SAN FRANCISCO -

The Presidio Group’s Automotive Retail Buy-Sell Report reinforced why executives from Sonic Automotive, Lithia Motors and Penske Automotive Group talked about potential store acquisition so much recently.

Report authors said lift in dealership buy-sell activity is being driven by a rising economy, higher dealership profits and attractive borrowing terms for dealership buyers.

After the first three quarters of 2012 saw sluggish activity in the market for U.S. auto dealerships, Presidio recapped that acquisitions by public dealer groups leapt to more than $350 million in Q4, more than doubling the amount committed in the first nine months of the year.

Alan Haig, head of automotive services for the Presidio Group, pointed out that year-end pace continued in the first quarter of this year.

“Coming out of the recession, we began to see signs of life in the market as buyers were again interested in acquiring dealerships,” Haig said. “Activity was sporadic in 2011 and 2012, however, because there was a gap between sellers’ expectations and buyers’ willingness to meet those prices. Late in 2012, buyers began stepping up their offers and more deals began closing.”

Haig mentioned the public dealership groups are also turning attention to stores in Europe and South America.

“Public retailers invested $224 million in international markets in 2012,” he said. “In the first quarter of 2013, Group 1 alone announced $220 million in South American acquisitions.”

While public retailers are active again in seeking U.S. dealership investments, Presidio contends the landscape is increasingly competitive for higher value dealerships and dealership groups.

“Many private retailers are becoming more aggressive dealership buyers,” Haig said. “In some cases, they’ve added corporate development professionals to their teams whose skills and talents were formerly the exclusive province of the public groups. And we’ve seen transactions where public retailers were outbid by private dealership groups, including some for more than $50 million.”

According to the National Automobile Dealers Association, average dealership earnings are at all-time highs.

“The economic and industry trends are increasingly positive,” Haig said. “Dealers who have been waiting for better sales and higher valuations before taking stores to market are finally seeing their desired conditions, so the availability of acquisition opportunities that public and private groups are seeking should improve. We anticipate a robust market through yearend and beyond.”

The Presidio Multiples, a widely-followed estimate of dealership blue sky valuation ranges, are updated in the current Automotive Retail Buy-Sell Report. The firm indicated eight brands (including Mercedes-Benz, Toyota, Hyundai, and Chrysler) saw their multiples rise; six held steady; and three (Kia, Nissan, and General Motors) declined.

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