the pandemic.”

Kerrigan Advisors has identified the following three trends, which are expected to meaningfully impact the buy/sell market for the remainder of 2020.

- Sellers’ blue sky pricing expectations exclude COVID-19 financial impact

- Surge in buyer/investor demand due to industry growth prospects and low cost of capital

- Buy/sell activity by state diverges based on level of economic shutdown

Highlights from the First Quarter 2020 Blue Sky Report® by Kerrigan Advisors include:

- Prior to COVID-19, dealership earnings through February were on track for a 38.7% increase over 2019 and near 2015’s record level.

- First quarter buy/sell activity declined 9.3%, with 49 transactions closing compared to 54 transactions during the first quarter of 2019.[1]

- The first quarter of 2020 saw a high level (31%) of multi-dealership transactions.

- Among the franchises being acquired, domestics continued to dominate in the first quarter of 2020, representing 57% of buy/sells, up 84% since 2015. Domestic dealership buy/sell market share is now consistent with franchise market share. Kerrigan Advisors expects domestics to dominate the 2020 buy/sell market, as multi-generation dealer families decide to sell post-pandemic.  Additionally, import luxury’s buy/sell market share increased in the first quarter to 18%, up 12.5% over last year.

- The public auto retailers’ spending on US dealership acquisitions in the first quarter of 2020 increased 11.5%, compared to the first quarter of 2019. The publics were expected to spend over $1 billion on acquisitions in the first quarter of 2020 with Asbury Automotive Group’s acquisition of Park Place Dealerships.

- Asbury Automotive Group terminated the Park Place acquisition on March 24th.  The company’s market capitalization declined 51.6% from the time of its announcement of the Park Place Dealerships acquisition in December to the time of the transaction termination.

- Kerrigan Advisors expects the second quarter of 2020 to be the slowest buy/sell market in recent history due to pandemic stay-at-home orders.

- Kerrigan Advisors upgraded Toyota’s low-end blue sky multiple from 5.25 to 5.5 and downgraded Ford’s low-end blue sky multiple, Buick GMC’s high-end and low-end multiples, and Nissan’s low-end and high-end blue sky multiples.

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 9,000 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 (http://www.kerriganadvisors.com/the-kerrigan-index/).

About Kerrigan Advisors

Kerrigan Advisors is a leading, national sell-side advisor and thought partner to auto dealers in the US.  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 auto retail’s largest transactions, including five of the Top 100 Dealership Groups in the US, more than any other firm in the industry. Led by a team of veteran industry experts in coast to coast offices, the firm does not take listings, rather it 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, restructuring services 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 9,000 industry recipients in 35 countries.  To register to receive The Blue Sky Report®, click here (https://www.kerriganadvisors.com/the-blue-sky-report/).  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 (http://www.kerriganadvisors.com/the-kerrigan-index/).

Kerrigan Advisors’ Founder and Managing Director, Erin Kerrigan, is a recognized expert on dealership valuation, real estate, and buy/sells, and is a frequent speaker at leading auto retail events and conferences, including NADA, JD Power Automotive Roundtable, Automotive News’ Canadian World Congress, AICPA, and NADC. She has also been quoted numerous times by The Wall Street Journal, CNBC, Bloomberg and The Economist and has been a keynote speaker for events hosted by American Honda Motor Company, Audi of America, US Trust, Bank of America, Ohio Automobile Dealer Association, and SunTrust Bank. Kerrigan Advisors’ Managing Director Ryan Kerrigan is also a sought-after industry expert. He is featured in a monthly column for Dealer Magazine and has written Op-Eds for Automotive News.

Kerrigan Advisors Media Contact:
Melanie Webber (melanie@mwebbcom.com), mWEBB Communications, 949-307-1723

Crisis triggers a 47.9% decline from 52-week high in December;  Kerrigan Advisors release additional insights into automotive retail ramifications

Irvine, CA – March 26, 2020 – Kerrigan Advisors, in the wake of the global economic shock caused by the coronavirus disease (COVID-19), has released The Kerrigan Index™ as of March 31, 2020, which is comprised of the seven publicly-traded auto retailers. When taken in context with Kerrigan Advisors just-released 2019 Blue Sky Report®, the updated Kerrigan Index provides the firm’s initial view on the short-and-mid-term ramifications of the crisis on dealership valuations and the buy/sell market, as well as on 2021 trends and prospects.  

