“The industry has an overabundance of cash,” says advisor Erin Kerrigan.
Dealers convening in Las Vegas this week (Feb. 1-4) for the 2024 NADA Show have a good problem to have: they’re sitting on a mountain of cash after three years of the best profits they’ve ever had, according to Erin Kerrigan, founder and managing director of Kerrigan Advisors, Irvine, CA.
“The industry has an overabundance of cash,” Kerrigan says during a webinar by American International Automobile Dealers Assn., based in Alexandria, VA. A lot of that money is going to be plowed into buying more dealerships, she says.
High interest rates would normally deter a high level of buy-sells, but the average dealership has so much cash, they don’t have to borrow as much to make acquisitions, Kerrigan says.
In the meantime, acquisitions by the public groups tend to increase when their share prices are high, since they often use stock to purchase dealerships, she says. The publicly traded groups collectively outperformed the S&P 500 in 2023, Kerrigan says.
With so much purchasing power in hand, the latest trend in dealership buy-sells is for big dealership groups to seek out and acquire other big dealership groups, a practice Kerrigan calls “elephant hunting.”
Especially if they’re entering what’s a new market for them, she says big dealer groups such as the six big, publicly traded groups, and other, sizable, privately owned groups, want instant “critical mass” in a market.
On the sidelines at the NADA Show, Kerrigan is scheduled to moderate a Feb. 1 panel called, “Get Big Or Go Home – Or Not?” at the J.D. Power Auto Summit at Resorts World.
The panelists are Rita Case, president and CEO of Rick Case Automotive Group, Sunrise, FL.; Howard Tenenbaum, partner, at Keyes Motors Inc., Los Angeles; and Damian Mills, CEO and owner, Mills Automotive Group, Columbia, SC. Mills is also chairman of the National Association of Minority Automobile Dealers.
In separate interviews, Kerrigan, Haig and Karolis all predict an active dealership buy-sell market in 2024 – still down from the record number of transactions in 2021, but more active than before the pandemic.
Kerrigan Advisors is the leading sell-side advisor and thought partner to auto dealers nationwide. Since its founding in 2014, the firm has led the industry with the sale of over 280 dealerships representing $9 billion in client proceeds, including the third largest transaction in auto retail history – the sale of Jim Koons Automotive Companies to Asbury Automotive Group. The firm advises the industry’s leading dealership groups, enhancing value through the lifecycle of growing, operating and, when the time is right, selling their businesses. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, accounting, finance and real estate, Kerrigan Advisors does not take listings, rather they develop a customized sales approach for each client to achieve their personal and financial goals. In addition to the firm’s sell-side advisory services, Kerrigan Advisors also provides a suite of consulting and investor services including growth strategy, market valuation assessments, capital allocation, transactional due diligence, open point proposals, operational improvement and real estate due diligence.
Kerrigan Advisors monitors conditions in the buy/sell market and publishes an in-depth analysis each quarter in The Blue Sky Report®, which includes Kerrigan Advisors’ signature blue sky charts, multiples, and analysis for each franchise in the luxury and non-luxury segments. To download a preview of the report, click here. The firm also releases monthly The Kerrigan Index™ composed of the seven publicly traded auto retail companies with operations focused on the US market. The Kerrigan Auto Retail Index is designed to track dealership valuation trends, while also providing key insights into factors influencing auto retail. To access The Kerrigan Index™, click here. To read the 2023 Kerrigan Dealer Survey, click here. To read the 2024 Kerrigan OEM Survey, click here. Kerrigan Advisors also is the co-author of NADA’s Guide to Buying and Selling a Dealership.
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