Pub. 57 2016-2017 Issue 2

28 E rin Kerrigan, TADA’s Keynote Speaker at the 100 th Anniversary TADA Conference and her husband Ryan have become the industry leaders in advising sellers of franchised new car and truck dealerships. Their quarterly Blue Sky Report is unique in our business and is reprinted here to provide dealers insight into an essential and dynamic marketplace. DEALERSHIPACQUISITIONACTIVITY 2016 US auto sales are on track to reach the second highest sales level in US history. Though car sales are down slightly for the year, higher margin trucks and SUVs will hit historic levels with over 10 million units sold. An industry sales plateau has been much lamented, particularly by certain public auto retailers; however, a plateau at these high levels portends a healthy auto retail climate and one less reliant on lower margin new car sales. Furthermore, the outcome of the presidential election is likely a net positive for the auto retail industry. A Trump Administration will focus on deregula- tion, potentially curtailing (and maybe even eliminating) the Consumer Financial Protection Bureau and lifting manufac- turer mileage requirements leading to improved availability of high margin trucks. Against this backdrop, the auto dealership buy/sell market remains highly active with existing buyers and new entrants seeking acquisitions of large, multiple franchise groups and profitable dealerships throughout the US. While premium pricing of auto dealerships is on the decline, most buyers are willing to acquire dealerships at Kerrigan Advisors blue sky multiples, published herein. At these multiples, the return on investment of an auto dealership is highly attractive, particularly when compared to alternative opportunities in today’s low-yield investment climate. Sellers continue to come to market with highly attractive franchises and groups. Many of these sellers are driven by non-economic factors, such as age, a desire to retire and a lack of succession. As mentioned in our prior report, after- tax transaction proceeds, even at average blue sky multiples, are now sufficient for dealership owners to pursue a sale and achieve their financial goals. Kerrigan Advisors expects this trend to continue into 2017, particularly if tax rates are reduced. The Blue Sky Report™ is informed by Kerrigan Advisors experience representing our clients in today’s active buy/sell market, as well as research conducted by our firm. In the last 18 months, Kerrigan Advisors has sold 27 dealerships rep- resenting client proceeds of over half a billion dollars. Our KERRIGAN ADVISORS Experts on The State of The Industry And The Value of Your Dealership “The U.S. auto industry is well positioned for sales to continue at or near record levels for the foreseeable future.” Mustafa Mohatarem, General Motors’ Chief Economist, The Detroit News “The acquisition market is robust.” Bryan DeBoer, CEO, Lithia Motors, Inc. – 3rd Quarter Earnings Call