Category

Mergers, Acquisitions, & Divestitures

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March 29, 2024 Blue Sky Public Auto Dealers

Public Auto Dealer Profiles: Group 1 Automotive

The automotive dealership industry remains highly fragmented, with publicly traded auto dealers owning only a small fraction of the total number of dealerships in the U.S. The business models of privately held and publicly traded auto dealers differ significantly, with the latter benefiting from greater scale, diversification, and access to capital. Group 1 Automotive, a key player in this sector, has demonstrated resilience in its operations and financial performance, while also pursuing strategic initiatives such as the development of its online platform, AcceleRide, and a careful approach to acquisitions and capital allocation.

February 16, 2024 Special Topics

How a Quality of Earnings Analysis Benefits Auto Dealership Buyers

The auto dealer transaction space has seen significant activity in recent years, with the prospect of Fed rate cuts in 2024 potentially attracting even more buyers. Obtaining a quality of earnings (QofE) analysis is crucial for buyers who don’t want to overpay for an acquisition. In this week’s post, we describe four key elements of a QofE analysis and how this analysis informs the buyer.

November 3, 2023 Special Topics Valuation Issues

Newly Released: Auto Dealer Video Series

Mercer Capital’s Scott Womack had the pleasure of being invited to record a series of videos created by the Rawls Group, where he talked with partner and succession advisor Dan Iosue. Get to know what both Dan and Scott do best as they talk about everything from the best timing for valuations to how to successfully negotiate business disputes in the auto industry. 

May 19, 2023 Blue Sky Valuation Issues

What Is the Value of My Auto Dealership?

It Depends on Who's Buying

Wondering what your auto dealership is worth? This post gives practical illustrations of how buyers might determine the premiums or discounts they are willing to pay for your dealership. Discover the unique facets that shape the value of your auto dealership through the lens of three distinct buyer types: strategic, financial, and minority interest. Understand the dynamics influencing your dealership’s value and arm yourself with knowledge for future negotiations.

March 31, 2023 Blue Sky Public Auto Dealers

Public Auto Dealer Profiles: Asbury Automotive Group

As discussed in previous installments of this blog series, six primary publicly traded auto dealers own over 1,300 new vehicle franchised dealerships as of year-end 2022. In other words, that’s less than 10% of the total number of dealerships in the U.S. (approx. 16,750 as of NADA’s mid-year 2022 report). The proportion of total U.S. dealerships that these publics own has increased, though it still demonstrates how fragmented the industry continues to be.

Our goal in highlighting Public Profiles 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. Larger dealers may benefit from benchmarking to public players. Smaller or single-point franchises may find better peers in the average information formerly reported by NADA or more regional 20 Group reports but might still find value in staying plugged into public auto dealers’ performance.

This week’s post covers Asbury Automotive Group, the second smallest of the six publicly traded automotive retailers in the United States.

September 21, 2022 Blue Sky

Blue Sky Multiples Remain Flat as Earnings Plateau

Dealers Continue to Perform through Negative Economic Indicators

Interest rates are up, gas prices are volatile, inflation is rampant and vehicle affordability, GDP, and the stock market are down. How have auto dealers belied all of these negative headwinds to produce strong earnings? The simple answer is that dealers have been able to pass on price increases to consumers and have benefitted from more lean cost structures in the wake of the pandemic when they had to cut all costs possible to the bone. In this week’s blog, we consider these trends and analyze Blue Sky values and multiples over the past few years thanks to info provided by Haig Partners.

June 13, 2022

Valuation and M&A Trends in the Auto Dealer Industry

Let the Good Times Roll?  

Scott Womack recently sat down with Tony Karabon of DCG Acquisitions to discuss trends in the auto dealer industry such as transaction volume and multiples along with the implications of an agency model for OEMs. DCG Acquisitions is a national, full-service mergers and acquisitions firm representing buyers and sellers of automobile dealerships.

April 18, 2022 Blue Sky

Values Up, Valuations Flat?

