Transactions fell 2.3% last year due to a 41% drop in the fourth quarter and driven largely by a reduction in public auto retailers’ acquisition spending. - Pixabay/Toby_Parsons

Transactions fell 2.3% last year due to a 41% drop in the fourth quarter and driven largely by a reduction in public auto retailers’ acquisition spending.


The auto dealership buy/sell market experienced its second most active buy-sell year ever in 2022, with a 25% increase in transactions in the first three quarters of the year compared to 2021, and a record 845 franchises sold during that period, according to the latest Blue Sky Report by Kerrigan Advisors. However, a dramatic decrease in transactions in the fourth quarter led to a 2.3% decline for the year overall.

In 2022, 374 dealership transactions were completed compared to 383 in 2021, impacted by a year-over-year fourth-quarter decline in transactions of 41% to 93. That was largely a result of public auto retailers’ lowered valuations, which spurred a significant reduction in their acquisition spending.

Public auto retailers' acquisition spending on U.S. dealerships was 79% less in 2022 than in 2021, according to the report, a dramatic about-face. They spent $1.9 billion, $7.1 billion less year-over-year but still 155% higher than the prepandemic average of $740 million. By the third quarter, the publics’ average blue-sky multiple had declined to just 2.9 times, a 64% reduction from their peak in the first quarter of 2021. Believing their companies were undervalued by Wall Street, the public auto retailers chose to primarily allocate their capital to acquiring their own stock, with 51% of their capital going toward stock buybacks, more than double 2021’s level and the highest level in recent history.

“Despite the public auto retailers' reduced acquisition spending, the industry still had the second most active buy-sell market ever, with private buyers dominating the market and putting their substantial war chest of capital to work,” said Erin Kerrigan, founder and managing director of Kerrigan Advisors. “Private dealers’ acquisition activity is a real endorsement of the auto retail business model and systemic of the industry’s strength over the last three years. Even in a rising interest rate environment, dealers voted with their pocketbooks and grew their businesses through acquisition in 2022 and continue to do so in 2023.”

Much of the activity in the buy-sell market was again driven by surging dealership earnings, which hit a third consecutive record year. Kerrigan Advisors estimates that average dealership earnings rose 9.0% year-over-year in 2022, ending the year 210% above the prepandemic five-year average from 2015 to 2019.

As the publics’ share of the buy-sell market declined, private buyers leveraged their strong balance sheets to make substantial acquisitions, rebounding from an all-time low buy-sell market share in 2021 of 71% to 94% in 2022. Multidealership transactions, which were particularly impacted by the decline in public acquisition spending, fell 24% to 96. That was still 67% higher than their prepandemic average of 58.

“While the publics ceded buy-sell market share to the private dealership groups in 2022, there is potential that these companies could increase their capital allocation to US dealership acquisitions in 2023,” said Kerrigan, who noted that this year the Kerrigan Index has risen nearly 14% through March, with five publics reaching record stock valuations in February.

“With their tremendous liquidity - a collective $7.6 billion - the publics will continue to focus on acquisitions as a means to grow their top and bottom lines. Assuming the challenges associated with the brewing banking crisis do not extenuate, some of these companies may choose to increase their allocation to dealership acquisitions in 2023.”

2023 Buy/Sell Trends

In the 2022 annual report, Kerrigan Advisors identified the following four important trends that are expected to meaningfully impact the market in 2023:

  • Buyers become increasingly selective with their acquisition criteria
  • Blue-sky pricing is based on profit projections rather than historical averages
  • As interest rates rise, dealership real estate values may decline in 2023
  • OEMs more aggressively manage their dealership networks

“The biggest trend for the buy-sell market in 2023 is that the ‘cream’ is starting to rise to the top,” said Ryan Kerrigan, managing director at Kerrigan Advisors. “The buy-sell market is beginning to diverge into a ‘have and have not’ marketplace, where certain dealerships remain in high demand, commanding tremendous pricing power, while others struggle to identify a buyer.”

According to the report, in 2021 and 2022, dealers were anxious to put their rising pool of capital to work, throwing a wide net when determining which acquisitions met their parameters. But this year, they are more judicious, paying a premium for top franchises in high-growth, business-friendly markets, such as Florida and Texas, while discounting riskier franchises in lower-growth markets, particularly those with low sales volume. Kerrigan Advisors is also seeing a notable migration in buyers’ acquisition preferences to higher-volume dealerships due to the economies of scale and projected higher profitability of those stores, a trend noted in the third-quarter 2022 Blue Sky Report. With just 31% of dealerships selling 750 new vehicles annually on average, Kerrigan Advisors finds high-volume dealerships can command premium pricing due to strong buyer demand for those scalable assets.

Honda, CDJR Multiple Fall, Buick GMC, Cadillac Multiples Could Rise

Kerrigan Advisors made several adjustments to its blue-sky multiples and multiple outlook this quarter, reducing Honda’s high-end multiple by .25. Honda lost significant market share last year - down 26.9%, the largest loss of any nonluxury franchise. Notably, Honda’s sales per franchise fall below Hyundai and Kia for the first time and a decline in buyer demand for the franchise toward the end of last year brought down the multiple. In the case of CDJR, Kerrigan Advisors reduced its multiple on the high and low ends by .25 as the franchise saw inventories rise and sales decline, which is resulting in a reduction in new-vehicle gross profits, reduced overall dealer profitability, and declining buyer demand.

Kerrigan Advisors saw improvements in the outlook for Buick GMC and Cadillac. Both franchises increased market share and sales per franchise, particularly as they reduced franchise count. With those moves, Kerrigan Advisors observed an increase in buyer demand for the franchises and expects both could see their multiples rise this year. In particular, Cadillac had the largest sales per franchise increase of any franchise -165 to 240 or 45% - resulting in increased dealer profitability, particularly in major metros where franchise consolidation is meaningful, and with stand-alone franchises, where sales per franchise is even higher than the average.

Highlights from the Q4 2022 Blue Sky Report include:

  • 374 dealership transactions were completed for the full year 2022. While this was a 2.3% decline compared to 2021, 2022 remained the second most active buy/sell year on record.
  • 93 dealership buy-sell transactions were completed in the fourth quarter, down 41% year-over-year.
  • Auto retail recorded its third consecutive year of record earnings in 2022, rising an estimated 9% compared to 2021, and ending the year at an all-time high of $4.43 million, 210% above the prepandemic five-year average of $1.43 million.
  • The public auto retailers reduced their acquisition spending on U.S. dealerships by 79% in 2022, spending $1.9 billion on the purchase of 52 dealerships.
  • Multidealership transactions fell 24% to 96 in 2022 but were 67% higher than their prepandemic average of 57.6 (2015-2019).
  • The average number of franchises sold per multidealership transaction declined from 4.0 to 3.4 in 2022.
  • The publics’ average blue-sky multiple declined to 2.9 times by the third quarter, 40% below the average private blue-sky multiple.
  • In 2022, just 21% of the public auto retailers’ capital was allocated toward U.S. dealership acquisitions, less than a third of 2021’s level, when 64% of their capital was deployed toward such deals.
  • Private buyers’ share of the buy-sell market rebounded to 94% in 2022 from its all-time low of 71% in 2021.
  • Import luxury and nonluxury buy-sell market shares rose to 43% and 18%, respectively, by the fourth quarter, while domestic buy-sell market share dropped to just 39%.
  • The Kerrigan Index declined 33.4% last year, stressed by rising interest rates and recession risks, but rebounded 28.5% through mid-February, with five of six public retailers achieving all-time high stock prices.


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