This year's buy-sell activity is expected to outpace 2016's in volume -- if sellers continue to come to market and prices drop, buy-sell advisers say.
"We have projected this to be the most active buy-sell market in history," said Erin Kerrigan, managing director of Kerrigan Advisors in Irvine, Calif.
Kerrigan said the number of buyers and her client base of sellers are growing. In addition, sellers are starting to temper their price expectations, dealers and advisers said.
"We're seeing the rationalization of the prices by sellers," said Rick Ford, CEO of RFJ Auto Partners Inc., in Plano, Texas. "In 2015 and 2016, there were inflated expectations."
The anticipated robust activity is driven by continued low interest rates, stable new- and used-vehicle sales volumes, and expected growth in fixed operations revenue all resulting in profitable dealerships that appeal to buyers, Kerrigan said. Finally, many of the public dealership groups are returning to the buy-sell arena after spending much of last year buying back their stock instead.
One big uncertainty hangs over the market: possible policy actions by the Trump administration, especially ones that could impact taxes.
Still, "The volume of inquiries, as a general measure, from people wanting to buy is still very good," said Brad Bickle, director of the North Central region for advisory firm Tim Lamb Group.
The number of sellers is slim, but growing, Bickle said.
The combination of succession issues and the realization that the market is at a historic high, which makes this a good time to cash out, will prompt more sellers to step forward, predicted Tim Wild, director of the Midwest and Plains region for Tim Lamb Group.
He added that prices must come down. "For us to do more transactions, buyers and sellers have to have the same price expectations," Wild said. "People are now seeing things more realistically."
Domestic brands and volume imports will be in demand, said Kerrigan. Last year, domestic brands made up 51 percent of all buy-sell transactions, up sharply from 35 percent in 2015, she said. One possible reason for the jump: Buyers had to pay less upfront for domestics than for most luxury marques, while getting big returns from truck-heavy domestic brands.
Demand for luxury brands will dwindle, Kerrigan forecast. That's because "buyers know so much capital is needed to buy them, for less returns," she said.