Publicly traded dealership groups are starting to return to the mergers and acquisitions market as the post-pandemic economy stabilizes and OEMs ramp up production. But what exactly are buyers looking for, and where are they hoping to purchase storefronts? On this episode of Inside Automotive, host Shyann Malone is joined by Alan Haig, president and founder of buy-sell advisory Haig Partners, and Mike Toth, the firm’s managing director, to give a quarterly update on the state of retail automotive M&A.

Haig notes that the April-June period was mixed for both private and publicly traded retailers. The average price of a new vehicle has fallen since 2022, while dealership inventories have grown to roughly 50 days of supply. Improving supply chains have ended major car shortages, which in turn has lowered per-vehicle profit margins. However, while the car market faces challenges, Haig clarifies that dealers still earn nearly twice their pre-pandemic revenues. The strength of the retail automotive sector has attracted hesitant investors back to the mergers and acquisitions market, creating opportunities for store owners looking to retire. “[Investors] are seeing the automotive industry…to be that excellent source of return on investment for capital, so they’re continuing to roll their chips into the future,” Haig remarks.

Mergers and acquisitions activity has especially picked up in non-traditional markets such as the Northeast. While buyers tend to search for locations in states such as Florida, California and Texas, Toth notes that there are only so many storefronts on sale in these regions. “So dealers are looking to these other markets where they can find other opportunities to acquire and grow their business that they otherwise wouldn’t be able to,” he explains.

There are certain elements that M&A firms are looking for in dealerships. Haig notes that size plays a crucial role in attracting publicly traded retailers. Large-scale and well-established operations have always been in high demand, but in the current mergers and acquisitions market, competition for these storefronts has rapidly intensified. The customer experience is another key component. Drivers are increasingly prioritizing convenience when they shop for a new vehicle. To accommodate consumer preferences and attract more buyers, dealers need to integrate efficiency-boosting technologies and practices into their operations. Dealerships that offer both quantity and quality can sell for massive amounts. Haig notes that his company recently oversaw the largest transaction in dealer M&A history with the sale of Al Hendrickson Toyota to Morgan Automotive Group in June. Haig Partners has even more massive deals in the pipeline as more store owners look to retire from the car business. Ultimately, while it will take some time for a sense of normalcy to return to the industry, the second quarter confirms that many opportunities remain for both buyers and sellers in the retail automotive sector.

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Group 1 Automotive sells four stores

Group 1 Automotive has been busy in the past month as it sold four dealerships throughout three states. This included Nissan of Mobile in Alabama, which was sold on July 31 to growing auto group Tameron Gulf Coast. The dealership has reportedly been renamed Tameron Nissan.

Group 1 Automotive also completed two transactions in Maine, which included Ira Chrysler-Dodge-Jeep-Ram and Volkswagen Saco. The dealerships were both sold to DSR Motor Group and have been renamed to Jack Chrysler-Dodge-Jeep-Ram and Jack Volkswagen of Saco. Regarding the Chrysler-Dodge-Jeep-Ram dealership, DSR Motor Group’s president, David Rosenberg, said, “I was probably the best buyer for the store. And I’m looking to grow the group anyway. I feel a lot of loyalty for the people that I used to work with. It made sense in both cases to buy the stores back.”

Group 1 Automotive also completed a sale in Oklahoma in June as it sold Smicklas Chevrolet in Oklahoma City to Dorian Jimenez, Lilly Jimenez, and Tom Durant. They have reportedly renamed the dealership Classic Chevrolet NW Expy. 

Woodhouse Auto Family acquires Nebraska CDJR dealership

On August 1, Woodhouse Auto Family said it had taken control of the Edwards Chrysler Dodge Jeep Ram dealership in Bellevue, Nebraska. Jason Pittack, the group’s Chief Executive Officer, said, “This location provides our current customers additional convenience and us as an organization an opportunity to develop a relationship with customers that wouldn’t have previously ventured to our Blair, Nebraska location.”  

