Typically, dealerships’ value is compromised of tangible assets such as cash, inventory, equipment, and goodwill. But, if dealers are looking to add or sell stores to their portfolio in the current faulty climate, they’ll need to know what impacts their values today. Joining us on today’s episode of Inside Automotive is Alan Haig, President and Founder of Haig Partners.
The latest Haig Report for Q3 2023 indicates that demand for dealerships remains robust. With at least 385 dealerships changing hands by the end of the third quarter, the report projects that 2023 will be the third-most active year in dealership acquisitions, following 2021 and 2022.
1. Dealers should be conscious of the fact that their profit mix is ever-changing. For instance, the Haig Partners have observed a shift in new car grosses as supply returns; used units and F&I remain steady, but fixed operations are increasing. Compared to 2022, dealership profits are down 17% year to date.
2. According to the results of a recent LinkedIn survey by Haig Partners, respondents anticipate a 25% drop in dealership profit on average. Haig affirms, “We have seen a decline in profits, but we haven’t seen a decline in dealership value.”
3. The Toyota and Lexus franchises have elevated themselves in the last 24 months. “I think dealers enjoy the spirit of partnership between dealers and the factory,” Haig argues. Moreover, Kia has become one of the most desirable brands over recent headwinds.
4. Earlier this year, the Haig team played a crucial role in completing two major dealership acquisitions: they facilitated the largest acquisition ever made by any franchise and also helped in acquiring Nick Saban’s Mercedes-Benz for $700 million.
5. After examining Haig’s statistics, the industry has sold 360 dealerships thus far, a 19% decline from last year. Haig Partners anticipates selling 500 stores by the end of this year if things continue at the current rate. After 2021 and 2022, this marks the third-best buy/sell year in the industry.
“The market is still two to three times more profitable today than it was before the pandemic in 2020.” – Alan Haig