The brisk pace of dealership sales continued from late 2020 into this year in what buy-sell experts describe as a seller's market amid record-high prices for dealerships — even as some worry that a possible increase to capital gains taxes could cut into the profits.
Haig Partners, a buy-sell firm in Fort Lauderdale, Fla., estimated in its first-quarter Haig Report that 99 dealerships sold during the first three months of 2021, up a whopping 46 percent from the same period in 2020, when dealership transactions came to a standstill in the early days of the coronavirus pandemic.
"Valuations are higher today than they have been really at any time in the past," said Alan Haig, president of Haig Partners. "And for any dealer that was getting close to retirement or any dealer that's concerned about a lack of succession plan or for any dealer that is concerned about an increase in taxes, it's really an excellent time for them to sell the business."
Haig's firm already has closed 12 transactions this year — about the same number of deals his business brokered in all of 2020, he said. And Haig said he expected the second half of 2021 to be even busier than the first.
Kerrigan Advisors, a sell-side firm in Irvine, Calif., estimated in its first-quarter Blue Sky Report that dealership transactions jumped 20 percent during the first three months of this year, to 66. Transactions, as counted by Kerrigan Advisors, can be single- or multiple-store deals.
Erin Kerrigan, the firm's managing director, wrote in the report that the average blue-sky value — the intangible value of a dealership, including goodwill — reached an all-time record of $8.5 million in the first quarter, up 10 percent from $7.7 million at the end of 2020. Haig Partners estimated that peak average blue-sky was about $9 million in the first quarter, up by a third from the end of 2019 and 10 percent from the end of 2020.