Dealership buy-sell activity could plateau this year after several years of strong growth, experts say.
"We expect it to be a strong year, but not up significantly from last year," Alan Haig, president of Haig Partners, a dealership buy-sell advisory firm in Fort Lauderdale, Fla., told Automotive News.
The slowdown in part reflects publicly owned retailers' opting for stock buybacks over acquisitions, given their low stock prices. Also, buyers' searing lust for luxury brands in recent years finally is cooling. Buyers still want those stores, but they are less willing to pay exorbitant prices for them, Haig and buy-sell adviser Erin Kerrigan said.
Instead, many buyers are turning to domestic brands, where dealership profits are rising on strong consumer demand for pickups and SUVs because of low gasoline prices. Domestic brands also command lower blue-sky multiples than luxury brands. Blue sky is the intangible value of a dealership, typically expressed as a multiple of adjusted pretax profit.
"The return on investment for a blue-sky value at a four times multiple [for a domestic brand] is very attractive relative to an eight times multiple for a luxury brand," said Kerrigan, managing director of buy-sell advisory firm Kerrigan Advisors in Irvine, Calif.