Despite lots of speculation about the health of the U.S. economy, dealers are in an incredibly strong financial position to weather any storm, which, in many ways, is underscored by the current strength of mergers and acquisitions. Recently, at the 2023 NADA Show, CBT News anchor, Jim Fitzpatrick spoke with Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors, to hear her expert insight into today’s automotive buy/sell market.
Key takeaways:
1. From Kerrigan’s perspective, dealer groups are still looking to expand, but economic uncertainty has made buyers more selective. Right now, buyers are seeking brands that have the highest sales per franchise, like Toyota, Mercedes-Benz, BMW, Lexus, and Subaru. However, demand for Hyundai and Kia stores increased significantly.
2. Regarding the publicly traded dealership groups, there was a significant difference in transactions between 2022 and 2021. $9 billion was spent in 2021, and while there isn’t complete data for 2022 yet, Kerrigan Advisors estimates that $2 billion will be the final tally for 2022. However, the automotive retailing business model is resilient and could beat these estimates.
3. Even though the public groups pulled back their M&A activity, private dealer groups more than made up for it. Private dealers, in many cases, are sitting on more cash than they ever have before, and they are bullish on the buy/sell market.
4. Kerrigan Advisors facilitated the sale of 33 dealerships in 2022, and Kerrigan expects to sell the same number or more in 2023.
5. The biggest issue with vehicle affordability is the growing negative equity. While that might be a headwind for dealers, they have plenty of tailwinds to keep them flying high.
“I EXPECT THAT ‘S REALLY AN INDICATION OF THE FUTURE—THAT YOU’RE GOING TO SEE PRIVATE CONSOLIDATORS REALLY DOUBLE DOWN WITH THEIR OWN CAPITAL AND, IN SOME CASES, PARTNER UP WITH A FAMILY OFFICE.” — ERIN KERRIGAN
Notable background:
— In the last five years, Kerrigan Advisors has sold six of the Top 100 Dealership Groups, more than any other firm in the industry.
Click here for more 2023 NADA Show coverage on CBT News.
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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 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.
Contact us to learn more about Kerrigan Advisors’ sell-side services.
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