Through Tuesday, March 31st, The Kerrigan Index reveals a devastating 37.7% decline for the month, more than triple that experienced by the S&P 500. Year-to-date, The Kerrigan Index is down 42.6%, and is currently 47.9% below its 52-week high, which was achieved in mid-December 2019, just three months ago. The Kerrigan Index™ is now trading at levels not seen since 2012.

“After an incredible year in 2019, it has been a roller coaster since news of COVID-19’s spread started to consume the industry,” said Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors. “We had a strong start to 2020 but, not surprisingly, March has been a very challenging month for auto retailers. Our firm expects the buy/sell market to slow dramatically in the second quarter of 2020.  Having said that, we believe private dealership values will not decline to the same degree we’re seeing public company values plummet.”  

A special edition of The Kerrigan Index released on March 23rd highlighted that auto retail is primarily a private industry with the publics owning just 6% of dealerships.  As such, while the publics’ valuations provide insight into valuation trends, they do not usually determine the market value of a private dealership.  The Blue Sky Report noted that the publics represented only 5% of the buy/sell market in 2019.

“Car dealers have proven time and time again their ability to survive, even in the worst of times. We expect they will do so again, once this pandemic is under control. Those who are considering a sale will wait until the industry returns to a more normal state and the buy/sell market reactivates, likely in the second half of the year. In the meantime, we focus on health and hope for calm,” said Erin Kerrigan.

The Kerrigan Index also noted that while COVID-19 will undoubtedly force some distressed dealership sales, those sales are not considered benchmarks for industry valuations, as most dealers today have strong balance sheets and can patiently wait for the right time to go to market. 

According to Kerrigan Advisors’ 2019 Blue Sky Report® , after a slow start in the first half of the year, the 2019 auto dealership buy/sell market had the most active second half on record leading to 233 completed transactions[1] for the full year – the second highest number since 2014, and the sixth consecutive year of over 200 transactions.  This was fueled by a high level of multi-dealership transactions and an increase in average dealership earnings and blue sky values.

“We are profoundly aware of dealer anxiety in the current crisis, but auto retail will bounce back much faster than many other sectors of retail.  We just need to wade through this crisis, get to the other side, and then start rebuilding.  Experienced dealers know the playbook.” said Ryan Kerrigan, Managing Director of Kerrigan Advisors.

“The business model is resilient because of its diversification with fixed operations and used vehicle revenue often sustaining losses in new vehicle sales. It is for this reason that buyer demand has recently been so high for dealerships.  We anticipate demand will bounce back as we come out of this crisis,” said Ryan Kerrigan, Managing Director of Kerrigan Advisors.

The Kerrigan Index Highlights

The mid-March Kerrigan Index vividly details the altered state of the automotive retail industry as it grapples with state-wide lockdowns, uncertainty about the crisis, and the continuing economic freefall -- albeit with optimism for the future. The special edition also examines the balance sheet strength of the seven public auto retailers, including CarMax, AutoNation, Penske Automotive Group, Lithia Motors, Group 1 Automotive, Asbury Automotive Group and Sonic Automotive, in light of the global COVID-19 pandemic and its economic aftermath that has rattled investors and sent stock prices plummeting.

Notable points include:

 - Major banks now predict a global recession (defined as two quarters of negative growth)

 - Goldman Sachs expects US GDP to decline by 24% in the second quarter of 2020 and 3.8% for the full year.

 - RBC Capital Markets now predict US auto sales will fall to 13.5 million vehicles, 20% below last year’s sales.

 - Buy/sell market is likely to be impacted through Q2 2020; expect a resurgence in the second half of 2020, with optimistic trends playing into 2021.

 - As a group, The Kerrigan Index component companies have a combined total debt (including floorplan)-to-equity ratio of 2.7x, and long-term debt-to-equity ratio of 0.7x. Historically, floor plan debt has not proven to be risky as long as operators stay “in trust”; as such, overall debt levels are reasonable and should provide ample resources to work through the financial challenges of the coming months.

 - Excluding CarMax’s $8.8 billion market capitalization, The Kerrigan Index’s new car retailers as of March 31st are now collectively valued at just over $9.3 billion. This compares to their collective value of $17 billion at the end of 2019.

 - For the month of March, Sonic Automotive posted the largest loss of 51.7%, followed by Group 1 Automotive (-48.1%), Penske Automotive Group (-39.2%), CarMax (-38.4%), Asbury Automotive Group (-37.8%), Lithia Motors (-31.3%) and AutoNation (-29.7%).

