Auto Dealer Valuation Insights

March 29, 2021 Blue Sky Current Events Mergers, Acquisitions, & Divestitures

What’s in a Multiple?

Blue Sky Multiples Improved in 2020 After a Rocky Start, and Buyers Weigh Multiple Years of Earnings

In this post, we present recent Blue Sky multiples along with the reporting of profitability moving from the last 12 months to the last 3 years. According to Haig Partners, buyers have historically focused on adjusted profits from the last 12 months, which has been viewed as the best indication of expectations for the next year. Throughout most of 2020, Haig’s reported Blue Sky multiples were applied to 2019 earnings as these were viewed as the best indication of a dealership’s “run rate” prior to any COVID impact. When profitability improved and uncertainty began to decline around June 2020, multiples applied on these 2019 earnings rebounded. Now into 2021, Haig reports that buyers are using a three-year average of adjusted profits from 2018 through 2020 as the best prediction of future profits.

March 22, 2021 Valuation Issues

Six Events That Trigger the Need for a Valuation

Auto dealers, like most business owners, are focused on many aspects of their business:  daily operations, strategic vision, competition, industry conditions, the state of the economy, etc.  It is less common for auto dealers to be concerned if/when their business might need to be valued.  Often, they are made aware of the need for these services by their trusted advisors including attorneys, financial planners, accountants, etc.

What are common events that trigger the need for a valuation for an auto dealership?

March 15, 2021 SAAR

February 2021 SAAR

Several Factors Put Pressure on February SAAR, Contributing to a 5.4% Decline from January

As we previewed in our January SAAR blog, February SAAR (a measure of Light-Weight Vehicle Sales: Auto and Light Trucks) declined as expected to 15.7 million from 16.6 million the previous month. This is a decline of 6.6% from the same period last year. In this post, we discuss the factors that contributed to this decline and expectations for March.

March 8, 2021 Current Events Public Auto Dealers

Q4 2020 Earnings Calls

Sales Return Quicker than SG&A Expenses, But Inventories Continue to Lag Amid Chip Shortages

As we do every quarter, we provide themes from the Q4 earnings calls as discussed by the major players in the auto industry. These trends give insight to the market that may exist for a private dealership which informs our valuation engagements.

March 1, 2021 SAAR

January 2021 SAAR

SAAR Hit Highest Levels Since the Pandemic Began, but Several Factors Could Hinder February’s Growth Prospects

January 2021 SAAR (a measure of Light-Weight Vehicle Sales: Auto and Light Trucks) increased to 16.6 million from 16.2 million in December. Though this is a decline of 1.4% from the same period last year, this is the highest that SAAR has been since the pandemic began. Light truck sales were behind this growth, as they captured 77.8% of all new vehicles sold in the past month. Despite January’s peak, two significant events could hinder February’s outcome.

February 22, 2021 Special Topics Valuation Issues

Seven Factors of a Highly Effective Buy-Sell Agreement for Auto Dealerships

A Roadmap to the Valuation Process

In this post, we will cover seven factors of a highly effective buy-sell agreement for auto dealerships and also touch on several other considerations.

February 15, 2021 Public Auto Dealers

Public Auto Dealer Profiles: Lithia Motors

This post is the first of a series where we profile the six public new vehicle dealerships; our goal is to provide a reference point for private dealers. Dealers may benefit in benchmarking to public players, particularly those that are significantly larger with numerous rooftops. Smaller or single point franchises will find better peers in the average information reported by NADA in their dealership financial profiles. Public auto dealers also provide insight as to how the market prices their earnings. This week, we start with Lithia Motors (LAD).

February 8, 2021 Special Topics

The Chip Shortage Is Making It Feel Like 2020 All Over Again

In this blog post, we will discuss the necessity of chips in the auto making process, how the chip shortage came into fruition, how it is affecting the industry, and what all this might mean for auto dealers going forward.

February 1, 2021 Special Topics

Changing Advertising Trends for Sunday’s Big Game

How the Auto Industry Is Spending Advertising Dollars

So it’s the week of the big game. What are you most looking forward to?  The game?  The food – appetizers and snacks?  The halftime show? Or maybe the commercials?  Inevitably, all of us probably have this same list of things in some particular order.  The festivities will probably look entirely different this year with smaller gatherings and pandemic protocols affecting travel and public viewing at restaurants and sports bars.  But what will this year’s commercial line up look like and will the auto industry participate? Will this year serve to be an aberration or is it a reflection of advertising changes impacting the auto industry and auto dealerships?

January 25, 2021 Special Topics

Headwinds and Tailwinds for Auto Dealers

Your Flight Itinerary for 2021

If you’ve ever been on a flight, you know that the pilot and plane itself can only do so much in determining how quickly you get to your destination. A key factor is which way the wind is blowing. If the pilot announces that there are headwinds, you can expect your flight time to be on the longer side. The opposite is true with tailwinds, and you can expect to arrive at your destination more quickly under these circumstances.

Similarly for auto dealers, sometimes it doesn’t matter what the dealership’s management is like or how good the dealership itself is, as certain headwinds and tailwinds can make it harder or easier to achieve its goals. In this post, we have considered some headwinds and tailwinds heading into 2021.