U.S. Dealership Buy/Sell Activity Hits Record Highs in 2015
New entrants drive 29% of sales, reports The Blue Sky Report™ released by Kerrigan Advisors
Irvine, CA – March 9, 2016 – U.S. dealership buy/sell activity reached record highs in 20151, with activity by new entrants outpacing public company acquisitions by over four to one, according to The Blue Sky Report™, a Kerrigan Quarterly, which today released its full-year 2015 analysis. The report from Kerrigan Advisors is the auto industry’s most comprehensive and authoritative quarterly report and analysis of dealership buy/sell activity and franchise values.
Laying out the high, average and low multiples for each franchise in the luxury and non-luxury segments for the quarter, the report offers a detailed view of public and private company dealership acquisition activity. Key findings of the 2015 report include record high valuations, partially driven by attractive acquisition financing and the increased importance—and price—of dealership real estate. And, while the first half of the year was marked by the Van Tuyl transaction—the single largest acquisition in auto retail history—it was the influence of new, nontraditional buyers in the market, paved by Berkshire Hathaway’s entrance in 2015, that led to new entrants outpacing public company acquisitions.
“A number of iconic multi-dealership groups came to market in 2015 and were acquired by both established consolidators and new entrants. Faced with this stiffer competition, the publics found it more difficult to compete for larger group transactions, and represented just 7% of the buy/sell market in 2015. Meanwhile new dealership buyers, including family offices, private equity firms, and public conglomerates, acquired 29% of the franchises sold, a stunning accomplishment,” said Erin Kerrigan, managing director of Kerrigan Advisors. “We believe new entrants will increasingly shape dealership consolidation and meaningfully impact the future of auto retail.”
In addition to offering a comprehensive analysis of 2015 buy/sell activity, The Blue Sky Report also focuses on four important market trends Kerrigan Advisors believes will shape 2016:
- New entrants continue to seek platform acquisitions
- Return on investment drives valuations, particularly for larger transactions
- Blue sky multiples are firmer, less dependent on profit potential
- Publics’ capital allocation is driven by stock price
“In 2015, dealership valuations rose to historically high levels, new entrants made sizable acquisitions, manufacturers approved numerous multi-dealership transactions, and real estate prices returned to prerecession levels,” continued Kerrigan. “In summary, it was a year that is hard to beat. While the 2016 buy/sell market is expected to be as active as 2015, we anticipate the proportion of sellers completing a successful sale could decline as industry growth plateaus and dealership earnings come under pressure.”
The Blue Sky Report, a Kerrigan Quarterly, is published four times a year and includes Kerrigan Advisor’s signature blue sky charts, multiples and analysis for each franchise in the luxury and non-luxury segments. The multiples are based on Kerrigan Advisors’ view of franchise values in the current buy/sell market and can be applied to adjusted pre-tax dealership earnings to estimate blue sky value. To download the report, click here.
Kerrigan Advisors’ market analysis will be showcased during Erin Kerrigan’s keynote at the J.D. Power 2016 Auto Summit March 31, 2016, at the Wynn Hotel in Las Vegas, Nevada.
1 17% YOY according to The Banks Report
About Kerrigan Advisors
Kerrigan Advisors is a national dealership buy/sell advisory firm focused on providing a high level of client service for dealership sellers. Led by a team of veteran advisors who have represented transactions totaling over $2 billion dollars in automotive, private equity, and investment banking, Kerrigan Advisors customizes each sale process to maximize the seller’s transaction proceeds. With the most comprehensive buyer database in the industry, Kerrigan Advisors has the industry context and expertise to match each seller with the right buyer.
Each quarter, Kerrigan Advisors publishes The Blue Sky Report, a Kerrigan Quarterly, which is the auto industry’s most comprehensive and authoritative quarterly report and analysis of dealership buy/sell activity and franchise values. Kerrigan Advisors’ managing director Erin Kerrigan, who authors the report, is a recognized industry expert on dealership valuation, real estate and buy/sells, and is a frequent speaker at leading auto retail events and conferences, including NADA, JD Power Automotive Roundtable, AICPA, NADC, and Driving Sales’ President’s Club. She has also been a keynote speaker for events hosted by American Honda Motor Company, Audi of America, US Trust, Ohio Automobile Dealer Association, and SunTrust Bank, and has led webinars for NADA and Automotive News. Her expertise is also featured in a monthly column for Dealer Magazine.