Auto dealership buy/sell market on path to most active year in history – 320 transactions June 2020 to June 2021 – as limited inventory and more efficient practices send dealership profits soaring 164%; historic access to capital fuels demand, and blue sky valuations tick up more than 40% from pre-COVID levels.

Incline Village, NV - September 20, 2021 – The auto dealership buy/sell market has hit yet another historic high, with 320 transactions completed in the 12-month period since the economy re-opened in June 2020, according to the Second Quarter 2021 Blue Sky Report® by Kerrigan Advisors, the industry authority on dealership valuation and buy/sell trends. Mostly driven by today’s unprecedented dealership profits, values for auto dealerships were at record levels, reaching an average of $9 million of blue sky per dealership for Q2, with 2021 on track to be the most active buy/sell year in history.

There were 144 dealership buy/sell transactions in the first half of 2021, a 27% increase over the first half of 2020 and a record number for the period[1]. Kerrigan Advisors expects transaction activity to rise dramatically in the second half of the year as more sellers seek to complete their transaction before year-end to potentially lock in a lower tax rate and avoid a tax increase in 2022.

“Today’s activity level is a byproduct of the industry’s explosive profitability,” said Erin Kerrigan, Founder & Managing Director of Kerrigan Advisors, noting that in the first half of 2021, the average dealership earned a jaw-dropping $1.96 million, 164% more than the industry’s average between 2015 and 2019, with the average dealership achieving a record trailing-twelve month profit of $3.51 million.

“Even with the removal of PPP funds received in 2021, most dealerships are achieving profitability levels several times higher than historical averages. Dealerships currently provide an incredibly high ROE of over 57% on average, and dealers have more capital than they have ever had. This is fueling buyer demand that is well outstripping supply and creating a seller’s market, further heating up the market and increasing blue sky values,” said Kerrigan.  

The report also discusses the impact of the semiconductor chip shortage that continues to limit the supply of new vehicles. With the resurgence of COVID cases further disrupting the entire auto industry’s supply chain and impacting inventory availability and pricing, new and used vehicle prices are up 10.6% and 29.6% respectively since January 2020, the largest rise in an 18-month period.

Intersecting with these factors, according to the report, is robust consumer demand for new and used vehicles, spurred by access to quarantine savings and government stimulus, low borrowing costs and a growing appreciation for the safety and importance of personal mobility. This, combined with dealerships’ increasingly productive and efficient business operations, is leading to record gross profits per vehicle: more than double for new compared to pre- pandemic levels, with used vehicle gross profit per vehicle rising 79%. 

“Given the industry’s incredible profit performance over the last 12 months, and positive outlook for 2022 and beyond, we find most dealers are buyers, not sellers, and few are willing to accept the status quo,” said Ryan Kerrigan, Managing Director of Kerrigan Advisors. “Today’s dealers, both private and public, want to grow and have tremendous access to capital to do so.  Few alternative investments provide the risk adjusted returns available from dealership acquisitions.”

OEM Approval Process Increasingly Sluggish

A significant trend potentially impacting blue sky multiples, according to the Blue Sky Report, is the slow-paced OEM approval process as OEMs are inundated with transactions. Increasingly, OEMs are requiring more terms from buyers, including more stringent framework agreements and facility upgrades. 

“We expect the challenges of OEM staffing on buy/sell approvals to become a crisis issue in the fourth quarter, given the economic fallout of missing a 2021 close,” said Erin Kerrigan “The old adage ‘time kills deals’ is still alive and well. OEMs that take too much time to approve their buy/sells and subject the process to unnecessary red tape and restrictions will likely find a larger number of their buy/sells fall apart, ultimately leading to less buyer demand and potentially lower blue sky multiples for their franchises.”

Multiple Outlook Adjustments – CDJR, Nissan Up, Ford Down

Kerrigan Advisors did not adjust blue sky multiples in Q2, but did make changes to the outlook for certain franchises due to fluctuations in buyer demand. Chrysler Dodge Jeep Ram (CDJR)’s multiple outlook was upgraded from Steady to Positive. “Buyer demand for CDJR is on the rise as Stellantis defies the odds with higher vehicle inventory levels, resulting in impressive sales gains (32.4%) in the first half of 2021 and high sales per franchise (787 sales per franchise) in the last twelve months,” said Ryan Kerrigan.

Nissan’s multiple outlook was also upgraded, from Steady to Positive. “We expect to see an increase in Nissan’s multiples by the end of 2021,” continued Kerrigan. “Nissan franchises improved in sales and profitability this year with buyers once again interested in acquiring Nissan franchises, particularly in strong, high growth markets such as Florida, Texas, and Nevada. We saw this firsthand when Kerrigan Advisors represented on the sale of Fuccillo Nissan of Clearwater, Florida to Morgan Auto Group in August 2021.”

