The buy/sell transactions of automobiles increased 20 percent year over year in the third quarter, which would make 2018 be the fifth-consecutive year of over 200 buy/sells according to The Blue Sky Report by Kerrigan Advisors.
“With rising interest rates and the changes coming to auto retail, we find sellers more motivated today, concerned that current valuations may not replicate in the future,” Kerrigan Advisors Managing Director Erin Kerrigan said. “Many of these sellers are willing to accept creative transaction structures as part of their exit in order to achieve their valuation goals, a new industry trend and one we expect to continue into 2019.”
According to the report, Factors contributing to these are the growing U.S. economy that has enabled the average dealership to achieve record sales over the last 12 months.
“Capital markets are attracted to the sustainability and resilience of the dealership business model, even in the face of a more volatile stock market,” Ryan Kerrigan, managing director of Kerrigan Advisors, said. “These investors believe in the business case for consolidation, particularly as technology becomes an increasingly critical part of retailing and scale improves profitability.”
Highlights from the Blue Sky Report Q3 2018 include that 179 dealership buy/sell transactions were completed in the first nine months of 2018, compared to 149 transactions in the first nine months of 2017; year to date domestics’ share of the buy/sell market increased to 52 percent, up 68 percent from 2015; and the number of larger dealership groups -- those with more than nine dealerships -- has grown by 50 percent since 2012.
Preview the report here.