The coronavirus pandemic continues to intensify one of the basic principles of economics. Dealer demand for inventory is growing, but supply at the auction still isn’t back to the level seen before facemasks, stay-at-home orders and other COVID-19 connected elements became commonplace.
The new COVID-19 Market Update from Black Book released on Tuesday described the latest viewpoints from both auctions and dealers that are all trying to serve their customers bases with limited manpower and social-distancing challenges.
Meanwhile, auction prices keep ticking higher, eroding at dealer margins already slim in some instances.
Black Book reported that according to its volume-weighted data, overall car segment values increased 0.88% this past week. Analysts determined all car segments experienced increases, except for sub-compact cars, which have been on a continual decline since the end of March.
“For the past four weeks, the compact car segment has had the largest car segment increases, but this past week the top spot was taken by the sporty car segment with a 1.65% increase,” analysts said in the newest update.
When volume-weighting is applied, Black Book found that the overall truck segment values — including pickups, SUVs, and vans — increased by 0.52% last week with all segments increasing except full-size vans.
Analysts added that the minivan segment led the increases with a strong rebound of 1.65% after 11 consecutive weeks of declines.
When recapping what the firm heard in discussions with auctions, Black Book mentioned what Auto Remarketing previously reported that Manheim is allowing consignor representatives back on the auction block to rep their vehicles during sales.
“Auctions, both physical and digital, continue to be hot with bidding activity and sales rates returning, and in some places exceeding expectations for this time of year,” Black Book said.
“Supply available at the auctions continues to be low and is contributing to the increase in sales rates and higher prices that buyers are having to pay to secure inventory,” analysts continued.
“Lease extensions and lack of repossessions over the last three months are resulting in some auctions being light on inventory to consign,” Black Book went on to say. “The estimation by some of the auctions we’ve been in contact with are expecting to be low on inventory for another two to three weeks.”
Auctions being low on inventory to cross virtual blocks is not helpful to dealerships, based on what Black Book shared about its conversations with store buyers and personnel.
“The most common comment we heard from dealers this past week is centered around their lack of inventory, both new and used,” Black Book said. “Dealers are finding themselves having to pay more for inventory, resulting in a smaller margin when the unit is retailed.
“However, most dealers we’ve talked to would rather keep the inventory moving and make the money on turning volume to prevent getting stuck with any units if the demand slows,” analysts continued.
“Availability of good condition, low mileage units are a rarity right now, and dealers are finding themselves having to settle for vehicles that require some reconditioning to be retail ready,” Black Book added.
Meanwhile, on the new-car side, dealers are struggling there, too. Analysts recapped that some dealers are still reporting being down by as much as 50% in available new-model inventory.
“Lack of new inventory has some dealers concerned about making it through the month with their current supply,” Black Book said.
“Manufacturing has resumed, but most of the facilities are not yet back to running all shifts and operating at full capacity,” Black Book continued. “New deliveries continue to be few and far between, contributing to the increased demand for used units.”
CORRECTION: Story has been corrected to clarify that DI is one of eight selected preferred providers.
Dealer Inspire (DI), a Cars.com company that provides disruptive technology and digital marketing solutions to the automotive industry, recently announced a new OEM agreement with American Honda Motor Co.
DI has been selected as a website and technology platform provider for the OEM’s U.S. network of franchised stores. DI is one of eight chosen preferred providers.
The company already is an approved digital advertising provider for Honda and works with approximately 220 Honda dealers across the country.
“We are excited to expand our relationship with Honda dealers and offer a fully connected and customizable website platform that seamlessly integrates with our digital advertising program and technology solutions for utmost efficiency,” Dealer Inspire chief executive officer and co-founder Joe Chura said in a news release.
“We believe we can help Honda dealers meet the needs of today’s digital shoppers and better compete in the rapidly shifting automotive market,” Chura continued.
A seven-time AWA Pinnacle Platform Winner, Dealer Inspire’s advanced website platform is the core of its connected ecosystem of solutions that is designed to make automotive retail faster, easier, and smarter from search to signature.