Kerrigan Advisors had one multiple outlook downgrade for the quarter, moving Ford from Steady to Negative.  “Buyer demand for Ford dealerships is on the decline, relative to its domestic competitors. Ford sales rose significantly less than its top competitor and dealers are skeptical of the ramifications for future dealer profitability of its imminent shift to a build-to-order model,” concluded Kerrigan.

2021 Buy/Sell Trends

Kerrigan Advisors identified the following three trends it expects to meaningfully shape the buy/sell market for the remainder of 2021 and into 2022.

·      Buyer pool of existing dealers expands as cash accounts rise and access to debt grows

·      Sellers become less flexible on valuation as their profits soar

·      OEMs are increasingly overwhelmed by 2021’s buy/sell volume and less flexible on framework terms

Highlights from the Q2 2021 Blue Sky Report® by Kerrigan Advisors include:

·      144 transactions were completed in the first half of 2021, a 27.4% increase over the first half of 2020 and a record number for the period.

·      320 transactions were completed over the last 12 months (June 2020 to June 2021), more than any 12-month period in recent history.

·      Including real estate, the average dealership’s enterprise value is approaching $21M, a 19% percent increase over 2019.

·      There were 51 multi-dealership transactions in the first half of 2021, a 96% increase as compared to 2020, representing 35.4% of the buy/sell market -- the highest percentage ever recorded during the first half of the year.

·      Average dealership blue sky values rose to another peak in the second quarter to $9M, up 42% from 2019.

·      More efficient business operations and higher gross profits contributed to increased dealership profits in the first half of 2021— an average of $1.96 million, more than any pre-pandemic 12-month period, leading to a trailing-twelve month profit of $3.51 million, 147% more than the pre-COVID average (2014-2019).

·      The Kerrigan Index™ continues to outperform S&P 500—up 1038% since 2009, outperforming the S&P 500 by 179%.          

·      Import franchises represent a disproportionate share of the buy/sell market at a combined 58% (41% non-luxury and 17% luxury), relative to their franchise 31% market share of just 34%.

·      The public auto retailers continued to allocate capital to acquisitions, spending a record $4.45 billion over the last four quarters.

·      In the first half of 2021, Toyota represented over 10% of the franchise buy/sells, in line with Ford’s, CDJR’s and Chevrolet’s buy/sell market share - impressive when considering that Toyota has only 1,238 franchises in the US, as compared to Ford’s 3,006, CDJR’s 2,461, and Chevrolet’s 2,924.

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 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 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

[1] Source: The Banks Report, Automotive News, Kerrigan Advisors’ Research

Dealership Transaction Values at Record Levels as Sellers Continue to Flock to Market, according to The Blue Sky Report® released by Kerrigan Advisors

Buy/Sell market remains highly active as concerns about disruptive technology drive dealers to sell; over 200 transactions projected to close in 2017 

Irvine, CA –November 28, 2017 – The auto dealership Buy/Sell market is poised for its most active year ever, with over 200 transaction closings projected for 2017, according to The Blue Sky Report® for Q3 2017 released by Kerrigan Advisors.

Factors driving market activity, says The Blue Sky Report, include strong financial markets, well-funded investors, and rising real estate values.  The pressures of a more challenging auto retail market, dropping margins and rising concerns about the impact of disruptive automotive technology on the traditional dealership business model are also having a major impact.  And, while blue sky values are slightly lower than their 2015 peak, and the overall industry is showing some stagnation, 2017 remains on track to be the third most profitable ever, driving more sellers to market and transaction values to record levels when including dealership real estate.

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

The Blue Sky Report, published by Kerrigan Advisors, is the auto industry's most comprehensive and authoritative quarterly report and analysis of dealership M&A activity, as well as franchise values. It includes analysis of Q3 2017 - laying out the high, average and low blue sky multiples for each franchise in the luxury and non-luxury segments for the quarter - and offers a detailed view of public and private company dealership acquisition activity.  

