Dealership owners are often focused on Blue Sky multiples when assessing their store’s worth, but industry experts say relying solely on this method can overlook critical factors. Todd Berko, co-managing partner of Bel Air Partners, joins us on today’s episode of Inside Automotive to break down how using multiple valuation approaches, like ROIs and EBITDA multiples, can provide a clearer picture of a dealership’s true value.
Berko notes that valuation is not just about current earnings but also future growth potential and predictability. By adjusting for working capital requirements, capital improvements, and asset turnover, dealers can align different methods and appeal to a variety of buyers, including private equity firms that prioritize EBITDA.
Notably, the current market remains strong, with Blue Sky multiples trending upward since the pandemic. For example, some brands are trending roughly seven times. Berko notes that non-economic factors, like personal and family circumstances, also drive buy-sell activity, keeping deal flow healthy.
“It’s a healthy market right now.”
Dealers preparing to sell can increase their value by focusing on accurate documentation, especially add-backs such as non-floor-plan debt, amortization, and depreciation adjustments. Moreover, operational improvements, such as hiring skilled managers or tidying up the store, can further enhance profitability and appeal to buyers. Berko warns, however, that some dealers may rethink selling once they see improvements, either from increased profitability or a renewed interest from family members.
Even franchises facing challenges, like Stellantis and Nissan, present opportunities. Smaller or niche brands can offer a strategic entry point for first-time buyers or used-car-focused investors seeking credibility and access to captive financing.
Berko stresses that valuation is as much about preparation and strategic positioning as it is about market conditions. Dealers who approach the process with a comprehensive perspective are most likely to achieve maximum value for their stores.