Built on a customizable platform and designed with user behavior data, DI insisted that its websites for dealerships are set apart by advanced technologies that drive modern consumers toward purchase decisions.
DI customers receive additional benefits as part of Cars.com portfolio, which includes Cars.com, Dealer Inspire and DealerRater. The company looks to leverage integrated technologies across brands to drive Cars.com’s 25 million in-market monthly car shoppers to dealers’ digital and physical storefronts.
Officials mentioned Honda dealers who partner with DI also gain access to:
• Advanced website platform: DI’s website platform is geared to be flexible, fast and to convert shoppers into buyers. It can adapt to each individual shopper with personalization and geofencing technology, and features Lightning Inventory to instantly guide them to the right vehicle for their needs. Seamlessly integrated to the rest of DI’s products, the website platform is the customizable core of any dealer’s business.
• 24/7 omnichannel messaging: Conversations is the advanced messaging platform built to connect today’s car shoppers with dealerships — wherever, whenever, and however they want to shop. Featuring live video and SMS texting capabilities to keep shoppers connected offline, Conversations is deeply integrated with the dealer’s website in unprecedented ways, replacing static lead forms by instantly answering questions and making connections.
• Connected marketing: DI also offers a full suite of connected digital marketing services to drive new customers to the platform, including Fuel In-Market Video, Search Engine Marketing, Email Marketing, Social Advertising and Creative Services. By deploying the company’s fully connected strategy, dealers can guide customers through each touchpoint in the car shopping journey.
• Proprietary Reporting Platform: Every DI website also comes with PRIZM, an advanced reporting platform at no additional cost, giving dealers ROI summaries, metric deep dives, group-level reporting, and proactive alerts for website analytics, marketing and product performance, and even open support requests — all from one dashboard.
• Superior Customer Support: Dealer Inspire supports a best-in-class dealer-to-employee ratio to ensure industry-leading service, achieving an average dealer satisfaction score of 9.5 out of 10, according to Dealer Inspire Dealer surveys, based on 2,800 dealer respondents that responded during a project last summer. A dedicated team of performance managers partner with dealers to continually increase results through marketing strategy, execution and transparent reporting.
For more information about DI’s offerings for Honda and other dealers, visit www.dealerinspire.com/honda. Honda dealers interested in partnering with DI can call (877) 899-8346 or email sales@dealerinspire.com.
Digital retailing and vehicle deliveries in driveways certainly have gained momentum during the coronavirus pandemic. But no doubt, plenty of potential buyers remain who still want to complete their purchase at the store.
To help owners and managers, the National Independent Automobile Dealers Association compiled a guide to operating an independent vehicle dealership in the era of COVID-19.
The association highlighted the Independent Dealer’s Guide for Safely Operating During COVID-19 contains guidelines, best practices, policies and procedures gathered from government agencies as well as independent dealers across the nation.
“As the automotive industry continues serving its communities in a post-COVID-19 environment, protecting the health and safety of the driving public is the highest level of priority,” NIADA chief executive officer Steve Jordan said in a news release that accompanied the guide’s availability on Friday.
“We are proud to offer this important guide to the dealer community as a set of recommended guidelines to assist in their ongoing efforts,” Jordan continued.
NIADA insisted the guide is a tool to help dealers plan carefully and understand what changes they might need to make in their businesses to take advantage of post-pandemic opportunities while protecting the health and safety of their customers, employees and vendors.
Some of the highlights include:
• General considerations for creating a safe workplace, such as establishing a written plan and conducting daily health checks of employees.
• Best practices for policies regarding social distancing within the dealership, and cleaning and disinfecting in the showroom and in vehicles.
• Handling interactions with customers, including test drives, sales and financing, service department operations and collections.
NIADA said the guide contains information from the Centers for Disease Control and Prevention, the Occupational Safety and Health Administration, the California Department of Public Health and other agencies.
The association noted special appreciation goes to NIADA senior vice president of legal and government affairs Shaun Petersen for spearheading the effort to work with the organization’s dealer community, as well as NIADA’s ad hoc committee and the NIADA board of directors for their work in developing these guidelines.
