This year has "the potential to hit record levels," Erin Kerrigan, managing director of buy-sell advisory firm Kerrigan Advisors, in Irvine, Calif., wrote in her "Blue Sky Report" for the fourth quarter.
"An increasing number of sellers [are] coming to market motivated by current prices," Kerrigan wrote. "As more dealers find their succession plans have run its course, the firm expects the number of sellers to rise given the generational shifts underway in auto retail and the aging of the U.S. dealer network."
In addition, "Buyers are finding pricing more reasonable in part because today's sellers are serious about a sale," she wrote. "The market testers who were seeking "crazy'" prices, and didn't get them, have stepped away.
Likewise, Alan Haig, president of buy-sell advisory firm Haig Partners, in Fort Lauderdale, Fla., wrote in his "Haig Report -- Year End 2016": "Financing is still readily available, and many sellers are realizing that if they want to sell their dealerships before the next recession, they will likely need to accept today's offer since tomorrow's offer is likely to be lower" because of softening sales and profits.
In 2016, domestic brands accounted for 44 percent of all U.S. buy-sell transactions, up from 31 percent a year earlier, while import nonluxury brands dropped to 37 percent from 48 percent and import luxury brands eased to 19 percent from 21 percent, data from The Banks Report and Kerrigan Advisors show.
Buyers sought truck-heavy franchises such as Ford, Chevrolet, Chrysler-Dodge-Jeep-Ram and Buick-GMC last year as low gasoline prices helped sales.
Also, domestic brands -- which typically cost less than luxury brands -- appeal to nontraditional buyers such as private equity funds and family offices, which are focused on return on investment.
Kerrigan said buyer demand is particularly evident for Ford, Chevrolet, Toyota, Honda and Subaru, which have lineups weighted toward crossovers, SUVs and pickups. Those five brands are the most requested by buyers, she added.
"These franchises require less capital than the luxury franchises and less operational risk than the lower-multiple franchises," Kerrigan said. She wrote that the capital required for the average domestic acquisition is 56 percent less than that required for the average import-brand purchase and 65 percent less than that for the average luxury franchise.