The automotive buy-sell market is poised for another record year, with over 300 transactions representing more than 500 franchises completed through Q3 2024. In today’s episode of Inside Automotive, Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors, shares insights into the trends fueling this activity despite ongoing challenges such as elevated interest rates and slower-than-anticipated vehicle sales growth.
The post-pandemic market has redefined valuation norms, with dealership earnings and valuations significantly exceeding pre-pandemic levels. Average dealership profits have risen from $1–2 million to $3–4 million annually, with blue sky valuations up approximately 70% compared to pre-pandemic benchmarks.
However, some franchises, such as Chrysler, Jeep, Dodge, Ram, and Nissan, are underperforming, reflecting earnings and valuations below their pre-pandemic levels.
Two primary factors are driving the surge in buy-sell activity. First, many dealership owners, particularly those nearing retirement, are capitalizing on heightened valuations after accruing significant profits during the pandemic years. Second, buyers and sellers are reaching a consensus on valuations, with 2024 earnings emerging as a reliable baseline for transactions. This alignment has stabilized the market and fostered increased deal-making.
Luxury franchises like Porsche, BMW, and Mercedes-Benz remain in exceptionally high demand due to their limited availability and strong profitability. With only about 100 Porsche dealerships serving the entire U.S., these franchises command multiples as high as 10 times earnings.
However, the high costs of meeting manufacturer-imposed facility requirements, often exceeding $15 million, are prompting some luxury dealers to exit the market instead of reinvesting in costly renovations.
Consolidation continues to reshape the industry. The top 150 dealership groups now account for 30% of industry revenue, up from 25% in 2020. Despite owning only 10% of dealerships, they represent a record 38% of the buy-sell market share this year. This trend is particularly pronounced in metropolitan areas, where smaller operators sell to regional and national consolidators.
Looking ahead, rising dealership rents—now averaging nearly $2 million annually—may challenge profitability and valuations. Kerrigan emphasized the importance of advocacy efforts to address the financial demands placed on dealers, urging state associations to oppose demanding OEM requirements.
"Today, most agree that for most franchises, 2024 is the new normal." – Erin Kerrigan
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 $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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