Blue sky multiples for dealership acquisitions will be mostly flat this year, buy-sell advisers say.
They cite several intertwined reasons for the softness:
1. More dealerships are being offered for sale, tilting the supply-demand equation.
2. New-vehicle sales are expected to peak, so no rising tide will lift all dealerships' revenue boats.
3. With growth slowing, buyers are pricing buy-sell deals on current earnings, not anticipated higher earnings.
The last point essentially means a rethinking of how blue sky values are calculated.
Blue sky is the intangible value of a dealership, expressed as a multiple of adjusted pretax profit. Multiples vary based on a dealership's location and other factors. They are based on actual adjusted earnings by normally performing stores.