FT. LAUDERDALE, Fla., Nov. 28, 2017 /PRNewswire/ — As published in the Q3 2017 edition of The Haig Report released today by Haig Partners, the number of dealerships that sold in the US through the first nine months of the year has declined 18% from the same period in 2016, from 278 to 228.1 Despite the decline in rooftops purchased by the public companies during this period, they ended up spending significantly more money. For the year to date ended September 30, 2017, the publicly traded retailers had spent $935M on auto dealerships in the US, an increase of 62% from the $578M spent in the same period in 2016. Lithia was the most active of the publicly traded companies and continues to target underperforming large platforms in different parts of the US. Despite all the noise regarding the potential negative impact on auto dealerships from ride sharing, electrification, autonomous vehicles and changes to the franchise system, the “smart money” is still buying dealerships.
Profits at privately owned dealerships for the twelve months ended September 30, 2017 were 3.8% lower than year end 2016 due to rising costs. Values of privately owned dealerships fell 3.2% during this period, according to the Haig Report. Haig Partners’ franchise blue sky multiples were mostly unchanged in Q3 , with increased valuations for Subaru and Volkswagen only.
Continuing the trend from 2016, demand for dealerships shifted from luxury brands to domestic brands that are heavier in trucks and SUVs. Luxury dealerships accounted for 14% of acquisitions through Q3 2017, down from 17% through Q3 2016, and purchases of domestic stores increased to 50% through Q3 2017 from 46% through Q3 2016.
The Haig Report tracks developments in auto retail and how they impact dealership values. It includes data and analysis on the performance of auto dealerships, identifies noteworthy events to the industry, discusses trends in the M&A market for dealerships, gives guidance on estimated range of values for different franchises, and provides an outlook for the M&A market in 2017. The Haig Report is based on data gathered from many public sources, as well as interviews with leading dealer groups, and bankers, lawyers and accountants who specialize in auto retail.
Other key findings from the Q3 2017 Haig Report include:
Macroeconomic indicators such as GDP,