Automotive M&A deals have been very active over the last 12 months as major retailers expand their footprint into new markets. Lithia Motors has been one of the most aggressive retailers on the market, as the company recently acquired dealerships in the Southeast and Midwest regions of the country. We recently spoke with automotive buy/sell expert, and Managing Director of Kerrigan Advisors, Ryan Kerrigan, about Lithia’s recent growth and what it could mean for the industry.
Throughout the second half of 2020, the firm’s Kerrigan Index kept hitting high after high, after high. Despite facing some uncertainty early on in 2021, the Index continued to hit an all-time high of 892.83 as of market closing on January 29. In fact, each component of the Index hit all-time highs as well. This means that valuations have never been stronger in automotive retail.
Lithia Motors has been the most aggressive in the M&A market. They announced that they had put $3.5 billion in new, annualized revenue. According to Kerrigan, they have a growth plan of having $4 billion a year in acquisitions. All of the public retailers are now looking at these substantial valuations. They have good Blue Sky valuations, and they’re all leaning in.
All of the trends in retail automotive point towards personal mobility. Pre-pandemic, younger generations were not fast to purchase their own vehicle. Instead, they were relying more on ride-sharing and ride-hailing services. The past year has watched that reverse entirely.
Kerrigan believes that the business model will undergo an evolution process to new types of profitability. Whether that process is lead by electrification, remains to be seen.
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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