Buy/sell expert Alan Haig on buyer confidence and industry consolidation

Are you wondering if now is the time to sell your car dealership or even acquire an additional one? Today on Inside Automotive, we’re joined once again by Alan Haig, President and Founder of Haig Partners, to discuss buyer confidence and his firm’s latest transactions, including a deal that is expected to add over $850M in annualized revenue for Lithia Motors.

South Florida is one of the best markets for auto retailing in the country and Haig believes Lithia Motors was smart to move aggressively and purchase the nine dealers from Lehman Auto World. There is buyer interest across the board and almost all of the offers received in the first quarter, closing in the second, surpassed expectations.

However, the auto industry is facing economic headwinds like rising gas prices, inflation, and interest rates. These factors are causing some dealers, who would normally be interested in buying, to hold off for more favorable conditions. Despite this, consolidation is not slowing down.

If you are a dealership buyer who now has two and a half years of record profits in the bank account, that money will have around a -8% yield due to inflation. So, dealers are finding it more lucrative to deploy those funds. Lenders are also confident and provide a lot of capital for these transactions.

Once the pandemic hit, there was an accelerated shift toward digital retailing. Consumers were turning to online retailers like Carvana and were buying cars sight unseen. Caravana’s model of a one-price, transparent buying process also allows smooth purchasing for consumers. Customers are returning to showrooms but not at the same levels pre-pandemic. Dealers who are still holding out on digital retailing can no longer afford to.

Haig Partners has been involved in the purchase or sale of more than 560 dealerships, including 20 of the top 150 dealers.