Today on CBT Now, we’re joined by Ryan Kerrigan, Managing Director of Kerrigan Advisors, to update us on mergers and acquisitions in automotive today.
The Kerrigan Index is a monthly study that consists of the seven major publicly traded auto retail companies with operations in the U.S. The index for context, Kerrigan claims, “Is taking the S&P formulation to all retail stocks and, as of this year, has zipped up.” While the auto retail market is highly fragmented and influenced by hundreds of small and mid-sized private companies, publicly traded auto retail stocks provide strategic insight into the dynamics driving auto retail and earnings projections for the industry.
The Kerrigan Index is a monthly study that consists of the seven major publicly traded auto retail companies with operations in the U.S. The index for context, Kerrigan claims, “Is taking the S&P formulation to all retail stocks and, as of this year, has zipped up.” While the auto retail market is extremely fragmented and influenced by hundreds of small and mid-sized private companies, publicly traded auto retail stocks provide strategic insight into the dynamics driving auto retail and earnings projections for the industry.
For the year to date, the index is up 37% against the S&P, which is at 9%. Despite the threat of rising interest rates, Kerrigan continues to see the auto industry defying the odds. In late June, Penske, AutoNation, and Group 1 were all trading at an all-time high. In addition to the breaking numbers, the public is getting more active, given the strong stock prices. For example, in 2020 and 2021, the public was highly functional. But in 2022, they were less enthusiastic. In 2022, the public bought 66 stores and sold 66, generating a net of zero ads.
Ryan claims that this year at Kerrigan, the business “noted virtually all publics getting back into the game.” For example, M&A transactions rose by 43% in the first quarter compared to last year. Kerrigan said, “We looked at over 400 deals transactions over the trailing 12 months, implying that the sector keeps breaking records in the buy-sell market. The figures indicate that dealers are optimistic while they remain dedicated to their business strategy. They also have a lot of cash to increase their market investments. According to Kerrigan, “Dealers are discovering that the more money they invest in other dealers, the more money they make.”
As a spoiler note, Kerrigan claims that in the upcoming years and quarters, “I believe that we are going to discuss more about BlueSky, multiples being historically more impacted by geography.” He continues, “I think we’ll still emphasize the state-by-state multiples as much as the franchises.” However, entering the second half of the year, interest rates are always a massive driver for the economy. Still, interestingly enough, “The conventional wisdom is that the industry could be in a loosening situation before the end of the year,” Kerrigan exerts.
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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 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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