Turns out the vehicles on dealership lots nowadays aren’t the only things at stores soaring in value.
Fueled in part by record-level dealership profits, Haig Partners said demand for stores is soaring as the average blue-sky value per rooftop has reached the highest values the boutique investment banking and buy-sell advisory firm has recorded.
Haig Partners pegged its estimate at $9.0M in Q1 2021, up 34% from 2019 and 11% from the end of 2020.
The firm also pointed out that dealership Q1 profits jumped 197% year-over-year, making stores so attractive to buyers like Lithia Motors, which so far just this month has purchased five stores in Texas and two others in southern California after making a pair of deals in April, including for the Suburban Collection.
“Dealers have enjoyed the unprecedented bust-to-boom period for about a year now,” Haig Partners president Alan Haig said in a news release that also highlighted the release of the Q1 2021 Haig Report, a quarterly endeavor that tracks trends in auto retail and how they impact dealership values.
“The strong demand from consumers paired with a lack of supply from the OEMs has created a gusher of profits,” Haig continued. “No one could have predicted business conditions could be so good for dealers for so many months. Investors are optimistic about the outlook for our industry as every publicly traded retailer, franchised and used, saw its valuation skyrocket during the pandemic. Dealers large and small are equally bullish about our future. We see an increasing number of dealers wanting to take advantage of current conditions to sell.
“And high prices are not the only reason some of the dealers have decided that now is the time to sell,” Haig went on to say. “Dealers are aging, some have concerns that it may be increasingly difficult to compete with larger groups that can offer more choice and convenience to customers, and some want to sell before capital gains taxes go up.”
Haig Partners recapped that buy-sell activity in the first quarter surpassed pre-COVID levels and blue-sky values are now at record high levels with all regions of the U.S. seeing plenty of buy-sell activity
The firm said public company spending continued to be strong in Q1 of this year with a total of $443M spent on domestic acquisitions, a 226% increase compared to Q1 2020. The massive increase in spending is attributable primarily to Lithia’s acquisitions of stores in Florida and Arizona that totaled $383.5M.
“We expect Lithia to continue its aggressive pace as it executes its plan to grow to $50 billion in revenue by the end of 2025,” Haig Partners said in the news release. “Private buyers are also active as they purchased about 80% of the dealerships that traded hands in Q1 2021.”
The firm reiterated that the Haig Report is based on data gathered from many reputable public sources, as well as interviews with leading dealer groups and dealers, bankers, lawyers and accountants who specialize in auto retail.
The report can be downloaded via this website.
Source : AutoFinanceNews
