DEALERSHIP BLUE SKY VALUES ARE STILL MORE THAN 2.5X HIGHER THAN IN 2019 –
DRIVING HIGHEST PRICE EVER PAID FOR A DEALERSHIP IN AUTOMOTIVE HISTORY

Fort Lauderdale, FL. Haig Partners LLC released its closely followed Haig Report^® for Q2, which tracks trends in auto retail and their impact on dealership values.

The blue sky values of dealerships remain high, although they are slightly declining since their peak in 2022. Haig Partners estimates the average blue sky value for a dealership has dropped 7% since the end of 2022 due to lower earnings. The good news for sellers is that the blue sky value for a typical store is still more than 2.5x higher than in 2019. On another positive note, some brands, like Toyota, have managed to remain unaffected by this trend. Haig Partners represented the seller on the sale of Al Hendrickson Toyota in South Florida for a value that we believe to be the highest price ever paid for a single dealership.

The decline in dealership profits is primarily related to lower margins on new and used vehicles. Big price increases and higher interest rates have begun to impact consumers’ purchasing power. At the same time, increased production by the OEMs is resulting in elevated inventories which gives dealers less pricing power. Higher floorplan expenses are also hurting dealers. The dealer community has been anticipating such a phase, so no one is surprised. Fortunately, a portion of the decline in variable gross profit has been offset by a healthy increase from fixed operations as consumers are pouring money into older vehicles to keep them on the road. The bottom line of these changes is that pre-tax profits at dealerships owned by the publicly traded retailers in Q2 2023 were 18% below what they were in the same period in 2022. To keep this level of earnings in perspective, dealership profits are still nearly 3.0x higher today than what they were in 2019. The industry is still in a very healthy position.

Highlights from the Q2 2023 Haig Report^® include:

• Dealership buy-sell activity picked up in Q2, with the number of rooftops trading hands rising 13% in Q2 compared to Q1 2023, climbing from 127 to 143.
• Public company spending on domestic dealership acquisitions ramped up in Q2 2023, nearly reaching $1B in the quarter, bringing Q2 2023 YTD spending nearly in line with 2022.
• The average publicly owned dealership made $5.8M in the 12-month period ended Q2 2023, a 10% drop from year-end 2022.
• Dealership profits in Q2 2023 decreased 18% from $1.8M in Q2 2022 to $1.5M in Q2 2023. Despite this decline, profits remain nearly 3.0x higher than pre-pandemic levels.
• Average estimated blue sky values per store remain robust in Q2 2023, down just 7% from the record seen in 2022.

Alan Haig, President of Haig Partners, shared, “The buy-sell market is holding up well. Many dealers are on the hunt for stores to buy and they are finding a healthy supply of dealerships for sale. In the first half of 2023, an estimated 270 dealerships were sold. If the current pace continues, 2023 will turn out to be the third most active year for buy-sells.

What is becoming more difficult now is for buyers and sellers to agree on value. Some sellers want to sell at yesterday’s price and some buyers want to buy at tomorrow’s price. In these times, it is more important than ever for a seller to run a competitive sale process to make sure that the Most Motivated Buyer® has an opportunity to bid for their business. Also, running a process will allow a seller to reach an agreement with a buyer more quickly, an important consideration during a time when dealership values may be slowly declining.”

For more highlights from the Q2 2023 Haig Report^®, read the full press release here.