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Go Big: Today’s Auto Dealer Buy/Sell Market

AICPA Auto Dealership Conference Highlights

SPARKS Newsletter
December 1, 2018

Joseph Esposito, CPA

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Go Big: Today’s Auto Dealer Buy/Sell Market

Members of the Automotive Dealerships Practice professional team attended the 2018 AICPA Auto Dealership conference, which focused on current trends in auto dealership accounting and auditing, tax planning, and business management solutions. One of this year’s takeaways included a look at trends in the auto buy/sell market. 

By Joseph Esposito and the Citrin Cooperman Automotive Dealerships Practice 

Multi-dealership transaction activity increased 43% in the first half of 2018 as compared to the first half of 2017 according to the Blue Sky Report by Kerrigan Advisors. According to the report, U.S. dealership transactions totaled 75 in the second quarter. Multi-store deals also are up, with more sellers coming to market. There are some significant factors that are increasingly driving the auto dealership market, resulting in greater opportunities for buying and selling dealerships. Small and mid-sized dealerships are concerned about certain risk factors in the industry and trying to think ahead. Some of these risk factors in include:

  • Succession: The next generation of dealer principals are no longer as driven to take over the family business, choosing instead their own career pursuits
  • Buying Trends: New retail buying trends are causing dips in profits, jeopardizing business sustainability
  • Overhead: Competition is increasing overhead costs and necessitating large capital and space requirements
  • Manufacturer: Today’s dealerships are more reliant on OEM incentives to drive sales
  • Operations: New technology and rent costs are causing a rise in operating costs

Mid-size dealership groups are pursuing deals to ‘get bigger,’ reasoning that bigger dealerships will thrive in the coming years. In some cases, as a way to finance growth and reduce risk, dealers are exploring mergers and transactions in which the seller retains some ownership of the stores and may continue to run the dealerships. 

Looking to 2019, Kerrigan expects the pace of buy-sell deals to stay strong despite talk of disruption in auto retail, rising interest rates and slight dips in dealership profits.

Dealerships looking to buy or sell should speak to a professional advisor to review their options and to determine store values before considering any transactions. Feel free to reach out to Citrin Cooperman’s Automotive Dealerships Practice professionals to speak with an industry advisor.