Publicly traded dealership groups are starting to return to the mergers and acquisitions market as the post-pandemic economy stabilizes and OEMs ramp up production. But what exactly are buyers looking for, and where are they hoping to purchase storefronts? On this episode of Inside Automotive, host Shyann Malone is joined by Alan Haig, president and founder of buy-sell advisory Haig Partners, and Mike Toth, the firm’s managing director, to give a quarterly update on the state of retail automotive M&A.
Haig notes that the April-June period was mixed for both private and publicly traded retailers. The average price of a new vehicle has fallen since 2022, while dealership inventories have grown to roughly 50 days of supply. Improving supply chains have ended major car shortages, which in turn has lowered per-vehicle profit margins. However, while the car market faces challenges, Haig clarifies that dealers still earn nearly twice their pre-pandemic revenues. The strength of the retail automotive sector has attracted hesitant investors back to the mergers and acquisitions market, creating opportunities for store owners looking to retire. “[Investors] are seeing the automotive industry…to be that excellent source of return on investment for capital, so they’re continuing to roll their chips into the future,” Haig remarks.
Mergers and acquisitions activity has especially picked up in non-traditional markets such as the Northeast. While buyers tend to search for locations in states such as Florida, California and Texas, Toth notes that there are only so many storefronts on sale in these regions. “So dealers are looking to these other markets where they can find other opportunities to acquire and grow their business that they otherwise wouldn’t be able to,” he explains.
There are certain elements that M&A firms are looking for in dealerships. Haig notes that size plays a crucial role in attracting publicly traded retailers. Large-scale and well-established operations have always been in high demand, but in the current mergers and acquisitions market, competition for these storefronts has rapidly intensified. The customer experience is another key component. Drivers are increasingly prioritizing convenience when they shop for a new vehicle. To accommodate consumer preferences and attract more buyers, dealers need to integrate efficiency-boosting technologies and practices into their operations. Dealerships that offer both quantity and quality can sell for massive amounts. Haig notes that his company recently oversaw the largest transaction in dealer M&A history with the sale of Al Hendrickson Toyota to Morgan Automotive Group in June. Haig Partners has even more massive deals in the pipeline as more store owners look to retire from the car business. Ultimately, while it will take some time for a sense of normalcy to return to the industry, the second quarter confirms that many opportunities remain for both buyers and sellers in the retail automotive sector.