The guide is available on NIADA’s COVID-19 resource page at covid19.niada.com.
Brian Skutta, the president of automotive at Spireon, discussed two topics that probably are top of mind at dealerships nowadays.
In this episode of the Auto Remarketing Podcast, Skutta described the progress dealerships are making toward more availability of touchless vehicle delivery while at the same time keeping their service drive busy, even if drivers aren’t on the roads as much as before the coronavirus pandemic arrived.
To listen to this episode, click on the link available below, or visit the Auto Remarketing Podcast page.
Download and subscribe to the Auto Remarketing Podcast on iTunes or on Google Play.
Vehicle sales aren’t the only retail category to drop because of the COVID-19 pandemic. Kerrigan Advisors’ first quarter 2020 Blue Sky Report outlined the decline of the dealership buy/sell market impacted by the same trigger.
Kerrigan Advisors reported this week that Q1 activity fell by 9.3% year-over-year. The firm indicated transactions slated to close at the end of the quarter were postponed, renegotiated or, in the worst case, terminated.
However, the report indicated that blue sky values are not dramatically impacted and, with auto sales due for an uptick, a buy/sell rebound in the second half of this year is anticipated.
Kerrigan Advisors acknowledged a bright start to the year was not enough to avoid severe financial whiplash as U.S. dealerships shuttered in mid-March and consumers were told to stay home. As a result, sales plummeted in March and April, resulting in one of the sharpest declines in dealership earnings on record, and the buy/sell market followed suit.
Kerrigan Advisors is expecting the second quarter to be the slowest buy/sell market in recent history.
“As a result of the coronavirus, auto dealers had to refocus their energy on internal operations and cash preservation in March and April,” said Erin Kerrigan, founder and managing director of Kerrigan Advisors. “And while, at present, the industry is still managing through the economic effects of the health crisis, we see better days ahead thanks to the resilience of the dealer model that’s likely to thrive as dealerships reopen.
“In fact, with industry cost cuts and improved efficiencies, we expect auto retail will see significant improvements in profitability, making more money on less revenue, in the second half of 2020,” Kerrigan continued in a news release.
Given strong buyer demand and today’s low cost of capital, The Blue Sky Report by Kerrigan Advisors does not forecast dramatic changes in blue sky values in the foreseeable future, despite the economic impact of COVID-19 in the first and second quarter.
Once again, the firm asserted that many dealers have shown the ability to maintain profits, even during the worst of times. “In the depths of the Great Recession, auto retailers remained profitable,” report authors said, “and sellers choose to patiently wait for a buyer to reach their valuation expectations, rather than sell at a discounted valuation.”
Kerrigan Advisors explained this situation means that the most likely impact of COVID-19 will be a slower buy/sell market in the second quarter of this year, rather than a decline in dealership valuations.
As vehicles sales rise and buyers seek to put a substantial amount of capital to work, the report indicated potential for a rebound in buy/sell activity in the second half of the year and noted that the capital markets are experiencing a surge in auto retail valuations.
Since bottoming on March 18, The Kerrigan Index has risen 81.2% through the end of May. Also, the firm pointed out the industry is seeing improved profits from an increased utilization of technology to cut costs as digital retailing becomes the order of the day.
“While the coronavirus will undoubtedly force some distressed dealership sales, those one-off valuations are not a reflection of the overall market,” said Ryan Kerrigan, managing director of Kerrigan Advisors. “In fact, while this global health crisis is impacting auto retail in many different ways, industry partners, vendors, lenders and OEMS have provided dealers with tremendous financial and administrative support to ensure they weather the financial impact of lost sales and avoid closure.
“And, auto retailers have the most flexible cost structures within the supply chain, so they are best able to adjust to unforeseen events,” Ryan Kerrigan continued. “Given that, the health crisis has caused few distressed transactions.”
Kerrigan Advisors made one valuation upgrade in its latest Blue Sky Report, increasing Toyota’s low-end multiple from 5.25 to 5.5. The firm noted this increase reflects rising buyer demand for one of the highest quality franchises in the market and a belief that Toyota is best prepared amongst all OEMs to weather the economic impact of COVID-19.
