The Numbers, the Deals, and What It All Means for the Future

The first half of 2024 has seen the dealership buy/sell market hit an all-time record, nearly doubling pre-pandemic averages.

According to the Second Quarter 2024 Blue Sky Report by Kerrigan Advisors , a whopping 204 dealership transactions were completed, representing a staggering 381 franchises sold. If this pace continues, we’re looking at over 760 franchises sold by year’s end.

What’s driving this frenzy? A combination of sellers eager to lock in strong blue sky values and deep-pocketed buyers itching to consolidate. But there’s a lot more to the story.

Let’s break it down.

The Kerrigan Index tracks the top seven publicly traded U.S. auto retailers, offering a snapshot of industry health and future earnings expectations.

As of July 2024, the Index surged 15.9%, outpacing the S&P 500’s modest 1.13% gain.

Year-to-date, it’s up 6.65%, though still lagging behind the S&P's 15.78% increase.

Notably, AutoNation and Asbury Automotive Group reached all-time highs, underscoring a strong but selective market for auto retailers.

Why the discrepancy between transactions and franchises?

Many of these deals involve multi-dealership transactions, where a single sale includes multiple franchises. In fact, 55 multi-dealership transactions accounted for 27% of the total buy/sell market, driving consolidation even further.

Key Stats

• Blue sky values remain a hot ticket, up 74% from pre-pandemic levels, despite a slight drop of 17% from last year’s peak.
• Public dealer groups are sitting on $7.4B in capital, with a $370M increase in liquidity from just the first quarter.
• Average dealership earnings have fallen 35% since 2022’s peak, now averaging $4.4M.

On the Upswing:

With a revised 2024 sales target of 450,000 units and growing buyer confidence, Mazda’s blue sky multiple has increased to 3.75. Honda and Ford are also seeing positive movement. Honda’s disciplined inventory management and sales rebound are making it a hot commodity, while Ford’s decision to roll back its ambitious EV dealer requirements is drawing more interest from potential buyers.

On the Downturn:

Some franchises like CDJR (Chrysler, Dodge, Jeep, Ram) are struggling. Ballooning inventory costs and cautious lenders have caused CDJR’s blue sky multiple to drop to a range of 2.5 to 3.5. Nissan is also on shaky ground, with profit declines of 70%, reducing its blue sky multiple to 2.5. Even luxury brand Mercedes-Benz isn’t immune, facing declining market share due to sluggish EV sales and high inventory levels, which have weakened buyer demand.

Shout out to all of our friends at Lithia & Driveway , Morgan Auto Group, Ciocca Automotive, Ourisman Automotive Group, Nucar Family of Dealerships, Hudson Automotive Group, Premier Truck Group, just to name a few of the many auto groups who have gained new partners this year.

Let us know if your dealership has recently gone through a buy/sell transition and how it's going. What suggestions do you have for other auto groups or dealerships looking to make some moves? ??????