“It’s an odd time when an empty lot means an overstuffed wallet. Consumers have cash to spend but automakers are not able to produce enough units to meet demand due to a lack of microchips. Dealers are enjoying these unprecedented conditions of high margins and low expenses which are leading to record high profits and record high dealership values,” commented Alan Haig, President of Haig Partners. “Buy-Sell activity is surging as buyers are eager to acquire more stores. Prior to the Pandemic we were tracking 75-90 dealerships sold per quarter and in Q2 2021 alone we saw 120 dealerships change hands. And since the lack of inventory is projected to last through the end of the year and beyond, we are expecting to see elevated profits and blue sky values for some time,” he continued.
Public company spending on acquisitions has significantly increased. In just the first six months of 2021 they spent almost $2.0B on acquiring dealerships, 756% more than they did in the first six months of 2020. This massive increase is attributable primarily to Lithia which alone spent $1.4B acquiring dealerships in Q2 2021. We expect Lithia to continue its aggressive pace and while they have been the most active buyer, the other public traded companies have also increased their rate of acquisitions. Group 1 acquired two Toyota dealerships that Haig Partners represented in Q1. In Q2, Penske and Sonic closed on acquisitions and AutoNation announced a sizeable deal. In addition to acquiring new car franchises some of the public buyers are also investing in used car dealerships.
Key findings from the Q2 2021 Haig Report include:
- Unprecedented conditions continue in auto retail fueled by inventory shortages and strong economic recovery
- The average privately-owned dealership generated an estimated $3.1M in adjusted pre-tax profit over the past twelve months, 2.2x the level of profits in 2019, the last year before the Pandemic
- Public company spending on US auto acquisitions in the first half of 2021 was almost $2.0B, 756% more than they spent in the same period in 2020
- An estimated 422 dealerships sold in the twelve-month period ended 6/30/2021, 41% more than in 2019, the last year before the Pandemic
- Blue sky values rose an estimated 52% from 2019 and 26% from the end of 2020 and are now at record-high levels
- Public equity valuations are 109% higher than they were before the Pandemic
For more details from the Q2 2021 Haig Report, register for the Haig Partners Q2 2021 Haig Report Live Q&A taking place, Friday, August 27, 2021, at 1:00pm ET. A recording of the webinar will be available.
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.
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SOURCE Haig Partners LLC