Kerrigan Advisors’ Long View

Over the long term, Kerrigan Advisors expects strength and stability in the buy/sell market, as evidenced by outside capital’s growing interest in auto retail. “We continue to speak with investors who are seeking investments in auto dealerships.  These investors are keenly aware of how well auto retail performed coming out of the Great Recession and believe now is the time to invest as the industry consolidates and capitalizes on efficiencies from digital retailing,” continued Erin Kerrigan.

The 2019 Blue Sky Report® found that an increasing number of experienced operators are linking up with private equity sources to grow their dealership groups. The number of dealerships owned by Top 100 Dealership Groups backed by private equity capital has increased 123% since 2014.  In 2020, Kerrigan Advisors believes this will continue as investors seek to buy on a downturn, knowing strong growth prospects are ahead.

“Now that we are in a more challenging time, we are hearing from more family offices, high net worth individuals and private equity firms,” said Ryan Kerrigan. “They believe valuations will be more attractive and, as a result, they will be more interested in buying dealerships; plus, they see a long runway of acquisitions ahead as the industry continues to consolidate and digitize”

The Blue Sky Report® by Kerrigan Advisors covers dealership M&A activity as well as franchise values, including analysis of all transaction activity and lays out the high, average and low blue sky multiples for each franchise in the luxury and non-luxury segments. The 2019 Annual Report also includes Kerrigan Advisors’ annual review of each franchise, discussing buyer demand, franchise profitability, product pipeline and sales expectations for 2020.  For the 4th quarter of 2019, the following adjustments were made to Kerrigan Advisors’ Blue Sky Multiples:

- Increased Chrysler Dodge Jeep Ram (“CDJR”) blue sky multiple to 3.5 – 4.5

- Lowered Buick, GMC’s blue sky multiple to 2.75 – 3.75

- Lowered Infiniti’s blue sky multiple to 2.5 – 3.5

- Initiated Lincoln’s blue sky multiple at 2.5 – 3.5

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.

About Kerrigan Advisors

Kerrigan Advisors is a leading 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.  Kerrigan Advisors has represented on auto retail’s largest transactions, including five of the Top 100 Dealership Groups in the US, more 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 over 9,000 industry recipients in 35 countries.  To register to receive The Blue Sky Report®, click here (https://www.kerriganadvisors.com/the-blue-sky-report).  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 (http://www.kerriganadvisors.com/the-kerrigan-index/).

Kerrigan Advisors’ Founder and Managing Director, Erin Kerrigan, is a recognized expert on dealership valuation, real estate, and buy/sells, and is a frequent speaker at leading auto retail events and conferences, including NADA, JD Power Automotive Roundtable, Automotive News’ conferences, AICPA, and NADC. She has also been quoted numerous times by The Wall Street Journal, CNBC, Bloomberg and The Economist and has been a keynote speaker for events hosted by American Honda Motor Company, Audi of America, US Trust, Bank of America, Ohio Automobile Dealer Association, and SunTrust Bank. Kerrigan Advisors’ Managing Director Ryan Kerrigan is also a sought-after industry expert. He is featured in a monthly column for Dealer Magazine and has written Op-Eds for Automotive News.

Kerrigan Advisors Media Contact:
Melanie Webber (melanie@mwebbcom.com), mWEBB Communications, 949-307-1723

86% of dealers expect dealership values to increase or remain the same over the next 12 months according to the first-ever Kerrigan Advisors Dealer Survey

Irvine, CA, October 21, 2019 – Kerrigan Advisors, the leading sell-side advisor and thought partner to auto dealers in the U.S., today released results from its first annual dealer survey. The firm’s first-ever survey was designed to gauge dealer sentiment about the future value of their businesses, as well as their perspective on franchise valuations. The survey queried 650 franchised auto dealers and found that 86% expect their business’ value to increase or remain the same in the next 12 months. Specifically, 60% of respondents were confident in the stability of their current valuation, while 26% expected their valuation to increase, with only 14% anticipating a decrease.

“These results reflect the strength of the diversified auto retail business model and dealers’ confidence in their ability to remain profitable, despite declines in new vehicle sales,” said Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors. “This is consistent with Kerrigan Advisors’ most recent assessment of dealership valuations.  In our second quarter 2019 Blue Sky Report®, we noted that blue sky values rose slightly in the first half of the year after three years of declines.” 

