The auto dealership buy/sell market rebounded dramatically in the second quarter of 2020, driving the first half of 2020 to surpass the first half of 2019, in spite of declines in Q1 2020, according to the just-released second quarter 2020 Blue Sky Report by Kerrigan Advisors. Valuations are now at historic highs and, with dealership earnings at record levels, Kerrigan Advisors predicts that the second half of 2020 could be the most active buy/sell market ever.

With 58 dealership buy/sell transactions in the second quarter of 2020, the overall transaction count for the first half of 2020 reached 113, a 9.7 percent increase over the first half of 2019. This positions the first half of 2020 nearly in line with 2018’s elevated level, despite the global economic shutdown as a result of COVID-19. This activity level, according to the report, was driven by a rebound in industry profits, an increase in sellers coming to market, and stronger buyer demand.

“We had predicted an uptick in the buy/sell market in the second half of 2020, but the remarkable boomerang of dealership earnings in Q2 brought the buy/sell rebound on even more rapidly, once again proving the resilience of the auto retail business model,” said Erin Kerrigan, founder and managing director of Kerrigan Advisors. “Meanwhile, the increasing volume of sellers coming to market was fueled by confidence in their valuations as reduced expenses and higher profits led earnings to exceed pre-COVID levels.”

With average dealership real estate values up 14.9 percent since 2015, dealership enterprise values, including real estate and blue sky, are now at peak levels.

According to the Blue Sky Report, the average dealership blue sky increased 3.3 percent in the second quarter compared to 2019, as buyers priced acquisitions based on pre-COVID earnings and post-shutdown expectations. The report projects that blue-sky values will increase in the second half of 2020, a result of historically low interest rates and a reduction in buyers’ cost of capital.