“Toyota had one of the lowest sales declines in the first quarter of any franchise and maintains the highest credit rating of the OEMs,” Erin Kerrigan said. “With a flight to quality assets, Toyota franchises are expected to command even higher multiples as buyers seek safe investments during the pandemic.”
Kerrigan Advisors identified the following three trends, which are expected to meaningfully impact the buy/sell market for the remainder of the year, including.
• Sellers’ blue sky pricing expectations exclude COVID-19 financial impact
• Surge in buyer/investor demand due to industry growth prospects and low cost of capital
• Buy/sell activity by state diverges based on level of economic shutdown
Other highlights from the Q1 report by Kerrigan Advisors include:
• Prior to COVID-19, dealership earnings through February were on track for a 38.7% increase over 2019 and near 2015’s record level.
• First quarter buy/sell activity declined 9.3%, with 49 transactions closing compared to 54 transactions during the first quarter of 2019, according to The Banks Report, Automotive News and Kerrigan Advisors’ research.
• The first quarter saw a high level (31%) of multi-dealership transactions.
• Among the franchises being acquired, domestics continued to dominate in the first quarter of 2020, representing 57% of buy/sells, up 84% since 2015. Domestic dealership buy/sell market share is now consistent with franchise market share. Kerrigan Advisors expects domestics to dominate the 2020 buy/sell market, as multi-generation dealer families decide to sell post-pandemic. Additionally, import luxury’s buy/sell market share increased in the first quarter to 18%, up 12.5% over last year.
• The public auto retailers’ spending on U.S. dealership acquisitions in the first quarter increased 11.5%, compared to the first quarter of last year. The publics were expected to spend over $1 billion on acquisitions in the first quarter with Asbury Automotive Group’s acquisition of Park Place Dealerships.
• Asbury Automotive Group terminated the Park Place acquisition on March 24. The company’s market capitalization declined 51.6% from the time of its announcement of the Park Place Dealerships acquisition in December to the time of the transaction termination.
• Kerrigan Advisors expects the second quarter of 2020 to be the slowest buy/sell market in recent history due to pandemic stay-at-home orders.
• Kerrigan Advisors upgraded Toyota’s low-end blue sky multiple from 5.25 to 5.5 and downgraded Ford’s low-end blue sky multiple, Buick GMC’s high-end and low-end multiples, and Nissan’s low-end and high-end blue sky multiples.
The complete Blue Sky Report published by Kerrigan Advisors and other firm services can be found on this website.
On Tuesday, Cox Automotive shared details about an integration involving Clutch Technologies and Xtime that further supports its vision for fixed ops and dealer mobility services.
The integration involves Xtime’s fully integrated, end-to-end service experience platform and Clutch’s fleet sync and service pickup and delivery software serve that are combing to be the engine for this next-level service offering.
According to Cox Automotive’s recent Reimagining the Automotive Consumer Experience Study, a majority of consumers said — 89% to be exact — that an ideal ownership experience would include a service where a dealer picks up the vehicle in need of maintenance or repair and returns the vehicle when the work is complete.
“With the digital economy raising expectations of convenience, it’s critical for dealers to further modernize their fixed operations functionality to meet consumer demand,” said Adam Carley, vice president of product for Clutch Technologies. “This solution truly eliminates hassle for the consumer, boosting customer loyalty and driving higher retention on service.”
Functionality of the new Cox Automotive fixed ops solution offered by Clutch Technologies and Xtime will be available progressively over the second quarter of the year, according to the companies.
Xtime Schedule & Clutch Fleet Sync
For dealers on Xtime, customers can book their service appointment at the dealership with Xtime Schedule and reserve a loaner through Clutch Fleet Sync.
Leveraging Clutch’s partnership with TSD, a leading provider of loaner management software, Fleet Sync can provide current and projected loaner availability within Xtime, so that a loaner reservation can confidently be made as part of booking a service appointment.