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

• The Kerrigan Index is up 4.24% year to date and 608% from its 2009 recession lows.
• 149 dealership buy/sell transactions were completed in the first nine months of 2017, according to Kerrigan Advisors’ research and The Banks Report, compared to 172 transactions in the first nine months of 2016. After hitting a plateau in 2015, buy/sell activity declined slightly in the first nine months of 2017, but is still tracking to be one of the most active years on record.
• Multi-dealership transactions represented one quarter of the completed sales in the first nine months of 2017. Kerrigan Advisors expects at least 51 multi-dealership transactions will close this year.
• Year to date, domestics’ share of the buy/sell market increased to 49%, up 18% from 2015.
• Non-luxury and luxury import franchises’ buy/sell market share declined.
• Public retailers’ US acquisition spending increased 61% in the first nine months of 2017 compared to the first nine months of 2016.
• Private dealership groups represent the largest share of dealership acquirers. Of the estimated 236 franchises which changed hands in the first nine months of the year, only 23 were acquired by public companies.
• Real estate, for most dealers, is their most valuable asset, far exceeding franchise value. Kerrigan Advisors estimates dealership real estate prices rose 3% in the first nine months of the year.

The report identifies three key trends shaping 2018’s buy/sell market and the remainder of 2017.

• The evolution of the dealership business model drives more sellers to market
• Dealers are choosing to sell their real estate with their franchise
• Captive finance companies play a critical role in acquisition financing

“Our clients increasingly cite the risk factors associated with changes in auto retail as their single biggest reason for selling, with many believing auto retail will consolidate out of necessity, as only the largest, best-capitalized players will have the balance sheet to navigate auto retail’s evolution,” continued Kerrigan. “This is contributing to a very competitive buy/sell market, particularly for top franchises and attractive platforms and the growing population of well-funded buyers in the market. This creates a healthy market equilibrium – one where buyers and sellers agree on price and complete win/win transactions. Kerrigan Advisors believes this equilibrium will continue for the next several years and result in a highly active buy/sell market.”

Kerrigan Advisors is deeply involved in the Buy/Sell Market having advised on the sale of 60 dealerships, including four of the Top 100 Dealership Groups in the US. Most recently, Kerrigan advised on the sale of Puente Hills Chevrolet, in their recent sale to Pendragon PLC (www.kerriganadvisors.com/kerrigan-advisors-represents-puente-hills-chevrolet-sale-pendragon-plc/) Kerrigan Advisors’ extensive experience representing the largest dealership groups in the country provides the firm with a unique perspective on the trends shaping the industry and today’s franchise values. 

The Blue Sky Report®, a Kerrigan Quarterly, is published four times a year and includes Kerrigan Advisors’ signature blue sky charts, multiples and analysis for each franchise in the luxury and non-luxury segments.   To download The Blue Sky Report, click here: www.kerriganadvisors.com/the-blue-sky-report/.  

Kerrigan Advisors also releases a monthly index, The Kerrigan Index™, composed of the seven publicly traded auto retail companies with operations focused on the US market.  The Kerrigan 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: www.kerriganadvisors.com/the-kerrigan-index/.

Erin Kerrigan (www.kerriganadvisors.com/meet-the-team/) is Founder and Managing Director of Kerrigan Advisors, and is a recognized industry expert on dealership valuation, real estate and buy/sells. A sought-after commentator on automotive retailing topics ranging from consumer auto buying trends to auto retail consolidation to private equity in auto retail, she has keynoted numerous automotive conferences and her analysis has appeared in publications such as Automotive News, CNBC.com, and the Wall Street Journal. For a recent video of Erin’s commentary on the market, click here: https://youtu.be/gPrMMtRF-IU.

Ryan Kerrigan (www.kerriganadvisors.com/meet-the-team/) is Managing Director of Kerrigan Advisors and an expert on US auto retail buy-sell transaction work. Prior, Ryan served as Managing Director at Serent Capital, a $250MM private equity fund investing in middle market companies and served as General Manager of the family’s auto dealership. Mr. Kerrigan began his career as a management consultant at McKinsey & Company, where he advised Fortune 500 companies on growth strategies, organizational issues, pricing and business valuation. For a recent video of Ryan’s commentary on the market, click here: cbtnews.com/october-buysell-report-kerrigan-advisors-market-update/.

About Kerrigan Advisors

Kerrigan Advisors is the leading dealership buy/sell advisory firm focused on providing a high level of client service for dealership sellers nationwide. Led by a team of veteran advisors, Kerrigan Advisors customizes each sale process to maximize the seller’s transaction proceeds. The firm has sold 60 dealerships since 2015.  With the most comprehensive buyer database in the industry, Kerrigan Advisors has the industry context and expertise to match every seller with the right buyer. In addition to Kerrigan Advisors’ sell-side transaction work, the firm also provides a suite of consulting services including accounting preparation for sale, litigation support, open point applications and transactional due diligence.

