The auto dealership buy/sell market rose to another record high in the first nine months of 2024, according to the Third Quarter 2024 Blue Sky Report by Kerrigan Advisors.

With 330 dealership transactions representing 544 franchises sold — a 93% increase compared to pre-pandemic 2019 — the company said the market velocity was fueled by more sellers entering the market, as stronger franchises took advantage of historically high blue-sky values while weaker franchises were divested.

“The buy/sell market remained robust in the third quarter, hitting new records as the largest buyers leveraged their strong balance sheets and solid banking relationships to add further scale to their enterprise,” Kerrigan Advisors founder and managing director Erin Kerrigan said. “At the same time, more sellers entered the market positioned to sell their businesses given the wealth they accumulated since the pandemic and historically high after-tax proceeds expected from a sale.

Kerrigan said 2024 is “clearly … on track to be another peak year for the buy/sell market”, citing her company’s Kerrigan Index, which was up 54% from its 2022 low and within 17% of its all-time high as of Nov. 7.

The report showed the big getting bigger, with the top 150 U.S. dealership groups raising their combined market share to 30% — a 5% jump over the past five years. At the current growth rate, Kerrigan Advisors projects the largest groups will account for the majority of industry revenue by 2043.

The growth rate has accelerated for those groups, the advisory firm said, thanks to their acquisitions of high-volume dealerships. Since 2021, the average dealership revenue for the top 150 dealership groups has climbed 7% and now stands at more than $83 million. That’s 16% more than the industry average, which has held steady at $71 million since 2021.

Erin Kerrigan said if the large groups’ rising market share reaches 50%, it could signal “potentially a tipping point for an acceleration in consolidation in the following decades. Major consolidators recognize the tremendous growth potential of an increasing supply of dealerships for sale, and are optimistic about their ability to pursue accretive acquisitions supported by their rising stock prices, longstanding banking relationships and the industry’s moderating blue sky values.”

While dealer groups continue to add high-performing stores, the report said they are also more willing now to shed their weaker franchises. In the first three quarters of this year, public dealership groups divested 36 franchises, 24% more than in the same period of 2023.

The report said the franchises being sold have some of the highest days’ supply in the industry and recorded the most significant declines in dealership profitability, as well as having the lowest Kerrigan Advisors blue sky multiples for their segments. The brands with the highest buy/sell market share for their segments — Chrysler Dodge Jeep RAM (32% domestic buy/sell market share), Nissan (20% import market share) and Infiniti (13% import luxury market share) — also show some of the highest days’ supply and the most declines in dealership profitability.

Looking forward, the Blue Sky Report offered three trends Kerrigan Advisors expects to impact the market in 2025: Expensive image upgrades, particularly for luxury import franchises, are prompting more dealers to sell, larger groups’ stronger balance sheets and banking relationships increase their buy/sell market share, and buyers are less open to new markets and more focused on tuck-in acquisitions and local scale.

Highlights from report include:

  • 104 multi-dealership transactions were completed in the first nine months of 2024, representing 25% of the buy/sell market. That’s down from 33% in 2021, but 79% above pre-pandemic levels.

 

  • Import non-luxury and luxury franchises’ buy/sell market share increased to a record 39% and 18%, while domestics’ buy/sell market share declined to 43% from 54% in the full year 2023.

 

  • The average U.S. dealership earned an estimated $900,000 in the third quarter of 2024, down just 3% from the prior quarter as pre-tax earnings have stabilized at more sustainable levels.

 

  • The US public dealer groups’ blended average blue sky multiple reached 6.5x in the third quarter, a 124% increase from 2022’s low.

A preview of the report can be downloaded here. Click here subscribe for the full report.