As the Inventory Shortage Persists, Dealers Are Getting More Credit for Their Outperformance

If you only look at the Blue Sky multiples, you’re missing the bigger picture because valuations (multiples) may be flat, but values are up. In this week’s post, we look at an illustrative example and check in on the valuation multiples for luxury, mid-line, and domestic brands.

March 28, 2022 Blue Sky Public Auto Dealers

Public Auto Dealer Profiles: AutoNation

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.

December 8, 2021 Public Auto Dealers Valuation Issues

Q3 2021 Earnings Calls

Q3 earnings calls across the group of public auto dealers began with similar themes from the prior two quarters: record profits and earnings, record Gross Profits Per Unit (GPU) on new and used vehicles, and tightening inventory conditions. In addition to those themes, we also discuss M&A, inflation, and other areas of profitability for the public auto dealers.

October 26, 2021 Special Topics

The Tricks and Treats of the Buy/Sell Process from a Selling Dealer’s Perspective

Fall District Meeting Roundup

We recently attended a series of district meetings sponsored by a state auto dealer association. The topic on everyone’s mind was transactions. Because potential transactions seem to be top of mind for so many dealers, this post focuses on that. Because Halloween is right around the corner, we offer guidance about how to think about and structure a transaction in the form of Treats (what is true) as well as Tricks (what is not). We hope you enjoy the post and Happy Halloween!

October 5, 2021 Public Auto Dealers Special Topics

September Acquisitions by Sonic, Asbury, and Group 1 and What They Mean for Privately Held Auto Dealerships

Smallest Public Players Getting Larger

In three consecutive weeks, 117 auto dealerships were bought across 3 transactions, each scooping up more dealerships than the last. The three smaller pure-play public auto dealership companies (Group 1 Automotive, Sonic Automotive and Asbury Auto Group) all made sizable acquisitions in a red hot M&A market coming after Lithia purchased a large private auto group back in April.

In this week’s post we discuss how these transactions highlight a couple of key themes in the marketplace for auto dealers.

September 20, 2021 Blue Sky Public Auto Dealers

Public Auto Dealer Profiles: Sonic Automotive

There are six primary publicly traded companies that own approximately 923 new vehicle franchised dealerships as of Q2 2021, or 5.6% of the total number of dealerships in the U.S. (16,623 at year-end 2020 per NADA). In this second installment of our series profiling the six publicly traded companies, we focus on Sonic Automotive.

Our goal with this series is to provide information and insight that can 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. Larger dealers may benefit in benchmarking to public auto dealers.

August 30, 2021 Special Topics

M&A, Reinvesting in Core Operations, or Paying Dividends

How Public and Private Dealerships Should Think About Allocating Capital Amidst Excess Liquidity

Over the past year or so, many auto dealers “outperformed” particularly as inventory shortages have raised margins on new and used vehicles in 2021. Additionally, cost cutting initiatives have dealerships running more efficiently, leading to record profitability. The question now comes for public and private auto dealerships alike: what do I do with this excess liquidity?

In this post, we consider what options are available to both public and private dealers. We look at what decisions the publics are making, and what that could mean for private dealers.

August 23, 2021 Public Auto Dealers Valuation Issues

Q2 2021 Earnings Calls

Public Auto Dealers Weigh Record Profits, Days’ Supply, and Capital Allocation

Second quarter earnings calls across the group of public auto dealers began with similar themes: record profits and earnings, record Gross Profits Per Unit (GPU) on new and used vehicles, and tightening inventory conditions. This week we take a deeper dive into some of those themes including remarks from management, related to expectations moving forward.

May 24, 2021 Special Topics Valuation Issues

Valuation and M&A Trends in the Auto Dealer Industry

Full Speed Ahead or Partly Cloudy?

A few weeks ago, I sat down with Kevin Nill of Haig Partners to discuss trends in the auto dealer industry and the release of their Fourth Quarter 2020 Haig Report. Specifically, I wanted to focus on the unique conditions impacting the industry, and also the changing methodology that buyers are utilizing to assess dealership values. Haig Partners is a leading investment banking firm that focuses on buy/sell transactions in the auto dealer industry, along with other transportation segments. As readers in this space are familiar, Haig Partners also publishes Blue Sky multiples for various auto manufacturers based on their observations and data from participating in transactions in this industry.

