The automotive buy/sell market has been busier than ever. Today on CBT News, host Jim Fitzpatrick is joined by Erin Kerrigan, Founder and Managing Director at Kerrigan Advisors. She joins the show to provide the latest update on the Kerrigan Index and discuss the latest trends and activity in the dealership acquisition market.
Kerrigan begins the conversation by reviewing the dealership buy/sell market from 2020 and the first quarter of 2021. In 2020, Kerrigan Advisors saw the most transactions in its history with 289 dealership acquisitions. Kerrigan believes Lithia Motors’ major acquisition of The Suburban Collection is a strong indication the market won’t let up for the rest of the year.
Kerrigan doesn’t believe fear was a major factor in the spike in acquisition activity. Instead, she says the market was driven by skyrocketing valuations. Based on recently collected data, valuations were up 20%, the highest year-over-year increase ever seen.
“The industry has proven to, not only be resilient, but to also capitalize on very challenging times in a way to become a more profitable industry,” said Kerrigan. “That has caught the eye of many outside investors, the capital markets, and the Kerrigan Index surpassed 1000 for the first time.”
According to Kerrigan, dealers are currently making the decision to sell based on two reasons. The first selling factor is the lack of a succession plan. Dealers who don’t have someone lined up to take over the business are finding that now is the best time to sell their dealership. The second reason is based on changes happening in the industry. Kerrigan says that many dealers are aware of evolution taking place in retail automotive. With consolidation on the rise, it is becoming harder for smaller dealership groups to maintain five or fewer stores.
