Multi-Franchise Dealership Transactions Rise by 52% in First Half of 2016 according to The Blue Sky Report™ released by Kerrigan Advisors

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Despite a slight decline in overall transaction activity, average transaction size is up; record franchise values and rising real estate prices spur more sales by family-owned dealerships; domestic transaction buy/sell share increases

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..we expect the pace of acquisition activity to increase in the second half of 2016, as private buyers and new entrants continue seeking sizable acquisitions and sellers continue to capitalize on attractive valuations

The number of large, multi-dealership transactions rose by 52% YOY in the first half of 2016, according to The Blue Sky Report™, a Kerrigan Quarterly, which today released its analysis of the first six months of 2016. Although there was a decline in overall transaction activity, the average size of transactions rose significantly. The report from Kerrigan Advisors is the auto industry's most comprehensive and authoritative quarterly report and analysis of dealership mergers and acquisition 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 report covering the first six months of 2016 included:

  • 32 multi-dealership transactions completed
  • 22% increase in average transaction size: average dealership group sold represented more than three franchises
  • 16% decline in overall transaction activity
  • Dealership group sellers spurred by retirement, estate planning, lack of a succession plan and rising real estate prices
  • Domestic buy/sell market share increases: buyers attracted to higher ROI vs. imports
  • Private buyers continue to drive the market as publicly-traded dealerships’ market caps decline
  • Publicly-traded dealerships, as a group, sold nearly as many dealerships as they acquired

“Many owners of multi-franchise groups, particularly those at or near retirement, are capitalizing on their ability to sell their groups to a single buyer in today’s market,” said Erin Kerrigan, Managing Director of Kerrigan Advisors. “Even with the exit of most of the public buyers, private buyers and new entrants remain active and are often attracted to the scale provided by larger group acquisitions. And, while the activity level in the first half of 2016, was lower than the first half of 2015, if annualized it would exceed the number of transactions completed in 2014.”

The report identifies three key trends for the second half of 2016:

  • Transaction sizes will continue to rise
  • Public valuation declines in first half of year, portends potential private valuation declines
  • The quality of current and future sales may weaken

“While buy/sell activity declined in the first half of 2016 for the first time since the recession, driven primarily by the exit of most public buyers, we expect the pace of acquisition activity to increase in the second half of 2016, as private buyers and new entrants continue seeking sizable acquisitions and sellers continue to capitalize on attractive valuations,” continued Kerrigan. “But it must be noted that the decline in the public dealership values as noted by The KAR Index, may portend a decline in future private values and the quality of industry sales may be weakening, increasing industry risk and resulting in lower dealership earnings.”

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 also releases a monthly index, The KAR Index, composed of the seven publicly traded auto retail companies with operations focused on the US market. The KAR Index is designed to track dealership valuation trends, while also providing key insights into factors influencing auto retail. To access the KAR Index™, click here.

Erin Kerrigan is Managing Director of Kerrigan Advisors, and is a recognized industry expert on dealership valuation, real estate and buy/sells. A sought after commentator on automotive retailing topics ranging from consumer auto buying trends to auto retail consolidation to private equity in auto retail, she has keynoted numerous automotive conferences and her analysis has appeared in publications such as Automotive News and the Wall Street Journal.

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.

Kerrigan Advisors Media Contact:
Cassandra Cavanah (cassandra(at)mwebbcom(dot)com), mWEBB Communications, 818.397.4630
Melanie Webber (melanie(at)mwebbcom(dot)com), mWEBB Communications, 424.603.4340

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Crystal Hartwell
mWEBB Communications
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Melanie Webber
mWEBB Communications
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