The Woodhouse Auto Family purchased nearby Huber Cadillac and Huber Chevrolet earlier this year and the latest purchase marks the auto group’s 21st dealership in Eastern Nebraska. 

“Acquiring this location was driven by our commitment to our long-standing Chrysler, Dodge, Jeep, Ram customers that live and work in the Omaha metro community,” Pittack added. 

Lithia Motors leaves North Dakota

Lithia Motors officially exited the state of North Dakota at the beginning of August, selling both Lithia Ford of Grand Forks and Lithia Chrysler-Dodge-Jeep-Ram of Grand Forks to the Nelson family. One of the Nelson dealership group’s owners, Adam Nelson, said his group “felt that [it’s] a good fit for the community” and praised the family-friendly environment in Grand Forks. He also said the dealerships will place a lot of focus on improving the existing service departments, noting that, “Customers can buy their vehicles anywhere, but they want someone who takes care of their vehicle throughout its life cycle.” 

The dealerships have been renamed Nelson Ford of Grand Forks and Nelson Chrysler-Dodge-Jeep-Ram of Grand Forks.  

Bill Ussery Motors sells Florida Mercedes-Benz stores

In transactions totaling $150 million, Bill Ussery Motors sold Mercedes-Benz of Coral Gables and Mercedes-Benz of Cutler Bay to an affiliate of Dream Motor Group earlier this month. Both dealerships were sold to BIJ Motors Coral Gables LLC, with the Mercedes-Benz of Coral Gables dealership costing $55 million and the Mercedes-Benz of Cutler Bay dealership costing $45 million. 

The dealership sales were just two parts of an overall real estate asset purge by Bill Ussery Motors that likely reached a total price of approximately $650 million. In addition to the two recently-acquired stores in Florida, Dream Motor Group also has five Mercedes-Benz dealerships and one Infiniti dealership scattered throughout the South.  

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In July, Zeigler Auto Group acquired Elhart Automotive, which includes Elhart’s Kia, Hyundai, Nissan and GMC dealerships. On this episode of Inside Automotive, host Jim Fitzpatrick is joined by Aaron Zeigler, president of Zeigler Auto Group, to discuss the acquisition and the current state of his businesses’ operations.

With its acquisition of Elhart Automotive, Zeigler Auto Group has now grown to include more than 40 storefronts representing multiple franchises. Its new Kia dealership represents the first time that the company has worked with the franchise. “Kia is very hot right now,” Zeigler proclaims, “and they have been for the last couple of years…it’s something that we’ve been eyeing.” In the coming months, the dealership group is also planning to purchase two additional Subaru franchises, a brand which Zeigler notes, “We’ve done very well with…”

The purchase of Elhart Automotive succeeded thanks to the success Zeigler Auto Group found in the post-COVID car market. However, despite the company’s focus on growth and expansion, the purchase follows a two-year break from the mergers and acquisitions space, which Zeigler notes is the longest in the organization’s history. The buy-sell market has been challenging for both sides since the pandemic: while the sector has seen unexpected strength, finding deals that made sense for all parties was a rare occurrence. But as 2023 proved to be a lucrative year for retailers, buyouts became more attractive investments, a factor that encouraged Zeigler, and many dealers, to re-visit the M&A space.

When Zeigler Auto Group first expanded into multiple locations, Zeigler recalls that most of these new storefronts were underperforming at the time of purchase. As a smaller company, the organization’s growth options were limited. However, rather than looking at these acquisitions as a means of driving revenue in the short term, Zeigler focused on turning these businesses around, re-hiring, re-training and re-organizing as needed to make the brand successful. This strategy proved to be an essential ingredient for the dealership group’s growth and allowed it to eventually acquire more successful stores.

