On today’s edition of Inside Automotive, Ryan Kerrigan, Managing Director of Kerrigan Advisors, gives an update on the buy/sell market and breaks down some of the auto industry’s most interesting headlines. In part one of this conversation, Kerrigan and anchor Jim Fitzpatrick discuss the unprecedented levels of M&A activity and electric vehicle adoption.
These are extraordinary days in automotive retail, and the public companies demonstrate that, says Kerrigan. Year-end announcements have made the rounds in the last couple of weeks, and profits are incredible. Most posted profits up 50% to 60% year over year in Q4. AutoNation was up two and a half times year-over-year and Sonic Automotive, which had been running at some lower margins prior, experienced a 700% profit increase year-over-year.
2021 ended up being a very big year for M&A activity as well. According to Kerrigan Advisors, there were 383 distinct transactions last year; a 35% increase over the prior year. Some states, like Colorado, are seeing dealerships trade hands even more frequently. Kerrigan says there are two primary issues that determine this: population growth and business environment.
In regards to electric vehicles, Kerrigan says, so far, he does not see the EV phenomenon really impacting buy/sells or valuations today. Buyers remain somewhat skeptical as to when and how EVs will be brought to dealerships. There are price constraints on the raw materials needed for batteries. There’s also no consensus on how this impacts the business model. Will EVs fundamentally change the retailing experience? Time will tell.
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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