The Driving Forces Behind M&A Activity in Texas: Several key factors are shaping the buy-sell landscape in 2025. Larger dealership groups and private equity investors are aggressively acquiring independent and family-owned stores, fueling consolidation across the state. Economic factors such as interest rates, tariffs, inflation concerns and fluctuating vehicle demand are influencing decision-making for both buyers and sellers. At the same time, original equipment manufacturer (OEM) strategies are placing significant financial and operational pressure on dealers. Meeting facility requirements, navigating EV investment and compliance, and adhering to strict digital and advertising covenants are all contributing to an evolving dealership environment.

Market Consolidation: Who’s Buying and Selling? Large dealership groups — both publicly traded and privately owned — are continuing to expand their footprints in Texas. Meanwhile, many family-owned dealerships, facing succession challenges, are opting to sell rather than pass ownership down to the next generation. Private equity firms and institutional investors have also taken note of the profitability and stability of dealership investments, increasing their presence in the market.

Another interesting trend is the influx of first-time buyers looking to transition into dealership ownership. Many of these candidates are factory-approvable but require assistance in sourcing capital. DSMA actively supports this new generation of ownership through its industry-leading first-time buyer program, which provides financial guidance, access to essential resources, and a network of industry contacts to help new owners successfully navigate the complexities of dealership ownership.

The Role of Technology and Electrification in M&A: Technology and electrification are playing significant roles in shaping the Texas automotive market. There has been a marked shift in OEM, dealer, and consumer sentiment toward electric vehicles (EVs). The transition from a push model to more of a pull strategy means Texas dealers are expecting modest growth in EV market share, rising from 9% of the total product mix in 2024 to approximately 10% in 2025.

The Bipartisan Infrastructure Bill allocated over $400 million to Texas for the development of an EV charging network along designated corridors, further supporting the state’s gradual shift toward electrification. Meanwhile, digital retailing trends have increased the value of dealerships with strong online sales platforms and customer engagement tools, making these businesses more attractive acquisition targets.

Texas’ Economic Strength Fuels the Automotive Market: Economic data from the Texas Comptroller’s Office revealed that in 2024, the state’s economy grew by 4.8%, doubling the national growth rate of 2.4%. The state’s business-friendly policies, including no state income tax and relatively low corporate taxes, make it an attractive market for dealership ownership and expansion.

Challenges in the Texas Automotive M&A Market: Despite the many opportunities in the Texas dealership market, challenges remain. Higher interest rates have increased borrowing costs, making acquisitions more expensive. Some potential buyers are delaying deals in hopes of more favorable financial conditions.

Valuation trends are also a point of discussion, as high-performing dealerships continue to command strong multiples. However, buyers are becoming more selective, and blue-sky values have stabilized, varying significantly by brand and location. Succession planning remains another pressing issue, as many family-owned dealerships lack a clear path for transition. Furthermore, OEMs are becoming increasingly selective about approving new operators, adding another layer of complexity to dealership acquisitions.

Strategic Partnerships and Capital Sourcing: To address these challenges, many dealers are seeking partnerships with private equity firms or sourcing alternative financing solutions to scale their businesses. Sale-leasebacks are becoming more popular, freeing up capital for acquisitions or to meet OEM image requirements. 

The Future of Automotive M&A in Texas: Looking ahead, the next three to five years will likely see continued consolidation, with mid-sized and independent dealerships being acquired by larger groups. As electrification and digital retailing trends gain momentum, dealers will prioritize acquisitions that align with these evolving industry dynamics. 

For dealers considering selling, now is a prime time to explore their options. The market is highly active, with demand significantly outweighing supply. DSMA’s industry-leading dealership valuations provide invaluable insights for sellers, often identifying double-digit enterprise value increases beyond traditional financial statement-based valuations. This professional third-party valuation is not just a document — it’s a package that can be taken to the bank.

For buyers, strategic acquisitions in Texas offer strong return on investment. With competition among buyers at an all-time high, it is essential to stand out. DSMA provides tailored services that help buyers navigate the market effectively, whether they are seeking an open point, are first-time buyers, or are looking to target specific acquisition opportunities.