Despite slight cooling due to economic headwinds, the buy-sell market remains active and thriving in 2025. In today’s episode of Driving Solutions, host Jim Fitzpatrick is joined by Erin Kerrigan, managing director of Kerrigan Advisors, to discuss the current state of the buy-sell market and the findings of the firm’s latest Q1 Blue Sky Report®.
Q1 activity slowed slightly but remains historically strong
According to the report, buy-sell activity in the first quarter of 2025 was down by 14% compared to the same period last year. Still, it remained 70% higher than the pre-pandemic average, with an annualized pace of 375 transactions. This pace suggests that the market is continuing to advance at an elevated pace despite short-term uncertainty.
The Kerrigan Advisors predict that 2025 will be a slightly slower year than 2024, but the broader trajectory remains strong.
Sellers hesitate while buyers remain committed
"The growth mentality is alive and well. Buyers are saying, 'I need to be one of the top 150.' A lot of folks are doubling down on their plans to grow."
One surprising trend revealed by the report is the shift in momentum between buyers and sellers. Despite economic turbulence, buyers aren’t pulling back — in fact, they’re doubling down on acquisitions. On the other hand, sellers are hesitant and wary of initiating a transaction if they perceive weakness in the market.
Shift toward single-store deals
The first quarter saw a significant decline in the number of franchises changing hands, with 134 franchises transacting compared to 234 a year ago — a 43% drop.
However, Kerrigan notes that the comparison is slightly skewed by Holman’s acquisition of Leith Automotive Group, which involved more than 30 stores.
Multi-store deals fell sharply. Nearly 80% of first-quarter transactions were single-store transactions, and multi-dealer transactions declined by 39%.
Volatility and valuations
There is a heightened level of volatility in the market, with the Volatility Index (VIX) hitting its 18th-highest level on record in the first half of the year. Meanwhile, the Kerrigan Index fell 20% after reaching an all-time high in February.
Still, dealership valuations remain strong. First-quarter earnings increased by an average of 7%, marking the first time the industry has seen both year-over-year and quarter-over-quarter gains since the pandemic. As a result, the Blue Sky Index remained flat but continues to sit 70% above pre-pandemic levels.
Tariff uncertainty and OEM impacts
While tariff concerns are causing some hesitation, Kerrigan doesn’t believe they will cause significant disruption to the buy-sell market. She predicts that once there is additional clarity or resolution, the market could experience a substantial surge in transaction activity.
OEMs, such as Mazda that don’t have a manufacturing footprint in the U.S. are exposed to tariff impact and will need to navigate the situation carefully.
Due to tariff uncertainty, Kerrigan Advisors will not adjust its valuation multiples until more information or clarity becomes available.
Long-term trends and consolidation
As buyers become more selective, regional market share is playing a larger role in acquisition strategies. Kerrigan predicts that over the next decade, major regions and metro areas will become significantly more consolidated, resulting in a dramatic reduction of single-point dealers.
Keeping an eye on Chinese OEMs
The Kerrigan OEM Survey, which queried more than 100 OEM executives, revealed a generally positive outlook on dealership profitability and valuations in 2025. However, 76% of executives expect Chinese automakers to enter the U.S. market, and 70% express concern about the financial impact due to the global market share loss caused by Chinese brands.
Despite the concerns, Kerrigan believes the U.S. is in a strong position. With legacy OEMS losing ground in China, the world’s largest auto market, they cannot afford to lose share in the U.S. market. As a result, they will fight aggressively to maintain their presence and profitability in the United States.
