Public Company Acquisitions Slow as They Divest Underperforming Assets
Public company acquisition activity in the US fell steeply in Q2. Only Lithia was active, pending just $79M on U.S. franchised dealership acquisitions. This level of investment was a 94% decrease from Q1, which had one of the higher quarterly spends on record at $1.2B. These groups did spend about $200M in Q2 on investments in non-US auto dealerships, such as heavy truck and European acquisitions. (Haig Partners represented the owner of a Freightliner heavy-duty truck group in a sale to Penske in June.)
Publicly traded auto retailers are spending more time selling auto dealerships than buying them in this environment. These divestitures include poorly performing dealerships such as ( Stellantis ) CDJR and ( 日产 ) Nissan , but also sometimes dealerships from leading brands due to concentration issues for companies such as Lithia & Driveway or @Group which have done large transactions in 2022 and 2023. In the second half of 2024, the public companies may be shrinking more than growing as they sell weak stores and wait for prices to fall on strong ones.
As these companies shed assets, they improve their profits and generate additional capital for new acquisitions or stock repurchases. And once these firms feel that blue sky values are in-line with expected future profits, we expect the public companies to return to the market and resume their acquisition activities.
Building @ Freddy Media
5 个月Should have held on for the rate cuts!