Post on 07-Feb-2017
Dealerships Are Far Too Valuable To Be Sold Any Other Way
Lots of Activity in the Buy/Sell Market
1899
1905
1911
1917
1923
1929
1935
1941
1947
1953
1959
1965
1971
1977
1983
1989
1995
2001
2007
2013
0100200300400500600700800
Source: SEC Filings
709.272008.11.20 – 2015.06.05Market Takes Off
968% Rise (Nov. 2008-June 2015)
The Kerrigan Auto Retail Index – Hit a Historic High in June 2015
The Kerrigan Index – Hit Historic High in June 2015
Dealership Earnings at an All Time High
Dec 99
Nov 05
Sep 11
Jul 1
7
May 23
Mar 29
Jan 35
Nov 40
Sep 46
Jul 5
2
May 58
Mar 64
Jan 70
Nov 75
Sep 81
Jul 8
7
May 93
Mar 99
Jan 05
Nov 10
350400450500550600650700750
Source: SEC Filings
42% Decrease (June 2015-Jan. 2016)
408.812015.06.05 – 2016.01.28
The Kerrigan Auto Retail Index – Declined 42% Coming into 2016
The Kerrigan Index – Declined 42% Coming into 2016
17+ Million Sales Means Slower Future Growth
Sales Plateau Means 0% Growth
2010 2011 2012 2013 2014 2015 2016*
$211$504 $502 $659
$1,449
$832$572
Source: SEC Filings
Public Dealership Group Acquisition Spending in USSince 2009
- 31%
The Publics Acquisition Spending Declines in 2016
*2016 represents acquisitions for first 9 months
The Publics Acquisition Spending Declines in 2016
Source: SEC Filings
Public’s Capital Allocation through Q3 2016
Stock Buyback$1,143
Dividends$110
Capex$799
Non-Dealership Acquisition
$521
Foreign Acquisi-tion
$163
Domestic Ac-quisition
$578
Publics Allocate Their Capital Elsewhere
“There is no question that our move into the Premier Truck Freightliner retail business was driven because of some of the multiples and goodwill requirements we had on the auto side.”
Roger Penske, Chairman and CEO, Penske Automotive – 3rd Quarter Earnings Call
Publics Allocate Their Capital Elsewhere
2013 2014 2015 2016
9.2x 9.1x
7.6x6.7x
Public’s Estimated Blue Sky Multiples
Source: Kerrigan Advisors Analysis
“This is an interesting industry. If we look back over time, there are times when the private dealers are valued at premiums well above where the publics trade. And there are times where the exact opposite happens.”
Craig Monaghan, President, CEO, Asbury Automotive, 2nd Quarter Earnings Call
Public Estimated Blue Sky Multiples Down Since 2014
6.2x
Public Estimated Blue Sky Multiples Down Since 2014
Source: Automotive News
The Publics Own Just 5.2% of US Dealerships – Auto Retail Remains Fragmented
Auto Retail – Highly Fragmented (Much Consolidation Left)
US Dealership Market Share
14,930 dealerships are ownedBy small groups and individuals
5.2%
82.9%
0.118166666666667
Non-Public DealershipsPublic Dealership Groups
Source: The Banks Report
Number of Transactions2013 to 2016
Number of Transactions – Still Near Record
2013 2014 2015 2016*
114 Transac-
tions
206 Transac-
tions
241 Transac-
tions
229Transac-
tions
+ 17%
*2016 represents first 9 months of acquisitions annualized
+ 81%
- 5%
101%
Increase
Number of Transactions – Still Near Record
2014 2015 2016 Annualized
50 51
65
Multi-Dealership Transactions
Multi-Dealership Transactions Increased in 2016
27%
Increase
Source: The Banks Report
Multi-Dealership Transactions Increased in 2016
2009 2010 2011 2012 2013 2014 2015
$594 $680
$816 $968 $1,000
$1,085 $1,230
Average Revenue of Top 119 Private Dealership Groups(in millions)
107% Increase
Source: Autonews
Private Dealership Groups Significantly Increase in Size
Private Dealership Groups Significantly Increase in Size
Green Street Commercial Property Price Index
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016$60
$70
$80
$90
$100
$110
$120
$130$126
Source: Green Street Advisors, Wall Street Journal
Higher Real Estate Values Result in Higher Transaction Values
Higher Real Estate Values Result in Higher Transaction Values
Annual Rent: $500,000
Total Blue Sky and Real Estate:
$13,100,000
Annual Rent @ 7%: $700,000
Earnings Before Taxes: $800,000
Total Blue Sky and Real Estate:
$14,800,000
Real Estate at7% Cap Rate:
$7,100,000
Blue Sky @ 6x:
$6,000,000
Appraisal: $10,000,000
Blue Sky @ 6x:
$4,800,000
Source: Kerrigan Advisors
Higher Real Estate Values Result in Higher Transaction Values
Domestic51%
Import Luxury19%
Import Non-Luxury29%
Buy/Sell Franchise Transaction Market Share
2016
Domestic35%
Import Luxury22%
Import Non-Luxury43%
2015
Source: The Banks Report and Kerrigan Advisors research
Domestic Franchises in High Demand in 2016
Domestic Franchises in High Demand in 2016
Domestics Will Continue to Benefit from Truck Sales
US Truck versus Car Sales
4 and Under 4 - 5 5 - 6 6 - 7 7 - Priceless
Average Kerrigan AdvisorsBlue Sky Multiple Ranges
Franchise Preferences Influenced by ROI, Capital Requirements and Risk
More Operational Risk
Higher ROI
LowerROI
More Capital Risk
Buyers Franchise Preferences
Luck Running Out?
The Auto Retail Elixir
Source: NADA
New Vehicle and Fixed Operations Sales Growth for the Average Dealership
2013 2014 2015 2016 YTD0%
5%
10%
15%
3.9%
8.3%
New Vehicles Sales Fixed Operations
Fixed Operations in Growth Mode
Fixed Operations in Growth Mode
New Vehicle Used Vehicle Fixed Operations
6% 12%
45%
Source: NADA
Average Dealership Gross Profit Margin by Department
2.1x
7.5x
Fixed Operations and Used Vehicles Drive Dealership Profits
“Parts and service was the highlight of the quarter. We were able to offset the declines in our new and used business with strong growth in parts and service.”
David HultCFO, Asbury Automotive3rd Quarter Earnings Call
Fixed Operations and Used Vehicles Drive Dealership Profits
Source: SEC Filings, NADA
SG&A as a Percentage of Gross Profit YTD
2016
73%86%
13% Delta
Economies of Scale and Scope Support Continued Consolidation
Economies of Scale and Scope Support Consolidation
Source: SEC Filings
12/31
/2015
350
400
450
500
550
600 544.452016.01.28 – 2016.12.30
27% Rise
Since Election
The Kerrigan Auto Retail Index – Experiencing the Trump Bump
The Kerrigan Index – Experiencing the Trump Bump
Sold ToGee Automotive
Sold ToLithia Motors
Sold ToAMSI
Sold ToKDW Automotive
Sold ToMcManes Auto Group
MERCEDES-BENZ OF EDMONTON
WESTSold To
Kendall Auto GroupSold To
AutoNationSold To
Car ProsSold To
Victory Automotive
Recent Transactions