FORT LAUDERDALE, Fla. – Haig Partners released its Q2 2021 Haig Report, a quarterly report that tracks trends in auto retail and how they impact dealership values.
For the twelve-month period ended June 2021, average adjusted dealership profits reached $3.1M, a record high and more than double average profits in 2019, the last year before the Pandemic hit. The blue sky value for a typical privately-owned dealership has increased 52% since 2019 to reach $10.3M, according to Haig Partners' estimate, also at a record high level. Buy-sell activity has also exploded. An estimated 422 dealerships sold in the twelve-month period ended 6/30/2021, 41% more than in 2019 before the Pandemic. There have been more dealership sales over the last twelve months than in any other period since 2015 when Berkshire Hathaway acquired the Van Tuyl Group.
It's an odd time when an empty lot means an overstuffed wallet. Consumers have cash to spend but automakers are not able to produce enough units to meet demand due to a lack of microchips. Dealers are enjoying these unprecedented conditions of high margins and low expenses which are leading to record high profits and record high dealership values," commented Alan Haig, President of Haig Partners. "Buy-Sell activity is surging as buyers are eager to acquire more stores. Prior to the Pandemic we were tracking 75-90 dealerships sold per quarter and in Q2 2021 alone we saw 120 dealerships change hands. And since the lack of inventory is projected to last through the end of the year and beyond, we are expecting to see elevated profits and blue sky values for some time," he continued.
Public company spending on acquisitions has significantly increased. In just the first six months of 2021 they spent almost $2.0B on acquiring dealerships, 756% more than they did in the first six months of 2020. This massive increase is attributable primarily to Lithia which alone spent $1.4B acquiring dealerships in Q2 2021. We expect Lithia to continue its aggressive pace and while they have been the most active buyer, the other public traded companies have also increased their rate of acquisitions. Group 1 acquired two Toyota dealerships that Haig Partners represented in Q1. In Q2, Penske and Sonic closed on acquisitions and AutoNation announced a sizeable deal. In addition to acquiring new car franchises some of the public buyers are also investing in used car dealerships.
Key findings from the Q2 2021 Haig Report include:
- Unprecedented conditions continue in auto retail fueled by inventory shortages and strong economic recovery
- The average privately-owned dealership generated an estimated $3.1M in adjusted pre-tax profit over the past twelve months, 2.2x the level of profits in 2019, the last year before the Pandemic
- Public company spending on US auto acquisitions in the first half of 2021 was almost $2.0B, 756% more than they spent in the same period in 2020
- An estimated 422 dealerships sold in the twelve-month period ended 6/30/2021, 41% more than in 2019, the last year before the Pandemic
- Blue sky values rose an estimated 52% from 2019 and 26% from the end of 2020 and are now at record-high levels
- Public equity valuations are 109% higher than they were before the Pandemic