In addition to the monthly Kerrigan Auto Retail Index, each quarter, Kerrigan Advisors publishes The Blue Sky Report®, a Kerrigan Quarterly, which is the auto industry's most comprehensive and authoritative quarterly report and analysis of dealership buy/sell activity and franchise values.  Kerrigan Advisors’ Managing Director, Erin Kerrigan, is a recognized industry expert on dealership valuation, real estate, and buy/sells, and is a frequent speaker at leading auto retail events and conferences, including NADA, JD Power Automotive Roundtable, AICPA, NADC, and Driving Sales’ President’s Club. She has also been a keynote speaker for events hosted by American Honda Motor Company, Audi of America, US Trust, Ohio Automobile Dealer Association, and SunTrust Bank and has led webinars for NADA and Automotive News.  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, among other outlets.

Contacts

Kerrigan Advisors Media Contact:
mWEBB Communications
Melanie Webber, 424.603.4340
melanie@mwebbcom.com

Family owned and operated since World War II, Puente Hills Chevrolet changes hands with the retirement of co-owners Tom Hoffman and Gary Campbell; Pendragon’s first US acquisition since the early 2000s.

Irvine, CA, October 31, 2017 – Kerrigan Advisors, the leading sell-side advisory firm to auto dealers in the US, represented and advised Tom Hoffman and Gary Campbell, co-owners of Puente Hills Chevrolet, in their recent sale to Pendragon PLC. The dealership has been in the Hoffman family since 1944, originally doing business as Leo Hoffman Chevrolet. Pendragon PLC is a UK-based auto retailer with over 220 dealerships worldwide; the company currently operates five dealerships in the United States under Pendragon North America.

“It’s been an incredible experience to be connected so deeply to the greater San Gabriel Valley community,” said Tom Hoffman. “It’s been 73 years of selling and servicing cars for families, first as Leo Hoffman Chevrolet, and now as Puente Hills Chevrolet,” he said. “It has been a privilege to grow our business and be a part of this wonderful community.”

“Heading into this transaction, it was critical that our sell-side advisors understand our business, its value and opportunities,” said Gary Campbell. “When a family sells a dealership after 70-plus years of ownership, it brings with it a unique set of complexities. Our sell-side advisor had to know how to navigate through these potential challenges. That’s why we chose Kerrigan Advisors. They have deep experience and expertise in terms of representing multi-generational dealerships and dealer families.” 

Kerrigan Advisors, headed by Erin Kerrigan and Ryan Kerrigan, has represented on the sale of 60 dealerships since July 2015, making it the most active sell-side advisor in the US auto retail industry. Ryan Kerrigan noted that the sale of Puente Hills Chevrolet was of particular note because the dealership is being acquired by an international buyer.  This buy/sell trend, which was featured in Kerrigan Advisors 2016 Third Quarter Blue Sky Report®, is expected to continue for the remainder of 2017 and into 2018.

“We were privileged to work with Tom and Gary in creating the right transaction for their families. We are confident that this is a very positive outcome for the employees and customers of Puente Hills Chevrolet.” said Ryan Kerrigan, Managing Director of Kerrigan Advisors. “We are also happy to see Pendragon grow its footprint in Southern California and expect more international buyers to enter the US auto retail market in the future.”

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 the report, click here. The company 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.

Ryan Kerrigan is Managing Director of Kerrigan Advisors and an expert on US auto retail buy/sell transaction work.  Prior, Ryan served as Managing Director at Serent Capital, a $250mm private equity fund investing in middle market companies and served as General Manager of the family’s auto dealership. Mr. Kerrigan began his career as a management consultant at McKinsey & Company, where he advised Fortune 500 companies on growth strategies, organizational issues, pricing, and business valuation.

About Kerrigan Advisors

Kerrigan Advisors is the leading dealership buy/sell advisory firm focused on providing a high level of client service for dealership sellers nationwide. Led by a team of veteran advisors, Kerrigan Advisors customizes each sale process to maximize the seller’s transaction proceeds. The firm has sold 60 dealerships since 2015.  With the most comprehensive buyer database in the industry, Kerrigan Advisors has the industry context and expertise to match every seller with the right buyer.

In addition to the monthly Kerrigan Auto Retail Index, each quarter, Kerrigan Advisors publishes The Blue Sky Report®, a Kerrigan Quarterly, which is the auto industry's most comprehensive and authoritative quarterly report and analysis of dealership buy/sell activity and franchise values.  Kerrigan Advisors’ Managing Director, Erin Kerrigan, is a recognized industry expert on dealership valuation, real estate, and buy/sells, and is a frequent speaker at leading auto retail events and conferences, including NADA, JD Power Automotive Roundtable, AICPA, NADC, and Driving Sales’ President’s Club. She has also been a keynote speaker for events hosted by American Honda Motor Company, Audi of America, US Trust, Ohio Automobile Dealer Association, and SunTrust Bank and has led webinars for NADA and Automotive News.  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, among other outlets.

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