Today on CBT News, Erin Kerrigan joins the show to share a monthly update on automotive M&A activity and the Kerrigan Index. Kerrigan is the Founder and Managing Director of Kerrigan Advisors.
In February, The Kerrigan Index had yet another record month. Year-to-date the index is up 20% as it quickly approaches 1,000. Kerrigan says that the industry is “knocking it out of the park” to perform at this level. As other retail industries suffered during the COVID-19 pandemic, the automotive industry showed resiliency through a flexible business model.
Kerrigan then talks about the growth of the used-vehicle market. She says that one reason why large dealership groups are focusing on expanding their used-vehicle presence is due to Carvana trading well above all the public new dealership groups combined.
Larger automotive groups should be best positioned to handle the digitalization of the industry. Kerrigan says she has seen this in the way Lithia has improved its stock pricing. As the rapidly growing retailer continues to expand, they are quickly approaching $1 billion in market cap. Kerrigan believes Wall Street has rewarded Lithia for the innovation they discuss on their earnings calls. The company continues to grow its Driveway product, and it is now developing its own fintech product for consumers. The retailer’s message is always centered around growth, and Wall Street continues to buy into the message.
Kerrigan wraps up the conversation by talking about what excites investors about the automotive retail industry. At a recent investor conference for investors looking to get involved in the auto retail space, investors said they love that margins are low. This allows investors to see plenty of new ways to increase profitability.
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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