Uncertainty and a widening bid-ask spread contributed to fewer transactions last year, according to industry experts..
Although merger and acquisition activity remained high, 2023 saw fewer transactions compared to 2022, attributed to economic uncertainty, lower profits, and a pricing gap between buyers and sellers.
Erin Kerrigan of Kerrigan Advisors highlighted a shift in buyer focus, stating that the market had splintered into "have" and "have not" franchises.
She noted, "The rising tide lifted all boats during the pandemic, and every franchise was very valuable and sought-after because everyone was doing so well, and there was so much capital, there was a strong demand to buy, really, almost any franchise."
However, Kerrigan pointed out that buyers are now "very much looking for top franchises in markets that make strategic sense, or top franchises in growth markets."
Now, she said, buyers have sharpened their pencils, and "they're very much looking for top franchises in markets that make strategic sense, or top franchises in growth markets."
Several deals last year highlighted that, including when Kerrigan Advisors represented John Beck and James Masten in selling three General Motors dealerships in Texas to publicly traded Group 1 Automotive Inc. Those stores were expected to add $760 million in annual revenue.
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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 275 dealerships representing nearly $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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