Public Retailer Acquisition Spending Jumps 41% But Number of Dealerships Sold Fell 6% According to The Q1 2018 Edition of The Haig Report Released by Haig Partners
- Auto dealership values are largely unchanged from Q4 2017
- More dealerships are hitting the market
- Buy-sell activity for remainder of 2018 is expected to pick up
FT. LAUDERDALE, Fla., May 30, 2018 /PRNewswire/ -- As published in the Q1 2018 Haig Report released today by Haig Partners, the number of dealerships that sold in the US declined 6% in Q1 2018 compared to Q1 2017, from 82 to 77.[1] But acquisition spending by publicly traded auto retailers jumped 41% in Q1 2018 to $403M, up from $285M in Q1 2017. Lithia was the most active of the publicly traded companies and continues to target underperforming large platforms in different parts of the US. Potential disruptors such as ride sharing, electrification and autonomous vehicles are not yet having an impact on dealership values, but some buyers are beginning to have concerns.
Profits at privately owned dealerships over the last twelve months were 0.4% lower than 2017 and are down 1.9% year over year, mostly due to rising costs. Estimated values of privately owned dealerships were essentially unchanged from year end 2017, according to the Haig Report. Haig Partners' franchise blue sky multiples were also unchanged, although valuations could decline later in the year if earnings decline and more dealers decide to sell their businesses.
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 value ranges for different franchises, and provides an outlook for the M&A market in 2018. 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.
Other key findings from the Q1 2018 Haig Report include:
- Macroeconomic indicators such as GDP, employment, number of miles driven and consumer sentiment remain highly favorable for dealers.
- Other trends such as interest rates, gas prices, consumer finance terms and declining dealership profits are growing less favorable to dealers.
- Fleet sales are up by 8.8% in Q1 2018, but retail sales were almost flat.
- Declines in new and used gross profits per vehicle are being offset by gains in F&I and fixed operations.
- Total sales and gross profits continue to increase at dealerships, but expenses are rising faster leading to earnings declines at many public and private dealers.
- The average dealership pre-tax profit for the twelve month period ended Q1 2018 was $1.389M, down 0.4% from year end 2017.[2]
- Average estimated blue sky value per dealership dipped 0.4% in Q1 2018 to $6.9M.
- Potential threats from autonomous cars, ride sharing, and electrification have not yet had a measurable impact on dealership values, but buyers are increasingly thinking about these risks.
- Public auto retailers spent 41% more acquiring auto dealerships in the US than in 2017.
- Institutional investors appear to be divesting more than investing in auto retail. Leucadia and Abrams Capital sold their stakes in two different dealership groups, and we are not aware of any new major entrants.
Alan Haig, President of Haig Partners, said, "The buy-sell market remains very active. Dealer profits continue to hold steady, but there are more headwinds than in the past. With the increase in dealerships for sale and a little pressure on earnings, we may see multiples come down slightly later in the year. But prime dealerships are still getting prime pricing."
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. They have closed dealership transactions with a value of $3.9B over the past 20 years, so they have unique insights into 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 five advisors has been involved in the purchase or sale of 290 dealerships since 1996 for a total value of $3.9 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, Asbury and Bank of America 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 (AICPA), National Association of Dealer Counsel, AutoTeam America Buy-Sell Summit, Bank of America Merrill Lynch Dealer Day, and many others.
Contact:
Alan Haig
954-646-8921
[email protected]
[1] Data from The Banks Report and Haig Partners.
[2] Data from NADA.
SOURCE Haig Partners
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