Key Takeaways
Strategy Should Drive Transactions, Not the Reverse - Murphy advocates for a more structured, data-driven buy-sell process where capital allocation decisions precede transactions, positioning M&A as an outcome of long-term strategy rather than a reactive event.
Dealers Benefit from a Full Value Chain Perspective - Understanding OEM product cadence, allocation trends, and market share shifts allows dealers to anticipate inventory and profitability cycles, improving decisions around acquisitions, facility investments, and brand mix.
Lifecycle Retention Expands Earnings Power - Dealers that prioritize service retention, used vehicle capture, and customer lifecycle management can materially increase return on invested capital and support higher long-term blue sky multiples.
After nearly 27 years covering the automotive industry as a sell-side analyst at Merrill Lynch and Bank of America, John Murphy made a deliberate shift from Wall Street to Haig Partners. His move was not about stepping away from the industry. It was about stepping closer to the operators who live it every day.
John’s questions often produced thoughtful commentary from senior executives at the publicly traded auto dealerships, many of which we have referenced in our quarterly earnings calls blogs. John has now joined Haig Partners, a leading auto dealership investment bank widely known for its buy-sell advisory work and for publishing blue sky multiples in the Haig Report, a platform he plans to augment with his research background and focus on broader strategy.
The perspectives that follow in this first installment of our two-part series are based on our recent conversation with John. To provide a more cohesive analysis, we have distilled and organized his insights around the themes that emerged most clearly – why he joined Haig, what he believes most analysts misunderstand about the automotive value chain, and why he sees structural upside in the dealership model over the long term.
Why Murphy Joined Haig: From Quarter-to-Quarter to Long-Term Strategy
Murphy describes life as a sell-side analyst as a “constant sprint marathon.” Over time, the pace of Wall Street has only accelerated. The focus has narrowed to the next quarter and the next earnings call. Maybe the next year at most.
That environment increasingly conflicted with what he views as his core competency: longer-term business strategy. “Calling the next quarter” is a game he knows well. But advising management teams and boards on capital allocation, product cycles, and structural positioning is where he believes he creates the most value.
At Haig Partners, Murphy saw an opportunity to bring institutional-level research and strategic thinking directly to private dealership operators. He views dealers not merely as operators, but as investors allocating capital across brands, acquiring and divesting stores, and continually evaluating return on invested capital. This perspective has only reinforced since joining Haig.
That investor mindset creates natural parallels to Murphy’s prior advisory role with institutional clients. The difference lies in both time horizon and operational proximity. Private dealers often think in decades, not quarters, and their closeness to daily operations allows them to implement strategic and process improvements more quickly than large public organizations.
Murphy also plans to expand Haig’s strategic advisory offering. Haig has long published industry-leading blue sky multiples, which he intends to deepen with more robust macro and brand-level analysis. That includes more systematic evaluation of OEM product pipelines, throughput trends, and market share shifts that influence dealership performance over multi-year cycles.
In addition, Murphy has emphasized the importance of registration data and units-in-operation analysis to better understand local competitive positioning. By layering micro-level market intelligence onto macro industry trends, Haig aims to provide dealers with more actionable insight into when and where to grow, where to consolidate, and where to redeploy capital.
Finally, Murphy believes buy-sell advisory can become more structured over time. Rather than engaging only when an owner is ready to transact, he envisions an ongoing dialogue around strategy, helping dealers think proactively about capital allocation. Historically relationship-driven and episodic, dealership M&A can become more disciplined and data-driven so that transactions emerge from strategy rather than drive it. Research should not simply inform a deal; it should shape the decisions that precede it.
Seeing the Whole Value Chain
One of Murphy’s differentiators throughout his career has been his coverage of the entire automotive value chain. While many analysts specialize in a single segment, he followed automakers, suppliers, public dealership groups, and related businesses simultaneously. That breadth, in his view, is critical.
The automotive ecosystem is highly integrated. Decisions upstream inevitably flow downstream. Product cadence at the OEM level influences allocation, inventory turns, and ultimately dealership profitability. Capital commitments by manufacturers shape the competitive landscape for years.
For dealers, understanding what is “coming downstream” is more than academic. It directly affects capital allocation decisions. If a brand faces a weak product cycle, dealers may choose to delay facility investments. Conversely, a strong upcoming product pipeline may justify leaning in with both financial and human capital.
Murphy emphasizes that product cadence analysis should not remain confined to OEM headquarters. Dealers benefit from understanding where each brand stands within its lifecycle. That insight informs staffing decisions, acquisition strategy, and even geographic expansion.
Strategic operators do not simply react to allocation and inventory conditions. They anticipate them. Viewing the dealership not as an isolated retail location but as a node within a broader value chain can materially improve long-term outcomes.
The Structural Bull Case for Dealers
Murphy is fundamentally optimistic about the dealership model. He describes the franchise system as analogous to the NFL: there is a relatively finite number of points, and entry is restricted as manufacturer approval is required. Capital continues to seek access, but private equity firms without demonstrated operational credibility in the industry may find themselves on the outside looking in. That scarcity has real valuation implications. When access to an asset class is constrained, and demand for ownership grows, capital competes for a limited supply of franchises. Over time, that dynamic can provide structural support for valuation, particularly when paired with stable earnings characteristics and recurring cash flow from fixed operations.
At the same time, Murphy believes earnings power across the dealer body has structural upside. Fixed operations and used vehicle operations provide more structural protection through economic cycles than many appreciate. While new vehicle sales are cyclical, service and parts revenue create recurring cash flow.
Beyond stability, Murphy sees growth. He suggests that the average dealership point could generate materially higher profits over time through operational optimization and lifecycle management. Even incremental improvements in retention and service capture can meaningfully enhance return on invested capital.
Having covered the sector through the Great Financial Crisis and the pandemic shock, Murphy’s optimism is informed by experience.
The Untapped Lifecycle Opportunity
Perhaps the most compelling opportunity Murphy highlights lies in lifecycle capture. While dealers generate substantial revenue, a meaningful portion of the broader aftermarket remains outside the franchise system. The objective extends beyond selling new vehicles. It involves originating and retaining the customer relationship through service, capturing the trade-in, and reselling the vehicle into the next ownership cycle, creating a virtuous loop. Retaining a vehicle within the dealership ecosystem for even one additional ownership cycle can materially expand lifetime value.
Connectivity and technological advancements may enhance this opportunity. Modern vehicles increasingly incorporate embedded systems capable of communicating service needs proactively. That connectivity can strengthen the dealer’s ability to retain customers for maintenance and repairs. Retention, in turn, supports used vehicle sourcing and residual values.
Murphy views this lifecycle strategy as central to long-term value creation. Dealers that focus solely on front-end grosses risk leaving significant profit untapped. Those that think holistically about customer retention and asset management may unlock substantial incremental earnings power, and potentially meaningfully higher long-term valuations.
Conclusion
We thank John for sharing his perspective on the auto dealership industry and congratulate him on the recent change. Murphy’s move reflects a broader shift towards more strategic, research-driven decision-making within the dealership industry. As competition and capital increase, insight and strategy will increasingly differentiate long-term winners.
In Part 2 of this series, we will examine how public and private markets value dealership groups differently, why private buyers sometimes pay premiums, and what factors ultimately move valuation multiples over time.
To discuss how recent industry trends may affect your dealership’s valuation, feel free to reach out to one of the professionals at Mercer Capital.