Zeigler acknowledges that it is challenging for smaller dealership groups to expand. Larger conglomerates often have better relationships with manufacturers, who have the first right of refusal when it comes to acquisitions. Additionally, the more businesses under the same umbrella, the more brain power can be leveraged to drive growth. This was especially important for Zeigler Auto Group. “We share a lot of ideas internally at our organization,” Zeigler notes. “No one person has all the right ideas, but collectively, as a group, we always come up with the right answers.”

Going forward, Zeigler Auto Group is cautiously optimistic about the future. Although the automotive industry is still facing headwinds caused by the COVID pandemic, Zeigler recommends planning for the future rather than worrying over the present. “Everything I do, I look at for the long haul, so I’m not looking at what’s gonna happen in the next six to twelve months,” he concludes.

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Lithia Motors Buys Wade Ford

In mid-July, Lithia Motors purchased Atlanta-based Wade Ford, one of the most prominent dealerships for the government fleet, and will not be renamed as part of the deal. The seller, Steve Ewing, said he “knew [he] could trust Wes and Pinnacle [Mergers & Acquisitions] to handle such an important and life-changing event for all involved.” According to Zacks Equity Research, Lithia Motors CEO Bryan DeBoer noted that “Wade Ford’s strong reputation with customers and community support will allow Lithia to expand its operation in the highly competitive market.” The recent transaction is the latest of many for Lithia Motors, which is still aiming to bring in $50 billion in revenue by the end of 2025.

Empire Automotive Group Acquires the Crystal Auto Mall

Also in mid-July, Green Brook Township, New Jersey-based Crystal Auto Mall was acquired by Empire Automotive Group. The auto mall consists of Toyota and Mazda dealerships and was first opened in 1988. The Dave Cantin Group advised the auto mall’s owners in the sale, and the advisory firm’s CEO, Dave Cantin, said the recent deal “further positions Empire [Automotive Group] to grow their business fueled by strong performance with consumers and great partnerships with their OEM partners.” In the four years since its foundation by owner Michael Brown, Empire Auto Group has grown to more than 20 dealerships throughout the Northeast.

Aaron Auto Group Buys Anderson Chevrolet

Last month, Anderson Chevrolet was sold by Jason Anderson to Vikas Mehandroo and the Aaron Auto Group. Anderson Chevrolet, which is located in Lake Elsinore, California, will now be named Aaron Chevrolet of Lake Elsinore. Mehandroo, who previously served as the General Manager for several dealerships in California, also owns Aaron Ford of Poway and Aaron Chrysler Dodge Jeep Ram of Norco. Speaking about the latest transaction, he praised Performance Brokerage Services and its co-founder, Jason Stopnitzky, noting that “the fact that [Stopnitzky] called me back when I was looking to buy my first store, with no prior experience of ownership, and spoke with me for almost an hour to understand my needs and situation, tells you everything you need to know.”

Lithia Motors Buys Hill Country Honda

In yet another purchase for Lithia Motors, the group’s Vice President of Strategic Operations, Tom Dobry, told Automotive News that Lithia Motors had completed the purchase of Hill Country Honda on July 31. The acquisition is Lithia Motors’ first dealership in San Antonio, Texas, and the auto group will reportedly not change its name. The group bought Hill Country Honda from Rene Isip, who has held several executive positions with the John Eagle Family of Dealerships throughout the last 20 years and is also the owner of RRIJR Auto Group Ltd.

Ken Garff Automotive Group Buys Seven Hawaii Dealerships

On July 31, Ken Garff Automotive Group completed the purchase of seven Aloha Kia dealerships in Hawaii. This includes dealerships on the islands of Oahu, Kauai, Maui and Hawaii. Previous owner Bill van den Hurk reportedly plans to retire and said, “I’m so proud of what we’ve built at these seven dealerships over the past 27 years, and in particular the positive influence we’ve been able to provide in our communities.”  The dealerships’ names will not be changed, and leadership teams will also remain the same. The Hawaiian acquisitions are the first of 2023 for Ken Garff Automotive Group, whose CEO Brett Hopkins said, “We are excited to expand into Hawaii and continue to grow our relationship with Kia.”

