SAN FRANCISCO – The Presidio Group LLC, through its subsidiary Presidio Merchant Partners LLC, recently released its Automotive Retail M&A Update for mid-year 2011.
- M&A activity for auto dealerships is up sharply in 2011. Public retailers completed $411 million in acquisitions through the end of July (according to corporate SEC filings), a 92 percent increase over commitments made in all of 2010. Private buyers are also active though terms of their purchases of dealerships and dealership groups are not reported.
- The increase is attributable to a number of factors. The market was virtually frozen for three years, with just $28 million worth of acquisitions by public retailers in 2009 (according to SEC filings). Many dealers were awaiting more favorable conditions to exit their businesses. Strong unit sales, fewer marginal dealerships, lower operating costs, and record dealership profitability are making acquisitions more attractive for both public and private buyers. Stabilized real estate values and low interest rates are also contributing to the rebound in M&A activity.
- Buyers remain most interested in Big 5 dealerships (Toyota, Honda, Lexus, BMW, and Mercedes Benz) though Korean and domestic dealerships are becoming more attractive, as is Audi. The supply and market share challenges facing the Japanese manufacturers should dissipate by year end; these manufacturers are expected to offer attractive incentives and products to restore sales to normalized levels late this year.
- Presidio believes the industry is in the early stages of at least a five-year up-cycle, and anticipates continued high levels of activity for several years, absent a double-dip recession. On an annualized basis, 2011 may see M&A activity by public automotive retailers exceed $750 million, impressive though still below the 2006 high of more than $1.0 billion.
“The M&A market for auto dealerships has rebounded strongly this year, after its virtual freeze of 2008-10,” said Alan Haig, Managing Director and Co-Head of Presidio’s automotive retail services group. “During the recession, most public companies and large private buyers shied away from acquisitions, and the few offers that were made were unattractive to sellers. Today, the perceived valuations of buyers and sellers are closer, so we’re seeing significant activity because of pent-up interests, as well as a dramatic improvement in dealer profitability.”
The full report is available here.
The Presidio Group’s automotive practice is the premier full service advisor for sellers of high value dealerships and dealership groups. The practice focuses on dealership transactions valued between $20 million and $300 million. Presidio’s professionals have been involved in more than 150 auto dealer related purchases, sales, and capital raises, totaling more than $4 billion. Its Automotive Retail M&A Market Update is a leading source of information on auto retailers and acquisition activity.
About The Presidio Group LLC. Presidio is a personal and corporate financial services firm, and one of the nation’s leading independent wealth advisors with client assets of nearly $4 billion. Through its interconnected investment banking, private equity, wealth advisory, and family enterprise strategies units, Presidio is uniquely capable of addressing the lifecycle challenges of wealth – from its creation, through its retention and growth, to its transfer to successive generations. The firm’s principals have extensive experience running businesses and creating wealth of their own; their understanding and management of risk is unsurpassed. Presidio and its subsidiaries currently serve clients throughout the United States, through offices in San Francisco, Dallas, Los Angeles, and Chapel Hill. Presidio Merchant Partners LLC is a member of FINRA and SIPC. For more information, visit www.thepresidiogroupllc.com.