April 6, 2021 Blue Sky

Analyzing the Relationship of Rent and Real Estate Values in Dealership Acquisitions

The Opposite, Break-Even or Something In-Between?

The relationship between rent and fair market value of the real estate has an impact on the components of an auto dealer acquisition. While the impacts may be opposite and felt on both sides of the two entities, the impact on the real estate can have a greater effect given lower capitalization rates and/or higher capitalization factors than most implied blue sky multiples. We provide a discussion of the topic with an example in this post.

March 29, 2021 Blue Sky COVID-19 Coverage

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.

December 22, 2020 Blue Sky COVID-19 Coverage

Weather Report for Auto Dealers

Q3 Climate for Blue Sky Multiples, Transaction Activity, and Other Trends

In the last few weeks, Haig Partners and Kerrigan Advisors have released their Third Quarter Blue Sky Reports and J.D. Power just released its U.S. Sales Satisfaction Index.  We find these reports to be timely and informative of not only where the auto dealer industry is today, but where it is headed.  Through observing all of these different sources, we can achieve a well-rounded understanding of the climate surrounding the auto dealership industry. In this post, we look at a few of the trends and key takeaways discussed in these reports.

November 2, 2020 Special Topics Valuation Issues

GM and Nikola Partnership: What Went Wrong and Where Does it Stand?

A new trend has emerged as auto manufacturers are seeking out start-ups for their technology in a mutually beneficial relationship, perhaps best exemplified by GM and Nikola’s plan for a partnership. In this post, we look at the original deal, ensuing issues, and current plans. We will also look at what this trend could mean for dealerships going forward, and the importance of the valuation date.

September 28, 2020 Blue Sky COVID-19 Coverage

Blue Sky Multiples Rebound from Q1 Declines but Full Recoveries Reserved for Top Brands

Blue Skies Ahead?

In this post, we review Haig’s Q2 report on trends in auto retail and their impact on dealership values. We’ll also look at how Blue Sky multiples have rebounded after declines in Q1. While most brands saw a partial recovery, a return to pre-COVID multiples was largely reserved for brands with the highest multiples in their category (luxury, mid-line import, and domestic).

July 27, 2020 COVID-19 Coverage

Fiat Chrysler & Peugeot (PSA) Merge into “Stellantis”

Analyzing the Timeline and Twists and Turns of a Transatlantic Merger During a Pandemic 

Last week, we analyzed Asbury Automotive Group’s acquisition of Park Place, a deal scuttled by COVID-19 that came back to life under revised terms. This week, we are moving upstream to look at the merger between Fiat Chrysler (FCA) and Group PSA (manufacturer of Peugeot and Citroen) and observe the new name of the entity, the merits and hurdles of the ongoing deal, and some potential impacts on auto dealers.

July 20, 2020 Luxury Public Auto Dealers Special Topics

Asbury-Park Place Acquisition as Seen Through a Monday Night Football Commercial

You Make the Call!

In this week’s post, we review a timeline of the Asbury-Park Place transaction, along with an analysis of Asbury’s stock price against the rest of its public competitors and also examine the operational strategy of Asbury over the years to explain aspects of the Park Place acquisition. As with any merger or acquisition, the true success or failure of the deal may not be known for years. Investors and industry professionals can try and play armchair quarterback and try to predict the outcome. This blog post aims to provide ample information so that you can “make the call” on the transaction.

June 22, 2020 Special Topics Valuation Issues

Valuation and M&A Trends in the Auto Dealer Industry

Shifting Out of Neutral

For this week’s blog post, we sat down with Kevin Nill of Haig Partners to discuss trends in the auto dealer industry and the recent release of their First Quarter 2020 Haig Report.  Haig Partners is a leading investment banking firm that focuses on buy/sell transactions in the auto dealer industry, along with other transportation segments.  As readers in this space are familiar, Haig Partners also publishes Blue Sky multiples for each of the auto manufacturers based on their observations and data from participating in transactions in this industry.