The March 2022 SAAR was 13.3 million units, down 5.3% from 14.1 million in February and down 24.4% from March 2021’s SAAR of 17.6 million units. This drop in the SAAR is a product of several factors. We dig into the low magnitude of the seasonal adjustment and ongoing supply chain issues in this post.
Publicly traded hedge fund managers and PE firms almost doubled in value during 2021 before nearly giving it all back in the first quarter. In this week’s post, we also examine the performance of other classes of RIAs and comment on the current market for privately held RIAs.
Timothy Lee will be attending and speaking at The ESOP Association National Conference in Washington, D.C. on May 3-6.
In recent months, inflation has overtaken labor market measures as the most headline-grabbing macroeconomic indicator in the financial press. Inflation typically moves the needle more than other economic measures because of its effects not only on businesses of all sizes but also on consumers. The current inflationary environment has contributed to shifts in consumer behavior thus far in 2022, and it is important that family businesses build responses to changing consumer behavior into their budgeting and forecasting processes. In this week’s post, we take a look at key considerations family businesses should be thinking about in their response to the current inflationary environment.
In each “Meet the Team” segment, we highlight a different professional on our Auto Dealer industry team. This week we highlight Scott Womack, Senior Vice President of Mercer Capital and the leader of the Auto Dealer industry team. The experience and expertise of our professionals allow us to bring a full suite of valuation, transaction advisory, and litigation support services to our clients. We hope you enjoy getting to know us a bit better.
There’s been a great deal of interest in RIA acquisitions in recent years from a diverse group of buyers ranging from consolidators, other RIAs, banks, diversified financial services companies, and private equity. These acquirers have been drawn to RIA acquisitions due to the high margins, recurring revenue, low capital needs, and sticky client bases that RIAs often offer. Following these transactions, acquirors are generally required under accounting standards to perform what is known as a purchase price allocation, or PPA.
A purchase price allocation is just that—the purchase price paid for the acquired business is allocated to the acquired tangible and separately-identifiable intangible assets. As noted in the following figure, the acquired assets are measured at fair value. The excess of the purchase price over the identified tangible and intangible assets is referred to as goodwill. Because most investment managers are not asset intensive operations, the majority of value is typically allocated to intangible assets. In this week’s post, we discuss common intangible assets acquired in the purchase of private asset and wealth management firms including the existing customer relationships, tradename, non-competition agreements with executives, and the assembled workforce.
Recently we had the opportunity to attend (virtually) the Johns Hopkins All Children’s Foundation 24th Annual Estate, Tax, Legal & Financial Planning Seminar. This year’s keynote speaker was Pamela Lucina, Chief Fiduciary Officer and head of the Trust & Advisory practice for Northern Trust Wealth Management, one of the country’s largest trust companies. Her keynote presentation highlighted the characteristics of successful families and provided practical strategies to avoid mistakes commonly seen in the administration of multigenerational wealth plans and trust structures. In this week’s post, we summarize Ms. Lucina’s nine key observations.
There are six primary publicly traded auto dealers that own approximately 923 new vehicle franchised dealerships as of year-end, or approximately 5.5% of the total number of dealerships in the U.S. In this blog, we focus on the largest automotive retailer in the United States, AutoNation.
Our goal with the Public Profiles blog series is to serve as a reference point for private dealers who may be less familiar with the public players, particularly if they don’t operate in the same market.
RIA group-think has been pro-consolidation for the past decade, and increasingly so. You’ve read the headlines about the pace of deals reaching a fever pitch last year and continuing into this year. We’ve been skeptical of the believed necessity for RIA consolidation in this blog in the past, and have yet to be dissuaded from our position. But opinions are only opinions, and facts are facts. This seems like an opportune moment to check our feelings against reality. How is RIA consolidation performing so far? The verdict from the public markets isn’t very encouraging. In this week’s post, we look at three publicly traded consolidators of wealth management businesses, Silvercrest, CI Financial, and Focus.
M&A activity in the Eagle Ford has picked up over the past year in terms of both deal count and the amount of acreage involved. The 10 deals noted over the past year were split evenly between property/asset acquisitions and corporate transactions, such as the Desert Peak Minerals-Falcon Minerals Corporation merger announced in mid-January of this year. This signals a notable increase in corporate-level activity as only one of the eight transactions in the prior year involved a corporate transaction, possibly foreshadowing greater industry consolidation in the Eagle Ford moving forward. Read more in this week’s post.
What is succession planning? Succession planning is the transfer of value or leadership in a company or organization. For auto dealers, the dealership can represent a lifetime of efforts and relationships with key employees and customers.
This post discusses some of the key factors involved in the succession planning process and why they are so critical.
This week, we welcome Tim Lee to the Family Business Director blog. This post originally appeared as an article in a recent Mercer Capital publication, The Transaction Advisory Update. Many family businesses will find the post interesting because it provides touch points and practicalities for identifying viable merger and acquisition targets and assessing strategic fit.
