M&A Activity for Auto Dealerships Falls Slightly in 2016 As Buyers Become More Cautious, according to 2016 Year End Edition of The Haig Report released by Haig Partners
FT. LAUDERDALE, Fla., March 24, 2017 -- The number of auto dealerships sold in the US declined 6.5% from the peak levels reached in 2015, according to data published in the 2016 Year End edition of the Haig Report released today by Haig Partners.1 Demand shifted from luxury and import brands to domestic brands that are heavier in trucks and SUVs. Most franchise values remain unchanged. Despite a decline in the number of dealerships sold, the number of dealership groups sold increased 17.6% as their owners took advantage of market conditions to exit the industry. Demand for dealerships remains strong with public dealer groups, private dealer groups and institutional investors all looking for fairly priced acquisition opportunities. Dealership buy-sell activity should be robust in 2017.
The Haig Report tracks developments in auto retail and how they impact dealership values. It includes data and analysis on the performance of auto dealerships, identifies noteworthy events to the industry, discusses trends in the M&A market for dealerships, gives guidance on estimated range of values for different franchises, and provides an outlook for the M&A market in 2017. The Haig Report is based on data gathered from many public sources, as well as interviews with leading dealer groups, and bankers, lawyers and accountants who specialize in auto retail.
Key findings from the 2016 Year End Haig Report include:
- 357 dealerships sold in 2016, down 6.5% from 2015.1
- Public company spending on US auto dealerships fell 14.5% from 2015 as they spent more of their capital on stock buy-backs, European auto dealerships and truck dealerships/leasing.2
- Sales of dealership groups increased 17.6% from 51 groups in 2015 to 60 groups in 2016 as owners took advantage of conditions to exit near all time high valuations.
- 21% fewer luxury dealerships sold, 25% fewer midline import dealerships sold, while sales of domestic dealerships increased 31%, as compared to 2015.
- Macroeconomic indicators such as GDP, interest rates, employment, number of miles driven, gas prices and consumer sentiment are all highly favorable for dealers at the moment.
- Other trends such as used car pricing, incentive spending by the OEMs, and loan losses are growing less favorable to dealers.
- Haig Partners average blue sky multiple fell 2.9% from 2015.
- Average profits per dealership fell 2.4% compared to 2015 to $1.467M per dealership.3
- Average estimated blue sky values per dealership dipped 5.4% from to 2015 to $6.83M.
- Private equity firms and family offices are increasingly active and making substantial investments in auto retail.
Alan Haig, President of Haig Partners, said, "Despite the small contraction in 2016, we expect 2017 will be another strong year for dealership buy-sell activity. There remain many buyers looking for dealerships, financing is still readily available, and more sellers are realizing that if they want to sell their dealerships before the next recession they will likely need to accept today's offer since tomorrow's offer could be lower."
The 2016 Year End Haig Report also addresses the potential impact of the Trump administration on the value of dealerships. Values could go up if regulations are reduced, taxes are reduced and we enjoy faster economic growth, or down if we face higher interest rates, trade wars, escalating international tensions, or a recession.
Haig Partners is seeing these conditions in its current engagements that include domestic, import and luxury dealerships that range from Florida to New York to California. The value of the transactions they have closed over the past two and a half years is approximately $900M, including two of the largest transactions of 2016, so they have unique insights into current market conditions and how they impact dealership values.
The Haig Report is published each quarter and is a valued source of information to many in the auto industry who look to it for its comprehensive data, analyses and opinions about the auto retail industry. Included in each edition are Haig Partners' blue sky multiples that serve as a gauge for franchise values. To download the report, please click here.
About Haig Partners
Haig Partners is the leading buy-sell advisory firm for owners of higher value dealerships and dealership groups. Its team of four advisors has been involved in the purchase or sale of over 270 dealerships since 1996 for a total value of over $3.5 billion (excluding inventories), more than any other team in the industry. Its team combines the expertise gained from its years in investment banking and senior positions at AutoNation and Asbury to provide advice and lead sales processes that are carefully tailored to maximize price while satisfying other client objectives like maintaining confidentiality.
Alan Haig, the founder, has been involved in auto retail since 1996 when he wrote the original business plan for the new car division at AutoNation and then went on to lead its acquisition department. Alan and the team at Haig Partners are well recognized experts in auto retail and the buy-sell market and are frequent speakers at leading industry events such as NADA/ATD, Automotive News Retail Forum, American Institute of CPAs, National Association of Dealer Counsel, AutoTeam America Buy-Sell Summit, American Financial Services Association, Bank of America Merrill Lynch Dealer Day, and others.
Contact:
Alan Haig
954-646-8921
alan@haigpartners.com
1 Data from The Banks Report and Haig Partners. Excludes the Berkshire Hathaway acquisition of Van Tuyl Automotive in early 2015.
2 Data based on SEC filings.
3 Data from NADA.
SOURCE Haig Partners
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