Sutherlin sells Nissan of Fort Pierce

On July 28, Performance Brokerage Services announced it had assisted Sutherlin Automotive Group in its sale of Sutherlin Nissan of Fort Pierce, Florida. The auto group’s owner and CEO, Brett Sutherlin, said it “made sense” to use Performance Brokerage Services because the firm previously advised Sutherlin Automotive Group in its purchase of a Subaru dealership. The recently sold dealership will reportedly be renamed Nissan of Fort Pierce. Both Sutherlin and Performance Brokerage Services Senior Partner George C. Chaconas said they look forward to working together in the future.

Great Lakes Auto Group Buys Dennis Automotive Dealerships

Great Lakes Auto Group announced in July that it had bought three Dennis Automotive dealerships in the Columbus, Ohio area. The combined $21.9 million acquisition included two Hyundai dealerships and one Genesis dealership, which will be renamed Great Lakes Hyundai of Dublin, Great Lakes Hyundai of Columbus, and Genesis of Columbus. The latest transaction was not the dealership groups’ first time working together, as Dennis Automotive sold a Kia dealership to Great Lakes Auto Group in September 2017.

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Today on CBT Now, we’re joined by Ryan Kerrigan, Managing Director of Kerrigan Advisors, to update us on mergers and acquisitions in automotive today. 

The Kerrigan Index is a monthly study that consists of the seven major publicly traded auto retail companies with operations in the U.S. The index for context, Kerrigan claims, “Is taking the S&P formulation to all retail stocks and, as of this year, has zipped up.”  While the auto retail market is highly fragmented and influenced by hundreds of small and mid-sized private companies, publicly traded auto retail stocks provide strategic insight into the dynamics driving auto retail and earnings projections for the industry.

The Kerrigan Index is a monthly study that consists of the seven major publicly traded auto retail companies with operations in the U.S. The index for context, Kerrigan claims, “Is taking the S&P formulation to all retail stocks and, as of this year, has zipped up.”  While the auto retail market is extremely fragmented and influenced by hundreds of small and mid-sized private companies, publicly traded auto retail stocks provide strategic insight into the dynamics driving auto retail and earnings projections for the industry.

For the year to date, the index is up 37% against the S&P, which is at 9%. Despite the threat of rising interest rates, Kerrigan continues to see the auto industry defying the odds. In late June, Penske, AutoNation, and Group 1 were all trading at an all-time high. In addition to the breaking numbers, the public is getting more active, given the strong stock prices. For example, in 2020 and 2021, the public was highly functional. But in 2022, they were less enthusiastic. In 2022, the public bought 66 stores and sold 66, generating a net of zero ads. 

Ryan claims that this year at Kerrigan, the business “noted virtually all publics getting back into the game.” For example, M&A transactions rose by 43% in the first quarter compared to last year. Kerrigan said, “We looked at over 400 deals transactions over the trailing 12 months, implying that the sector keeps breaking records in the buy-sell market. The figures indicate that dealers are optimistic while they remain dedicated to their business strategy. They also have a lot of cash to increase their market investments. According to Kerrigan, “Dealers are discovering that the more money they invest in other dealers, the more money they make.”  

As a spoiler note, Kerrigan claims that in the upcoming years and quarters, “I believe that we are going to discuss more about BlueSky, multiples being historically more impacted by geography.” He continues, “I think we’ll still emphasize the state-by-state multiples as much as the franchises.” However, entering the second half of the year, interest rates are always a massive driver for the economy. Still, interestingly enough, “The conventional wisdom is that the industry could be in a loosening situation before the end of the year,” Kerrigan exerts.

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So, let’s go through this question together: why now?

No surprises

According to Maxime Théorêt, Managing Partner at DSMA, assessing your business regularly is a lot like having your car serviced: no one wants unpleasant (and costly) surprises. A dealership evaluation is a preventive exercise that allows you to analyze the areas of improvement and the good practices of your dealership. It’s an exercise that highlights performance, but also areas where your business can do better. This in-depth analysis of your dealership’s activities also allows you to detect business trends that you may want to pursue or improve, especially if you feel short-changed by your fiscal year (we know you’re thinking of your tax return as you read this). In short, this one to two-week exercise will allow you to take stock of your business from every angle.

