Haig Partners LLC has released its Q3 2024 Haig Report®, offering an in-depth analysis of the key trends influencing the automotive retail sector. Despite ongoing challenges such as affordability concerns, rising interest rates, and global uncertainties, U.S. auto dealers continue to demonstrate remarkable resilience. Profits per store remain double their pre-pandemic levels, reflecting the industry’s adaptability and strength.
The resilience of the auto retail industry is truly remarkable, said Alan Haig, President of Haig Partners. While profits have softened from pandemic-era peaks, they remain significantly above historical averages, creating attractive opportunities for both buyers and sellers in the industry.
Key Trends from the Q3 2024 Haig Report®
Evolving Buy-Sell Market
Dealership M&A activity surged in Q3, with 92 rooftops changing hands—an increase of 10% over Q2—keeping 2024 on track for a record year. Private dealers dominated acquisitions, accounting for 96% of transactions, signaling strong confidence in the long-term profitability of the industry. Haig Partners is on pace to close the sale of 60 dealerships in 2024, showcasing the sustained vigor of the buy-sell market.
Diverging Franchise Performance
Franchise profitability continues to vary widely. High-performing brands like Toyota, Honda, and Lexus maintain their market leadership, commanding premium valuations. In contrast, Stellantis and Nissan face challenges, creating opportunities for value-conscious buyers to acquire underperforming franchises at more attractive prices.
Declining Blue Sky Values
Blue sky values—representing goodwill in dealership valuations—have declined 12% from year-end 2023 but remain roughly double pre-pandemic levels. The average estimated blue sky value for a publicly owned franchised dealership stood at $21.3 million in Q3 2024. While market conditions are normalizing, strong-performing franchises continue to achieve near-peak valuations.
Adjustments to Blue Sky Multiples
Haig Partners adjusted its blue sky multiples for Q3 2024 based on evolving market dynamics:
- Audi: Reduced by 0.25x
- Subaru: Reduced by 0.50x
- Mazda: Increased by 0.25x
Shifting Strategies Among Public Dealer Groups
Public auto retailers slowed acquisitions in Q3, focusing instead on streamlining operations and divesting non-core assets. Lithia led the quarter’s largest acquisition, purchasing three stores, while other publicly owned dealerships reported a 7% decrease in pre-tax income from Q2 and a 28% decline compared to Q3 2023. These strategic shifts present opportunities for private buyers to enter the market at more favorable prices.
Positive Macroeconomic Indicators
Improving macroeconomic conditions—falling interest rates, moderating inflation, and steady GDP growth—have bolstered consumer confidence. These trends are expected to enhance vehicle affordability and drive a potential rebound in retail sales volumes.
Opportunities for Dealers Amid Change
The buy-sell market is undergoing a healthy evolution, added Haig. “Sellers of strong franchises are realizing near-peak values, while buyers can find opportunities in underperforming brands. As profits normalize, mid-tier franchises are seeing gradual declines in valuation, opening doors for strategic investments.”
Haig Partners is set to achieve a record-breaking year, with 60 dealership sales projected for 2024. This milestone coincides with the firm’s 10th anniversary as a trusted advisor to dealership owners nationwide.
These milestones represent more than numbers—they reflect our commitment to honoring the dedication, vision, and hard work of dealership owners, Haig emphasized. “Selling a business is not just a transaction; it’s the culmination of a lifetime of effort. Our team takes immense pride in helping clients maximize the value of their life’s work.”
As the auto retail sector evolves, Haig Partners remains a trusted partner, guiding clients through market transitions and ensuring successful outcomes.
