The latest Kerrigan Advisors Market Update revealed that the Kerrigan Index performed very well during October, finishing the month at 675.71. Erin Kerrigan, Founder and Managing Director for Kerrigan Advisors, joined the show to provide more insight on the latest market update.
Year to date for the index is up 9.52%, well above the S&P 500 Index which is currently up 1.21%. According to Kerrigan, the biggest surprise was how much the index has increased since the beginning of the COVID-19 pandemic. Since its lowest mark for the year, the Kerrigan Index has shot up 127% to where it stands today. This has a lot to do with the industry outperforming other industries during the pandemic. Kerrigan says the rise in valuations can be credited to industry earnings hitting all-time records in the third quarter. The industry has also been aided by low-interest rates.
Looking ahead to Q4, Kerrigan says they are predicting sales to rise beyond what was achieved last year. As OEMs return to full capacity, gross profit per new vehicle will probably drop, however, the rise in sales will support the industry.
Kerrigan then discusses the increase in average dealership pre-tax profit. According to NADA, dealership pre-tax profit was up 134%, making a significant jump from $128,282 in 2019 to $300,548 in 2020. Additionally, year to date earnings are up 13% for dealers.
“Our industry is proving out its ability to cut expenses quickly, and also in the face of limited inventory to increase their gross profit margin,” said Kerrigan. “Even with the service business coming back more slowly.”
With valuations up, new investors are exploring their options in retail automotive. This is happening both in public companies as well as private dealerships. Kerrigan says the new investors and creative financial structures are here to stay.
Kerrigan concludes the conversation by discussing Kerrigan Advisors recent transaction as Kerrigan represented Continental Motors Group in its selling of three stores in Illinois. Kerrigan said the deal was aided by a strong car market in the Naperville, IL market. The transaction included Audi, Acura, and Mazda. Kerrigan said they expect this to be the beginning of many transactions for their firm in fourth quarter.
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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