Be better equipped for short, medium, and long-term planning

Are you thinking or expanding your portfolio, or maybe retiring? No matter what stage of your professional life you are in, an annual business valuation is an indispensable tool for clear and precise planning of your business activities. Anthony Codispoti, our Manager of Valuations, notes that among the thousands of appraisals, DSMA has performed over the past decade, there have indeed been several instances in which our results showed a 20-30% difference in value from what a dealer thought their dealership was worth. Such a difference, whether higher or lower than expected, can paint a clearer picture of what your fiscal future will look like.

Don’t underestimate the power of a balance sheet

Thanks to the rising inflation rates, a clear and precise balance-sheet of your business is crucial when negotiating. Indeed, dealership transactions can be quite complex, and the current economic climate (inflation, brink of recession, etc.) unfortunately further complicates negotiations. This is why a dealer in expansion-mode should know their business inside and out. A balance sheet is your best asset when approaching investors and financial institutions in order to accomplish your next acquisition goal. In the same breath, a dealer wishing to sell will equally be much better equipped to deal with potential buyers when knowing the exact net worth of their business.

Proactive + prepared = peace of mind

You don’t need to wait for a crash in the industry to act. By conducting a regular valuation of your dealership, you are being proactive. Such preparedness shows that you are ahead of the curve. According to Étienne Demeules, our Director of Finance, proper knowledge of your dealership’s accurate value will help you deal with various industry crises…or better yet, prevent them. And you know who loves to see that? Financial partners.

Prepare for the unexpected

Although grim topics, they are important to cover as well: when faced with a separation, a divorce, or even death, dealers or their teams often find themselves completely rushed and in no state to evaluate their business. These unexpected events can occur at any time on a personal level and can greatly affect the day-to-day operations of your dealership. If this happens, having an accurate assessment of your business can help you maneuver these challenging times and protect your estate in the event of your death.

Maximizing your dealership’s value

Lastly, you can’t grow your dealership without knowing its true value. At DSMA, we have the certified staff and sophisticated tools to accurately value all vehicle dealerships, regardless of their market or location. We use QUOTUS, a confidential and secure digital platform we’ve developed internally over the past few years, which allows us to evaluate a dealership in every respect – with the most precise data on the market. It is the most reliable automotive market intelligence in North America which allows you to maximize the value of your dealership. This tool benefits not only automotive dealers, but everyone in the motorcycle, heavy truck, agriculture, marine, and heavy vehicle industries.

At DSMA, our team of financial experts can appraise your dealership in just a few business days, giving you an accurate representation of your business’s value on the market. So we ask you again: what are you waiting for?

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Lithia Motors Sells

Lithia Motors Inc. was busy selling dealerships in June, finalizing a total of three sales throughout the month. 

The latest sale consisted of Priority Toyota Hampton in Hampton, Virginia to Mills Automotive Group on June 27. Mills Automotive Group’s Variable Operations Director, Kelly Alston, noted on LinkedIn that Mills Auto is “excited to grow [its] presence in the Hampton Roads area” and thanked Lithia for “a smooth process and transition.” Lithia had recently required the dealership, which has been renamed Classic Toyota of Hampton. 

On June 22, Lithia sold Pennsylvania-based Ford of Monroeville to #1 Cochran Automotive and the dealership has been renamed #1 Cochran Ford Monroeville. According to #1 Cochran’s Chief Executive Officer, Rob Cochran, #1 Cochran is “delighted to continue [its] growth in Monroeville, where [it has] served customers and the community for nearly 60 years.” The company has also completed several other notable deals within the past year and now operates 35 new vehicle franchises, eleven collision centers, and a distribution center for parts. 