“Dealer optimism about their franchise values isn’t a surprise, not when Wall Street analysts see automotive as a hedge against a possible recession,” said Ryan Kerrigan, Managing Director of Kerrigan Advisors.  The Kerrigan Index™, the firm’s index of the seven publicly traded auto retail stocks, is up an impressive 41% year-to-date through September, more than double the S&P 500’s 19% gain this year. “While the news headlines tend to focus on the decline in new vehicle sales, investors are paying more attention to industry profitability, which is growing due to the higher margin parts of the auto retail business model, namely used vehicles and fixed operations.  Earnings growth is what drives valuations higher and that is what we are seeing in the market today.”

While the survey showed that dealers were notably optimistic about their own dealership values over the next 12 months, they also shared opinions about the direction of specific franchise values, pointing out potential winners as well as the franchises they felt would decline in value. For example, Subaru had the highest percentage of dealers anticipating an increase in value at 43%, well ahead of second place Toyota, at 30%. There was also significant consensus among dealers about which brands were likely to decline in value over the next 12 months, with 65% pointing to Infiniti and Nissan, followed by Cadillac at 55%.

The results of the 2019 Kerrigan Dealer Survey correlate strongly with buyer demand for franchises, as demonstrated within Kerrigan Advisors’ Buyer Database. “Not surprisingly, the franchises expected to increase in value are showing strong or rising buyer demand, while franchises expected to decline in value have low or declining buyer demand,” said Erin Kerrigan. As an example, Kerrigan noted that the outlook for Volkswagen’s blue sky multiple in the most recent Blue Sky Report was upgraded to “positive” due to rising buyer demand, meaning the franchise’s blue sky multiple could increase in the next few quarters. This is consistent with the results of The Kerrigan Dealer Survey where Volkswagen ranked 4th most likely to see its value rise in the next 12 months.  

The survey also showed which franchises are expected to have the most stable valuations, namely Honda, Toyota, BMW, Lexus and Mercedes. It’s no surprise that these also happen to be among the most valuable franchises in the industry and are the most consistently profitable. Kerrigan Advisors believes this is primarily due to the stability of their dealer network, high sales per franchise and the strength of their franchise business models.

The top five franchises expected to increase/remain the same/decrease in value over the next 12 months are as follows:

Survey Methodology

Data for The Kerrigan Dealer Survey was gathered through an annual survey of auto dealers in conjunction with issuance of The Blue Sky Report®. The Kerrigan Dealer Survey is based on 650 responses from franchised auto dealers in Kerrigan Advisors’ proprietary database.  Survey responses were collected from June to September 2019.

To download the full Kerrigan Dealer Survey report, click here: https://www.kerriganadvisors.com/the-kerrigan-dealer-survey/

About Kerrigan Advisors

Kerrigan Advisors is the leading 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 auto retail’s largest transactions, including five of the Top 100 Dealership Groups in the US, more than any other firm in the industry. Led by a team of veteran industry experts, the firm does not take listings, rather develops a customized approach for each client to achieve their 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 due diligence.

In addition to the Kerrigan Dealer Survey, each quarter, 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 9,000 industry recipients in 35 countries.  Kerrigan Advisors also publishes The Kerrigan Index™, the only monthly report tracking the seven publicly traded auto retail companies.  Kerrigan Advisors’ Founder & Managing Director, Erin Kerrigan, is a recognized expert on dealership valuation, real estate, and buy/sells, and is a frequent speaker at leading auto retail events and conferences, including NADA, JD Power Automotive Roundtable, Automotive News’ Canadian World Congress, AICPA, and NADC. She has also been quoted numerous times by the Wall Street Journal, CNBC, Bloomberg and The Economist and has been a keynote speaker for events hosted by American Honda Motor Company, Audi of America, US Trust, Bank of America, Ohio Automobile Dealer Association, and SunTrust Bank. Kerrigan Advisors’ Managing Director Ryan Kerrigan is also a sought-after industry expert. He is featured in a monthly column for Dealer Magazine and has written Op-Eds for Automotive News.

Kerrigan Advisors Media Contact:
mWEBB Communications
Melanie Webber, melanie(at)mwebbcom(dot)com, 424.603.4340
Angela Jacobson, angela(at)mwebbcom(dot)com, 714.454.8776