It’s de ja vu all over again. The volatility from the onset of the pandemic two years ago has been creeping back up as investors grapple with the global implications of the war in Ukraine. At the end of last year, most RIA owners were enjoying peak AUM and run-rate profitability. Since then, these measures have likely taken a substantial hit as the S&P 500 and NASDAQ are down 12% and 19%, respectively. When this happened two years ago, the market made a sharp recovery in the preceding quarters, but looking forward, we don’t know where the bottom lies. Most RIA principals are likely grappling with a sizable decline in management fees and earnings for the next billing cycle.
With taking a look at the VIX Index, we have assessed that the market volatility is likely here to stay – at least for a while. In this post, we explore what this volatility means for you and your RIA.
Mercer Capital has its finger on the pulse of the minerals market. An important trend has been the rise of mineral aggregators, which have largely supplanted the trusts as the primary method of publicly traded minerals ownership.
In this updated Study, Mercer Capital has thoughtfully analyzed the corporate and capital structures of the publicly traded mineral aggregators to derive meaningful indications of enterprise value. We have also calculated valuation multiples based on a variety of metrics, including distributions and reserves, as well as earnings and production on both a historical and forward-looking basis.
Scott Womack will present The Art and Science of Business Valuations: A Guide for Attorneys/Advisors for the Knoxville Estate Planning Council on March 24, 2022 in Knoxville, TN.
Inventory shortages are at the forefront of many of Q4’s earnings calls themes. While dealers across the country are looking to increase their new vehicle inventories, used vehicles are in greater supply. Numerous executives noted they are carefully managing this used inventory to avoid getting burned on currently elevated prices. In addition to inventory shortages, we also highlight comments concerning dealers charging above MSRP and the effect that has on the market.
The list of forecasting cliches is long (thanks, Yogi Berra!), but we were recently reminded of a good one: there are only two kinds of forecasts – lucky and wrong. That reminder came from an article by Joachim Klement 10 Rules for Forecasting.
Klement’s list is focused on macro level economic forecasting, but several of his rules apply equally well to the micro level of individual family businesses. In this post, we will consider four of Klement’s rules in the context of family businesses.
After summarizing the key topics from Q4 earnings calls from public E&P operators and Mineral Aggregators, this week, we turn our attention to the Q4 earnings calls from Oil Field Service companies. Key themes include 1) macroeconomic headwinds, such as labor shortages and supply chain constraints; 2) the anticipation of greater M&A activity and industry consolidation in 2022; and 3) ESG, including recognition of OFS operator initiatives from outside the industry, the mitigation of environmental impacts on local communities at present, and projections of continued demand for ESG-focused services.
February’s CPI growth came in at 7.9% year-over-year (the highest level in recent memory), and the ongoing Ukraine conflict portends further supply chain challenges that could drive prices even higher. The front-end of the yield curve has shifted higher as market participants reason that rising inflation will force the Fed to raise rates sooner and by a greater magnitude than had been previously anticipated.
Historically, a flattening yield curve has signaled an end to a growth cycle, and so far in 2022 that certainly seems plausible. Markets are down and valuation multiples have declined significantly, particularly in high-flying tech stocks. Read this week’s post to find out what this means for the RIA industry.
Here at Family Business Director, we are focused on the numbers of family business: measuring and assessing financial performance, establishing dividend policy, setting capital structure, making capital budgeting decisions, and structuring shareholder redemptions. All that said, we also recognize that family business leaders face many other critical challenges. So, in this week’s post, we provide a quick roundup of some of the best pieces we’ve come across recently dealing with management succession, governance, attitudes toward wealth, family relationships, board dynamics, and more.
The February SAAR was 14.1 million units, down 6.4% from last month and 11.7% below this time last year. The 2022 Q1 SAAR is expected to be the highest since Q2 2021 when the vehicle inventory shortage started to fully take hold. While the seasonally adjusted annual rate has certainly improved from the lows of late 2021, raw sales numbers tell a different story. Read more about it in this week’s post.
This week we look to understand why private market multiples for RIAs have consistently embodied more optimism than that of their publicly traded peers. In doing so, we identify RIA investor preferences unique to the industry, and why such multiples may even be misleading indications of your firm’s value.
“Price” and “value” are terms that are often used interchangeably but their meaning may not be synonymous in the context of a private business, or in this case an auto dealership. In this post, we examine the differences between “price” and “value.”
Capital budgeting tools are ideal for answering the question: Is the proposed capital project financially feasible? Too often, however, we see these tools being used to answer what seems to be a related question, but one that the tools are simply not designed to answer: Should we undertake the proposed capital project? The first question opens the door to the second, but the tools of capital budgeting – no matter how sophisticated or quantitatively precise – cannot answer the second. To answer the second question, family business directors need to consider three qualitative questions identified in this post.