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Record Growth in the Auto Dealership Market
The auto dealership buy-sell market is experiencing unparalleled activity, with Kerrigan Advisors' 2024 Blue Sky Report revealing a stunning 10% increase in transactions compared to the previous year. In 2024 alone, there were 438 completed dealership transactions, marking a new all-time high and demonstrating the industry's robust recovery trajectory. Moreover, 697 franchises changed hands, the second highest in history, reflecting a growing confidence among dealership owners and potential buyers.
The Drivers Behind Increased Transactions
Several factors are propelling this market resurgence. Notably, stability in vehicle supply has ignited consumer demand, as evidenced by strong fourth-quarter sales indicating a potential revival in auto retail that might even eclipse the 2016 record of 17.55 million unit sales, granted trade policies remain conducive. Erin Kerrigan, founder of Kerrigan Advisors, pointed out that growing dealership earnings post-election and the influx of dealers ready to capitalize on favorable valuations significantly contribute to this bullish outlook.
Future Trends: Consolidation and Risk Factors
The trend towards consolidation within the dealership sector is anticipated to accelerate into 2025. With significant earnings amassed since the pandemic, dealership owners find themselves in a position to sell or regroup their resources. As Ryan Kerrigan observes, continuing interest rate reductions and moderating inflation enhance the likelihood of further transactions in the market. The competition is expected to intensify as stronger dealerships leverage their advantages for strategic acquisitions while divesting weak franchises.
Perception of Value in Franchises
Interestingly, while the average blue sky values in 2024 are below their peak levels in 2022 by 19%, many remain historically high, offering lucrative prospects for buyers. Dealers increasingly recognize 2024 as a critical inflection point for valuations, setting a stage for potential rebound in values as economic conditions improve. This context encourages a proactive buy-sell strategy among dealers, highlighting the pivotal role of blue sky valuations in driving marketplace decisions.
The Divided Market: Challenges and Opportunities
The dealership marketplace is becoming increasingly polarized, creating a “have” versus “have-not” scenario among brands. Strong franchises thrive, supported by solid earnings, while weaker brands face challenges that prompt owners to consider divestiture. The report emphasizes that diversification in franchise investment is vital for dealership groups aiming to enhance their market positioning in such turbulent waters.
As 2025 approaches, owners will face a critical choice: pursue growth or exit the market amid a climate of rising valuations and uncertain market dynamics. Successful navigating of this landscape hinges on understanding both immediate and long-term market trends, informing savvy acquisition strategies.
Action Steps for Dealers Moving Forward
Dealership owners must remain agile, considering the local dynamics and broader economic pressures shaping the buy-sell landscape. This implies actively seeking advice, staying informed on market forecasts, and preparing for possible strategic shifts as opportunities arise. The current environment rewards proactive engagement with evolving market trends—dealers who capitalize on this moment could find themselves well-positioned for future success.
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