Public Retailer Acquisition Spending Jumps 53% While Total Auto Dealership M&A Falls 7% According to Q4 2017 Edition of The Haig Report Released by Haig Partners

FT. LAUDERDALE, Fla., March 21, 2018 /PRNewswire/ -- As published in the Year End 2017 edition of The Haig Report released today by Haig Partners, the number of dealerships that sold in the US declined 7% in 2017, from 357 to 331.[1]  Despite the decline in rooftops purchased by the public companies during this period, they ended up spending significantly more money.  In 2017, the publicly traded retailers spent $1,015M on auto dealerships in the US, an increase of 53% from the $661M spent in 2016.  Lithia was the most active of the publicly traded companies and continues to target underperforming large platforms in different parts of the US.   The new Tax Cut and Jobs Creation Act reduces taxes for almost all private and public dealer groups.  Haig Partners believes this will add additional demand for dealerships that will support dealership values in 2018.

Profits at privately owned dealerships in 2017 were 4.9% lower than 2016 due to rising costs.  Values of privately owned dealerships fell 2.6% during this period, according to the Haig Report.  Haig Partners' franchise blue sky multiples were slightly higher, with increased valuations for Buick-GMC, Chevrolet, Honda and Toyota partially offsetting lower profits.

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 range of values 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 Q4 2017 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 used car pricing, incentive spending by the OEMs, and rising interest rates are growing less favorable to dealers.
• Fleet sales fell by 8.1% in 2017, 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 in 2017 was $1.395M, down 4.9% from 2016.[2]
• Average estimated blue sky value per dealership dipped 2.6% in 2017 to $6.9M.
• Potential threats from autonomous cars, ride sharing, electrification, changes to franchise laws are so far having no measurable impact on dealership values.
• Public auto retailers spent 53% more acquiring auto dealerships in the US than in 2016.
• Private equity firms and family offices continue to make substantial investments in auto retail.

Alan Haig, President of Haig Partners, said, "The buy-sell market remains very active, although at a slightly lower level than in the past.  The new tax code could soon be having an impact on dealership values.  All dealers will be paying lower taxes and we expect this to lift the demand for dealerships.  If so, we could see a continued decline in profits but an increase in blue sky values." 

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 over $3.8B 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 over 280 dealerships since 1996 for a total value of over $3.8 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, American Financial Services Association, Bank of America Merrill Lynch Dealer Day, and 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