John Elway Dealerships purchased Bentley of Denver-Lotus from Lithia on June 8 and has reportedly moved the dealership from Highlands Ranch, Colorado to Lone Tree, Colorado. Lithia was represented by Pinnacle Mergers & Acquisitions throughout the sale of the dealership, which has furthered John Elway Dealerships’ presence in the luxury segment. John Elway Dealerships Managing Partner, Todd Maul, noted that the recently acquired dealership “complements [John Elway Dealerships’] Cadillac brand in a way that is fairly rare to have.” 

Tim Lamb Group Facilitates Sale to Victory Automotive Group

Earlier this month, Marietta, Ohio-based C&C Toyota and C&C Chrysler Dodge Jeep Ram were sold to Victory Automotive Group and were renamed Victory Toyota Marietta and Victory Chrysler Dodge Jeep Ram. Blair Sharpe of the Tim Lamb Group collaborated with both parties to complete the transaction, which also consisted of a collision center and body shop, detail shop, and quick lube shop plus the C&C Car Wash and Service Center in nearby Parkersburg, West Virginia. The dealerships’ owner, Jim Cobb, expressed satisfaction with the transaction, stating that Sharpe “was upfront, honest, and understanding with our needs when it came to finding a buyer that would be the right fit for our property.” As part of the deal, all current employees will be retained.  

Holand Automotive Group Buys Ferrari Store in California

Canada-based Holand Automotive Group announced earlier this month that it had expanded to California through its purchase of the Ferrari South Bay dealership in Torrance. The company’s Chief Executive Officer, Gad Bitton, noted that his company “[looks] forward to building a strong relationship” with the Ferrari South Bay dealership and seeks to bring Holand Auto’s “unique Ferrari Quebec insight to make the dealership even more successful.” Holand Auto Group now operates a total of thirteen luxury dealerships throughout Florida, California, and Quebec, and Bitton noted his group is planning to expand throughout the United States. 

Young Automotive Group Expands into Montana

On June 26, the Young Automotive Group finalized its purchase of Flanagan Motors Mazda of Missoula, marking the group’s entry into Montana. Young Auto’s Paul Byron will serve as the general manager of the dealership while its previous owner, Shannon Flanagan, will be named the community service representative manager. Speaking about the recent transaction, Flanagan stated he feels like the Young Auto Group “has a lot of wisdom” and Byron noted he “can’t wait to show those who are unfamiliar with our company how we do business.” As part of the sale, the dealership was renamed Young Mazda Missoula. 

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After over 30 years of building the second highest volume Toyota store in the country, Al Hendrickson and his son, Al Hendrickson, Jr., sold their store to Morgan Auto Group. Haig Partners, one of the leading buy-sell advisory firms in the nation, served as the exclusive sell-side advisor on the sale, and this transaction marks the highest transaction price for a single dealership. For Haig Partners, it’s the third transaction since late 2022 in which record prices have been paid. On today’s Inside Automotive, we’re pleased to welcome the President and Founder of Haig Partners, Alan Haig, and we’re joined in the studio by the Managing Director of Haig Partners, Kevin Nill. 

The former owner of Al Hendrickson, Al Hendrickson Jr., was conserving his options for his family’s future. After speaking with one of his bankers, he decided to weigh his options with Kevin Nill and Haig’s partners. Nill said, “We had great dialect from the buy/sell market perspective. We weighed what he would face if he bought more stores and the valuations of the ‘trophy operations,’ like Al Hendrickson Toyota.” Nill also noted that the conversation drifted to CharlesMon Toyota, which Group 1 Automotive acquired in 2022. At the time, the acquisition set the record for the highest price paid for a Toyota dealership. “Push forward, the conversation lead to the ultimate sale of his dealership,” asserts Nill. 

