Last year’s merger and acquisition activity by public dealerships groups jumped 140 percent above the 2010 total, according to the Presidio Group’s Automotive Retail M&A Report.

Presidio combed through corporate SEC filings to determine publicly held dealer groups completed $512 million in acquisitions in 2011. While making a significant year-over-year climb, Presidio acknowledged the total is still well-below the all-time record of more than $1 billion set in 2006.

Analysts believe the past year’s activity represents an accelerating trend in the M&A market, and private buyers are also active though terms of their purchases of dealerships and dealership groups are not reported.

Presidio thinks the increase is attributable to a number of factors.

First, the firm noted the market was virtually frozen for three years with just $28 million worth of acquisitions by public retailers in 2009, according to SEC filings.

“Many dealers were awaiting more favorable conditions to exit their businesses,” analysts surmised.

Presidio went on to mention strong unit sales, fewer marginal dealerships, lower operating costs and record dealership profitability are making acquisitions more attractive for both public and private buyers. 

The firm said stabilized real estate values and low interest rates are also contributing to the rebound in M&A activity.

The report also indicated Toyota, Honda, Lexus, BMW and Mercedes-Benz remain the most sought after acquisitions, while five others (Audi, Chevrolet, Ford, Hyundai and Nissan) are drawing increasing interest. 

In fact, Presidio raised its estimated blue sky multiples for 12 franchises in the report.

Furthermore, Presidio believes the industry is still in the early stages of at least a five-year up-cycle and anticipates continued high levels of activity for several years. 

“Rising consumer confidence, declining unemployment rates, more accessible financing and the average age of existing vehicles — now 10.8 years, a record high according to the National Auto Dealers Association — are driving new vehicle sales higher,” analysts explained.

Presidio also pointed out that 2012 estimate for new-vehicle sales will be 9.2 percent above last year.

“And that may be conservative given that the annualized rate from January and February is 18 percent greater than 2011’s sales,” the firm emphasized.

Alan Haig, managing director and head of Presidio’s automotive retail services group, elaborated on the report’s findings.

“All of the factors we saw driving M&A activity in the first half of 2011 remained in force through the balance of the year, and they appear to be gaining strength in 2012,” Haig surmised.

“Dealerships and public and private dealer groups are booking sharply higher profits,” he continued. "Despite higher valuations, acquisitions remain attractive to buyers given the anticipated growth in dealership profits over the next several years. We anticipate 2012 will be another vibrant year in the M&A market.”