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Auto Retail M&A Activity Declined 31% in Q3 According to the Latest Edition of the Haig Report

- Year to Date Transactions are Down 36% and Public Company spending is down 28%

- Dealership Profits Have Increased 2.9%

- Public Company Acquisition Spending Jumped 80% in Q3 2019 and Activity Appears To Be Picking Up

FORT LAUDERDALE, Fla., Dec. 20, 2019 /PRNewswire/ -- As published in the Q3 2019 edition of The Haig Report released by Haig Partners, the number of public and private dealerships that sold in the US decreased 31% in Q3 2019 compared to Q3 2018, from 106 to 68.1 Excluding a unique transaction in Q3 2018 that included 28 stores of the Ken Garff Automotive Group, the number of dealerships sold in Q3 2019 represented a 12.8% decline.  The number of dealerships sold Q1-Q3 2018 decreased 36% from the same period in 2018.  

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Acquisition spending in the first three quarters of 2019 by publicly traded auto retailers decreased by 28% compared to the same period in 2018, but spending in Q3 2019 jumped 80% from Q3 2018.

Profits at privately owned dealerships over the last twelve months through September 2019 were 2.9% higher than for the full year 2018.2 Threats from technology disruptors such as autonomous vehicles, electric vehicles and ride sharing appear to be dissipating.

Blue sky multiples remained essentially unchanged from Q2 2019.  Haig Partners lowered the estimated blue sky multiple on the top and bottom end of the range for Infiniti from 3.0x-3.75x to 2.75x-3.25x, and increased the top-end of the blue sky multiple range for Subaru by 0.5x to 5.0x-6.5x.

When higher profits per dealership are combined with the same 4.80x average blue sky multiple as the previous quarter, Haig Partners estimates the value of privately owned dealerships increased 2.9% from year end 2018 to Q3 2019. 

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 2019.  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 Q3 2019 Haig Report include:

  • Macroeconomic indicators such as GDP, employment, inflation, fuel prices and consumer sentiment remain highly favorable for dealers.
  • Other trends, such as lower interest rates, lower average monthly car payments and increasing dealership profits, are helping dealers.
  • Fleet sales are up 0.2% in Q1-Q3 2019, but retail sales were down 2.3%.
  • Floorplan interest expense has swung from a credit of $119 per vehicle in 2015 to an expense of $121 so far in 2019.
  • The average dealership pre-tax profit for the twelve-month period ended Q3 2019 was $1.40M, up 2.9% from year end 2018.2
  • Average estimated blue sky value per dealership increased 2.9% in Q3 2019 to $6.7M compared to $6.5M at year-end 2018.
  • The average stock price for the six publicly traded franchised auto retailers is up 79% in 2019.
  • Most investors now believe that, for the foreseeable future, threats from autonomous cars, ride sharing, and electrification will not have a measurable impact on dealership values.

Alan Haig, President of Haig Partners, said, "Based on reports from the market and our own practice, we are expecting a good number of transactions to close in the first quarter of 2020. There are more dealerships available for sale than in the past, and there are many buyers with access to plenty of capital."

JOIN HAIG PARTNERS AT NADA.  Dealers are invited to join Haig Partners and other industry experts at the 7th annual Buy/Sell Summit and 26th annual Dealer/CEO/CFO Forum Friday, February 14th in Las Vegas.  Click here for the full agenda and to register.

Haig Partners LLC is a boutique investment banking firm that focuses on auto/heavy truck/RV dealers and the companies that serve them.  It is the leading buy-sell advisory firm to owners of higher value dealerships and dealership groups.  Since 1996, the principals at Haig Partners have completed 180 dealership transactions totaling $5.0 billion, more than any other team in the industry.  They also publish the widely followed Haig Report that tracks trends in the auto industry and how they impact dealership valuations.  The latest Haig Report is available hereAlan Haig is a frequent speaker at leading industry events.  For more information, visit www.haig partners.com.

Contact:
Alan Haig
954-646-8921
alan@haigpartners.com

1 Data from Haig Partners.

2 Data from NADA.

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SOURCE Haig Partners LLC