“Dealers have enjoyed the unprecedented bust-to-boom period for about a year now,” commented Alan Haig, President of Haig Partners. “The strong demand from consumers paired with a lack of supply from the OEMs has created a gusher of profits. No one could have predicted business conditions could be so good for dealers for so many months. Investors are optimistic about the outlook for our industry as every publicly traded retailer, franchised and used, saw its valuation skyrocket during the pandemic. Dealers large and small are equally bullish about our future. We see an increasing number of dealers wanting to take advantage of current conditions to sell. And high prices are not the only reason some of the dealers have decided that now is the time to sell. Dealers are aging, some have concerns that it may be increasingly difficult to compete with larger groups that can offer more choice and convenience to customers, and some want to sell before capital gains taxes go up,” he continued.
As published in the Q1 2021 Haig Report released by Haig Partners, buy-sell activity in the first quarter of 2021 surpassed pre-COVID levels and blue sky-values are now at record high levels. Public company spending continued to be strong in Q1 of this year with a total of $443M spent on domestic acquisitions, a 226% increase compared to Q1 2020. The massive increase in spending is attributable primarily to Lithia’s acquisitions of stores in Florida and Arizona that totaled $383.5M. We expect Lithia to continue its aggressive pace as it executes its plan to grow to $50B in revenue by the end of 2025. Private buyers are also active as they purchased about 80% of the dealerships that traded hands in Q1 2021.
Key findings from the Q1 2021 Haig Report include:
- A lift in sales and a drop in production is creating unprecedented conditions in auto retail
- Dealership profits jumped 197% in Q1 2021 compared to Q1 2020, reaching record-high levels
- Blue sky values rose an estimated 10% from the end of 2020 and are now at record-high levels
- Public equity valuations are 98% higher than they were before the pandemic
- Average blue-sky value for a single-point dealership is $9M, the highest we have seen
- All regions of the US are seeing plenty of buy-sell activity
The Haig Report, published quarterly, includes data and analysis on the performance of auto dealerships, discusses noteworthy events to the industry, identifies trends in the M&A market for dealerships, provides guidance on estimated value ranges for different franchises and shares an outlook for the M&A market. The Haig Report is based on data gathered from many reputable public sources, as well as interviews with leading dealer groups and dealers, bankers, lawyers, and accountants who specialize in auto retail.
Haig Partners LLC is a boutique investment banking firm and the leading buy-sell advisory firm to owners of higher value auto, heavy truck, and RV dealerships. Since 1996, the principals at Haig Partners have completed more than 280 dealership transactions for more than 525 dealerships totaling over $7.8 billion, more than any other team in the industry. For more information, visit www.haigpartners.com.
Media Contact:
Aimee Allen
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SOURCE Haig Partners LLC