It’s crucial to note that when a dealer decides to sell their business, typically, that’s the most valuable asset they have in the family. Therefore, “If you’re going to sell, you want to maximize the value,” Nill advises. To that end, they ran a very successful process. They were able to compile comprehensive material on the business and why Al Hendrickson Toyota is something buyers should primarily focus on. Al ultimately chose Morgan Auto Group, and Haig Partners had the fortune of collaborating closely with the transaction. 

The Market

Haig asserts, “The dealership’s financial performance is a driving factor of successful the acquisition, but there are other factors.” Such as:

• The franchise type- in this case, it’s Toyota. “Toyota is undeniably the most desired among buyers right now,” says Haig.
• The next factor is location. For the buy/sell market, Florida is considered a desirable location.
• Then, it factors down to the profitability of dealers inside operations.

Dealers are nonetheless optimistic about the industry’s future. Haig believes, “The pandemic was a beneficial factor ever to hit the industry.” He also believes that the tenacity and resiliency dealers had to build during the most challenging times is why dealers now have more cash assets than ever. In addition, the appetite for the market is considerably strong. “There isn’t a significant difference in the appetite for dealerships versus the market,” claims Nill.

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The following notable M&A deals were finalized in the past few months, involving numerous brands and a few high-profile dealer groups. 

AutoNation

AutoNation has expanded once again, this time buying five dealerships from the Bob Baker Auto Group in Carlsbad, California. The acquisition, which was finalized on June 5th, consists of Hyundai-Genesis, Chrysler-Dodge-Jeep-Ram-Fiat, Volkswagen, Mazda, and Subaru dealerships along with their service lanes. Bob Baker Auto Group’s President and CEO, Chris Baker, noted he “either needed to grow much bigger to get more support to run [his] organization” or he “needed to go the other way and get out of the business” due to the “complex” liability updates constantly being implemented by the State of California. He added that he chose a buyer who would make the transition seamless for its employees and added, “Obviously any commitments that we’ve made to a customer, we stand behind them and AutoNation stands behind them with us.” The Bob Baker Auto Group had operated in the Carlsbad area for over 40 years. 

Ciocca Dealerships

On May 17, Ciocca Dealerships said on Facebook that it had acquired another Stellantis dealership two days prior to the announcement. Located at 2209 State Road in Duncannon, Pennsylvania, the dealership group purchased Forrer Chrysler-Dodge-Jeep-Ram from Jeff Forrer and renamed it Ciocca Chrysler-Dodge-Jeep-Ram of Duncannon. In its Facebook announcement, the group noted the dealership will “remain committed to providing exceptional customer service and top-notch vehicles.” The latest acquisition is the 41st dealership owned by Ciocca Dealerships, which is based in Allentown, Pennsylvania. 

Baxter Auto Group

Baxter Auto Group has expanded its presence in Kansas after its acquisition of Audi Shawnee Mission in Merriam. The dealership, which was sold by Holman Auto Group, was originally located in Lenexa before moving to its current location in 2018. Speaking about the purchase, Baxter’s CEO, Mickey Anderson, stated, “This commitment leads us to invest with brands that hold a similarly high standard of service, and Audi has been an exemplary partner in this respect.” Baxter Auto Group also operates Subaru of Olathe, Honda of Olathe, Legends Toyota, and Legends Honda, which are all located near Kansas City. The company has reportedly said it expects to exceed $500 million in revenue throughout that metro area.   

Goode Motor Auto Group

Goode Motor Auto Group expanded in March with the purchase of Alaska-based Mendenhall Auto Center from husband-and-wife duo Steven and Karla Allwine. “I’ve worked with cars my entire adult life but we reached a point where it didn’t make sense to do it forever,” noted Steven Allwine, who is well-known in the local community. The auto center includes Mendenhall Chrysler-Dodge-Jeep-Ram-Subaru and Mendenhall Toyota-Honda-Chevrolet plus a Honda Powersports franchise. Goode Motor’s CEO, Matt Cook, said that doing business in Alaska is “much more difficult than the lower 48 for logistical reasons” but that acquiring the Juneau-based dealerships was “an opportunity to sort of own an entire market and acquire brands that [Goode Motor Auto Group] didn’t currently have.” 

