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Report: Auto Dealers are in Acquisition Mode

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May 12, 2014 by   Leave a Comment

It is a buyer’s and a seller’s market right now for auto dealerships looking to expand.

Automotive News reported that such a rare occurrence has brokers predicting big buy-sell activity this year and for the next few years. The 2014 pace of dealership consolidation already is almost double that of 2013, says Tim Lamb, president of Tim Lamb Group, a buy-sell advisory firm in Ohio.

“The (mergers and acquisitions) business in automotive retail couldn’t be any better right now,” Lamb said.

Several elements are driving consolidation, but the key one is an unusual win-win market.

Most car brands are healthy, and dealership profits are good. That means dealers who sell out can command a premium.

At the same time, buyers project a good return on investment — even with a relatively high purchase price — because the long-term U.S. auto market is trending upward.

A favorable financing environment helps, as does the presence of big, cash-rich buyers. Lamb says he’s seeing record transaction prices.

Most car brands are healthy, and dealership profits are good. That means dealers who sell out can command a premium.

At the same time, buyers project a good return on investment — even with a relatively high purchase price — because the long-term U.S. auto market is trending upward.

A favorable financing environment helps, as does the presence of big, cash-rich buyers. Lamb says he’s seeing record transaction prices.

“The revelation has hit some guys that this good fortune may not last forever, so they’re starting to come off the fence, making the determination to sell,” he said.

Lamb expects consolidation to accelerate this year and even more during the next two or three years.

 

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