Dealership Buy/Sell Market Sets Records

By Staff Writer March 23, 2021
Average dealership blue sky values are up by 20.7 percent over previous years. Average dealership blue sky values are up by 20.7 percent over previous years.

The auto dealership buy/sell market set new records in 2020, despite starting the year with pandemic closures and lockdowns, according to the 2020 Q4 and Full Year Blue Sky Report by Kerrigan Advisors. Overcoming the standstill at the end of the first quarter, the buy/sell market came back with a vengeance in the second half: Over 176 transactions were completed after July 1, with a total of 289 completed for the year — a 24 percent increase over 2019 and 47 more transactions than in 2015. In the fourth quarter alone, 103 transactions were completed — another record.

Erin Kerrigan, Founder of Kerrigan Advisors

“This record-breaking market was driven by a resurgence in dealership profitability,” said Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors. “This happened even with a dip in revenue, thanks to improvements in new and used vehicle gross profits and floorplan and SG&A expense reductions.

“Importantly, the numbers of multi-dealership transactions continued to rise through the end of the year, setting another record (74 transactions), which is over a quarter of all buy/sells. That reflects auto retail’s significant consolidation trend.”

Increasingly, according to the report, owners of large dealership groups are choosing to sell their businesses at today’s high valuations rather than accommodate the changes and investments required in terms of electric vehicles and digital retail sales. For the year, average dealership blue sky values rose to $7.7 million, up 20.7 percent thanks to a combination of higher earnings and rising multiples. Valuation multiples rose even higher in high growth, business friendly states such as Texas, Florida, Arizona, Colorado, Georgia, Nevada, North Carolina, South Carolina, Tennessee and Utah.

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Last modified on Wednesday, 24 March 2021 14:01