Notifications & Messages

Jared Hamilton
From: Jared Hamilton
Hey - It’s time to join the thousands of other dealer professionals on DrivingSales. Create an account so you can get full access to the articles, discussions and people that are shaping the future of the automotive industry.
×
Industry Press Releases

Industry Press Releases Industry Press Releases

Exclusive Blog Posts

2017 Presidents Club Insights - Patrick McMullen

2017 Presidents Club Insights - Patrick McMullen

Listen to what Patrick McMullen from MAXDigital has to say about the future of automotive, what dealers can do today to prepare, and how DrivingSales Presi…

Five Tips for Selling Used or Certified Pre-Owned Vehicles

Five Tips for Selling Used or Certified Pre-Owned Vehicles

Selling used or certified pre-owned vehicles can be daunting task. With prices, laws, and competition varying across the country selling a pre-owned car fo…

What Motivates Your Employees to Perform?

What Motivates Your Employees to Perform?

Sorting through resumes, you find applicants who show potential. There are some with experience to walk on the job and set your service department abla…

How to Recruit the Best Talent for Your Dealership

How to Recruit the Best Talent for Your Dealership

Employee turnover can cost a dealership approximately $400,000 per year through lost sales, service offerings, new hire search, and training expenses even …

2017 Presidents Club Insights - Mark Brown

2017 Presidents Club Insights - Mark Brown

Hear from Mark Brown, sales director at Grappone Auto, about what he thinks is coming for the auto industry, how dealers can prepare, and how the DrivingSa…

U.S. Dealership Buy/Sell Activity Increased 60% in First Quarter 2014

Blue sky pricing remains very high as pricing floor forms; more sellers enter market; privates dominate, while public spend rises 9% year-over-year, according to The Kerrigan Quarterly Blue Sky Report

 

Irvine, CA, June 23, 2014 – U.S. dealership buy/sell activity dramatically increased in the first quarter of 2014, according to The Kerrigan Quarterly Blue Sky Report for Q1 2014, which was released today by Kerrigan Advisors. The report is the auto industry's most comprehensive and authoritative quarterly report and analysis of dealership buy/sell activity and franchise values.

 

Laying out the high, average and low multiples for each franchise in the luxury and non-luxury segments for the quarter, the report offers a detailed view of public and private company dealership acquisition activity.  In addition to the sharp spike in selling, among the key findings in the report are that blue sky pricing remains high for most franchises and that the market has established a pricing floor.

 

“As anticipated, an increase in the number of sellers coming to market has led to a major uptick in buy/sell activity.  We attribute this to high blue sky prices, buyer demand for dealerships and a slow-down in dealership profit growth, meaning sellers are concerned about missing the market and want to ensure they exit on top,” said Erin Kerrigan, founder and managing director of Kerrigan Advisors.  “Private companies continued to dominate the market in Q1, although public company activity rose slightly during the quarter and will likely continue to pick up after the announcement of Lithia’s acquisition of DCH.  The publics, however, are being very disciplined with their capital allocation.  If they believe the better investment is their own stock, they are choosing a stock buyback over an acquisition.  In the first quarter, collectively, they chose to spend 70% more on their own stock than on U.S. acquisitions.”

 

Report Highlights

 

  • Buy/Sell activity increased 60% in the first quarter.
  • More sellers coming to market to capitalize on high blue sky values that may fade as earning growth slows.
  • Blue sky values remain at elevated levels as dealership earnings continue to grow, albeit more slowly; and multiples remain high or reach higher levels.
  • The multiples for Honda, Toyota, BMW, Mercedes, Lexus and Porsche have increased since 2013. As competition for auto retail market share heats up, buyers are placing an even higher premium on these franchises. 
  • Pricing floor forming: with the average dealership earning an annual 28% return on equity, few dealers are willing to sell their franchises for less than a 3x blue sky multiple in today’s market. 
  • 48 dealerships were acquired in the first quarter of 2014, 40 of which were acquired by private dealership groups.
  • Collectively, the publics spent 70% more on stock buybacks ($163 million spent) than on U.S. acquisitions ($96 million spent) in the first quarter.

 

“While the future continues to look rosy for dealership acquisitions, we will likely start to see some negative shifts as increasing competition for car sales brings blue sky winners and losers,” concluded Kerrigan.

 

The Kerrigan Quarterly Blue Sky Report, which is published four times a year, includes Kerrigan Advisor’s signature blue sky charts, multiples and analysis for each franchise in the luxury and non-luxury segments. The multiples are based on Kerrigan Advisors’ view of franchise values in the current buy/sell market and can be applied to adjusted pre-tax dealership earnings to estimate blue sky value. To download the report, click here.

 

About Kerrigan Advisors

Kerrigan Advisors is a national dealership buy/sell advisory and brokerage firm focused on providing a high level of client service for dealership sellers. Led by a team of veteran advisors who have represented transactions totaling over $2 billion dollars in automotive, private equity and investment banking, Kerrigan Advisors customizes each sale process to maximize the seller’s transaction proceeds. With the most up-to-date buyer database in the industry, Kerrigan Advisors has the industry context and expertise to match each seller with the right buyer.

 

Each quarter, Kerrigan Advisors publishes The Kerrigan Quarterly Blue Sky Report, 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, who authors the report, 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, AICPA, NADC and Driving Sales’ President’s Club. She has also been a keynote speaker for events hosted by American Honda Motor Company, Audi of America, US Trust, Ohio Automobile Dealer Association,  and SunTrust Bank and has led webinars for NADA and Automotive News.  Her expertise is also featured in a monthly column for Dealer Magazine. 

 

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

 

 Unlock all of the community & features  Join Now