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With the arrival of summer drawing ever closer, car dealers are anxious to know where the auto industry stands and where it will go in the coming months. To answer these questions, Haig Partners, one of the nation’s most-recognized dealership buy-sell firms, has published its first quarter report, giving retailers invaluable insights into the trends shaping retail automotive. In this article, we examine four major takeaways from the Q1 2023 Haig Report and what they can tell us about the automotive mergers and acquisitions market.

Interest rates and dealership buyers

While inflation has improved, the costs of goods and services still remain well above the Federal Reserve’s target. As a result, the government has raised interest on a regular basis, with rates hitting a 16-year high in May. Like many sectors of the economy, the car business has suffered under the increasing burden of these rate hikes. Consumers are paying heavier interest on both new and used vehicles, while storeowners are struggling to cover expensive floor plan costs. 

According to Haig, these rate hikes could also produce a negative effect on the automotive buy-sell market if they continue. The report reads: “…for dealership-buyers, acquisitions may be less attractive due to high financing costs that reduce cash flow to their new stores.”

Prices and dealership values

While new car prices have risen month-over-month, Q1 values were slightly lower compared to Q4 2022. OEM incentives have also re-emerged, averaging $1,599 in April. Although this news may disappoint some dealers, storefronts have nevertheless continued to rake in massive returns thanks to the favorable margins.

This influx of cash has also served to drive store valuations even higher. Haig writes: “A typical dealership today is worth around $40 million, including real estate and other assets.” The opportunity to make a lucrative exit has many storeowners weighing “the risks and capital investments required to remain dealers and deciding to take their chips off the table via a sale.”

Optimism and uncertainty

Based on the perspectives buyers have in regard to their personal finances and the economy, the consumer sentiment index is an important variable for dealers to track due to its effectiveness in predicting auto sales. Since dropping to historic lows last June, the index has steadily recovered, driving demand in the automotive sector. However, the Haig Report notes that economic concerns still persist among American shoppers, especially in the areas of pricing and employment. 

These worries may also explain the sudden decline in mergers and acquisitions activity seen over the first quarter. Buy-sell activity dropped 31% year-over-year, according to the Haig Report, and while 2022 was a particularly busy year for dealership exits, the number of companies looking to purchase a storefront has decreased under the weight of economic uncertainty.

Just as consumers have grown more optimistic since the start of the year, buyers are also likely to overcome their hesitation sooner rather than later, eventually returning to the mergers and acquisitions market. Haig Partners predicts that transaction numbers will rise throughout the year as the industry’s confidence in dealerships recovers.

Fluctuating profits

Fluctuations in the new and used market were apparent throughout the first quarter, propelling opposite results for the two sectors. New vehicle inventory grew over the period, hitting its highest level since April 2021 as car manufacturers overcame supply chain difficulties, while used vehicle inventory fell under declining rates of leasing and rentals. Profit margins also trended in different directions, with new cars earning less and preowned cars earning more than the prior quarter.

Opinions on the direction profits may take down the road tend to vary between dealerships. Haig Partners notes that storeowners are unable to decide whether automakers will return to their old habit of producing more supply than necessary or if car brands have “learned their lessons” and will maintain more profitable levels of inventory. 

In the buy-sell market, however, the consensus is generally optimistic.

While quarterly margins, inventory, and sales have varied unpredictably between dealerships, storefronts are still making substantially more than they were pre-2020. In fact, for the 12 months ending March 31, 2023, retail profits were 212% higher than their 2019 average.

While the trends influencing the vehicle market have changed rapidly from the year before, automakers and dealers have demonstrated their aptitude for handling fluctuations in supply and demand. These strengths are likely to bring out even more activity in the buy-sell sector as investors see profits continue to pour in. To read the full Q1 2023 Haig Report and learn even more about the status of the automotive industry, visit Haig Partners to request access.

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