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Dealer Acquisition Action is Strong, Growing

  • May 01, 2014
  • Auto Remarketing

Dealers and dealer groups are making moves at a rapid pace, as research shows acquisition rates are on the way up. 

According to an industry report released Monday, auto dealership buy-sell transactions rose by double-digit rates in 2013, and analysts are predicting this year's rates will continue to rise. 

The buy-sell market is reviewed in The Blue Sky Report from Haig Partners LCC, and the report shows public retailers committed more than $1 billion to acquisitions for the first time since 2006 last year. 

And these stores are going for more, as the value of public dealerships' acquisitions climbed 16.5 percent from 2012 levels, according to the report. 

The number of private transactions rose 14 percent. 

"Auto dealers are enjoying record profits, new vehicle sales are strong and rising, and the economy is improving. Those factors are driving valuations to all-time highs. It's an ideal environment for sellers," said Alan Haig, founder of Haig Partners. "But the sellers' advantageous position isn't deterring buyers. It's a low-yield world with few attractive alternatives for investment capital. Even with high purchase prices, dealership acquisition returns are very compelling." 

New firm Haig Partners advises owners on selling their dealerships. Its founder, Alan Haig, led the automotive retail practice for the investment banking arm of The Presidio Group LLC, and was head of AutoNation's corporate development group. 

Haig explained the buy-sell market will remain "robust" for a variety of reasons. 

The report states private buyers are very active and interested in both single-point stores and larger groups. 

Haig also shared that most all of the public retailers have expressed "a desire to grow through meaningful acquisitions." 

"Many dealership groups have the capacity to make commitments of $100 million or more, with several capable of $500 million deals," according to the report. 

The range of brands is growing, as well. 

According to the report, the 10 largest dealer groups acquired 16 different franchises in 2013. 

"For sellers, dealership values appear to be at an all-time high. Plus, almost every franchise is in demand today. More dealers are taking this opportunity to sell their business for values that were not conceivable just a few years ago. And the market is ripe for the sale of large dealership groups," the report stated. "We remain in a 'win-win' period for dealership sales: strong returns for buyers and strong pricing for sellers."

 

 

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