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 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.

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.

Erin Kerrigan 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.

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. For a recent video of Ryan’s commentary on the market, click here.

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