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What falling dealership values mean for the future of M&A

Dealership values remain higher than before the pandemic but have started to decline in the latter half of 2023. This has led some to feel concerned about their retirement plans and whether now is a good time to exit the business.

On this episode of Driving Solutions, host Jim Fitzpatrick is joined by Haig Partners Managing Directors Peter Thiel and Jayson Crouch. Haig Partners is one of the leading buy-sell advisory groups in the U.S., overseeing some of the largest M&A deals of the last few years. Both Thiel and Crouch bring years of experience in financial analysis and business strategy to the automotive sector, making their insights invaluable to automotive leaders. Now, they share insights into today’s M&A market and what current dealership values mean for business owners.

Key Takeaways

1. Dealership values are indeed starting to decline in response to profitability pressures. With the return of inventory, vehicle prices have started to deflate, challenging dealers to sustain their revenues.

2. Nevertheless, dealership values remain higher than they were before the pandemic. More importantly, the market is seeing surging demand for more rooftops. Confidence in the retail automotive sector has grown heavily since the COVID-19 pandemic, thanks to unexpectedly high sales, new opportunities in the electric vehicle market, and legislative support for the franchise system.

3. Haig Partners uses a competitive bidding process to close deals instead of targeting a single client. This allows retailers to identify better buyers and gives them more negotiating power to land bigger deals.

4. It is crucial to contact a buy-sell firm such as Haig Partners when putting a storefront up for sale since M&A advisors have a nationwide network of potential clients and can match retailers with buyers already interested in expanding into their area. By including a wider list of potential customers, business owners may also discover their dealership values are higher than expected by only speaking with local buyers.

5. With more consolidation expected to happen within the retail automotive sector, independent storefronts may struggle to compete with bigger conglomerates in some areas. However, standalone businesses do have strengths in certain areas and can outmaneuver bigger corporations by exploiting their advantages.

"[Buy-sell] activity is still very high; we are very busy working on a lot of transactions across the country. Why is that? Well, look at it from the perspective of a buyer. Number one, they have very strong balance sheets right now, they have a lot of cash built up...they have high confidence in the industry right now...there's a lot of pent demand out there on the new vehicle side...the fixed ops business is still very strong and growing...and then consolidation continues." Peter Thiel

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Colin Velez
Colin Velez
Colin Velez is a staff writer/reporter for CBT News. After obtaining his bachelor’s in Communication from Kennesaw State University in 2018, he kicked off his writing career by developing marketing and public relations material for various industries, including travel and fashion. Throughout the next four years, he developed a love for working with journalists and other content creators, and his passion eventually led him to his current position. Today, Colin writes news content and coordinates stories with auto-industry insiders and entrepreneurs throughout the U.S.

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