Auto dealers are enjoying some of the best operating conditions in over a decade. Record profits from higher new vehicle sales and improving fixed operations, combined with a stable economy are creating a robust buy-sell market with both public and private dealer groups keen to acquire additional franchises.
Haig Partners LLC today released The Blue Sky Report for the first quarter of 2014, analyzing recent buy-sell activity and evaluating and forecasting industry trends.
“The number and value of deals accelerated in the first quarter,” said Alan Haig, a leading authority on the auto dealer buy-sell market. “Private dealer groups made 56 acquisitions in all of 2013, but 42 through May of this year alone. Public retailers tripled their activity in the quarter from a year ago, and unlike in recent years, no major acquisitions were made in foreign markets.”
Haig Partners is paying close attention to the significant recalls of General Motors vehicles, but so far, sees no ill-effects on buyers’ interest in GM dealerships. “While GM will be incurring extraordinary costs for the recalls, GM dealers stand to benefit from customers bringing vehicles in for repairs and trading in recalled cars for newer models,” said Haig. “It’s early to call it a non-event, yet GM’s market share is stable, new unit sales are increasing, and its stock price is up from a year ago. We’re currently representing the seller of a very profitable GM dealership and we believe it will trade for a franchise-record price.”
The acquisition of the DCH Auto Group by Lithia Motors (NYSE: LAD) for more than $363 million confirms Haig Partners’ expectation that buyers would begin to pursue acquisitions of high value dealership groups, as discussed in its 2013 Blue Sky Report. “No one’s shying away from very large transactions,” Haig said. “They’re a better use of capital than other investment opportunities, and lenders are more than willing to finance deals. As the buy-sell market began to recover from the doldrums of the recession, there was a concern that sellers had unrealistic valuations for their businesses. But many dealerships have grown into these valuations, so we are seeing buyers and sellers reach agreement on prices.”
The firm’s widely followed Blue Sky Multiples were unchanged from its year end Blue Sky Report. Haig said that some adjustments would likely be made based on mid-year data.
About the firm. Haig Partners LLC focuses on higher value auto and truck dealerships and dealership groups where it can add substantial value through expert advice and comprehensive services. The firm’s principals combine the financial and marketing skills developed as investment bankers with their dealership experience at AutoNation and Asbury. They have an unmatched record of success, having closed more than 230 dealership buy-sells with a value of nearly $3 billion. For more information, visit www.haigpartners.com.