When the service appointment is finalized, the loaner reservation will be created with the consumer’s information. The consumer will then receive a secure link to provide their payment card, driver’s license and insurance information, which are added to the loaner reservation.
Finally, as the appointment approaches, the system automatically can assign the right vehicle to the right customer. The dealer can benefits from increased efficiency at the loaner desk and higher utilization of the loaner fleet. Consumers benefit from greater availability of loaners and a streamlined experience.
Xtime Schedule & Clutch Service Pickup & Delivery
Scheduling a concierge pickup of their vehicle for service — with the option of a loaner to be dropped off when pickup happens — can be just as simple, according to the companies.
Dealers and consumers can add pickup to service appointments booked within Xtime’s multichannel scheduling tools. Xtime Schedule can display availability of both loaners and valets so that appointments can be made with confidence.
From that point, Clutch can handle the full workflow for the dealer, including scheduling concierge labor and messaging with the consumer. Through its integration with TSD Cirro, Clutch also has the ability to deliver digital loaner contracts for signature in seconds within Clutch’s Sideflip concierge app.
In addition to driving customer loyalty, Cox Automotive explained this collaboration is intended to generate extra service revenue for the dealership, with 67% of today’s consumers willing to pay more for a great experience.
Additional revenue will be realized over time with a more efficient usage of loaner vehicles and repeat business from customers, according to the companies
“Convenience is key when evaluating how to implement or enhance a dealership’s customer-centric service experience,” said Tracy Fred, vice president and general manager for Xtime.
“Marrying the very best of what Xtime and Clutch have to offer provides dealers with an opportunity to standout in the market and not only attract new business but turn them into repeat customers,” Fred went on to say.
Before stores intensified their holiday-season sales efforts, both Haig Partners and Kerrigan Advisors released their third-quarter dealership buy/sell activity reports, highlighting how activity during the timeframe put the transaction pace on a healthy course to round out 2019 and to begin 2020.
Beginning first with the Q3 2019 edition of The Haig Report released by Haig Partners, the firm said the number of public and private dealerships that sold in the U.S. decreased 31% in Q3 2019 compared to Q3 2018, dropping from 106 to 68.
Excluding a unique transaction in Q3 2018 that included 28 stores of the Ken Garff Automotive Group, Haig indicated the number of dealerships sold in Q3 2019 represented a 12.8% decline. The firm added the number of dealerships sold during the first three quarters of 2019 decreased 36% from the same period in 2018.
Haig calculated that acquisition spending in the first three quarters of 2019 by publicly traded auto retailers decreased by 28% compared to the same period in 2018, but spending in Q3 2019 jumped 80% year-over-year.
Haig’s report indicated profits at privately owned dealerships over the last 12 months through September came in 2.9% higher than for the full year 2018. Threats from technology disruptors such as autonomous vehicles, electric vehicles and ride sharing appear to be dissipating, according to Haig’s analysis.
Haig also noted blue-sky multiples remained essentially unchanged from the second quarter. Haig lowered the estimated blue sky multiple on the top and bottom end of the range for Infiniti from 3.0 times-3.75 times to 2.75 times-3.25 times, and increased the top-end of the blue sky multiple range for Subaru by 0.5 times to 5.0 times-6.5 times.
When higher profits per dealership are combined with the same 4.80 times average blue sky multiple as the previous quarter, Haig estimated the value of privately owned dealerships increased 2.9% from year end 2018 to Q3 2019.
Haig Partners president Alan Haig said in a news release, “Based on reports from the market and our own practice, we are expecting a good number of transactions to close in the first quarter of 2020. There are more dealerships available for sale than in the past, and there are many buyers with access to plenty of capital.”
Other key findings from the Q3 2019 Haig Report that’s available here also included:
— Macroeconomic indicators such as GDP, employment, inflation, fuel prices and consumer sentiment remain highly favorable for dealers.
— Other trends, such as lower interest rates, lower average monthly car payments and increasing dealership profits, are helping dealers.
— Fleet sales are up 0.2% in Q1-Q3 2019, but retail sales were down 2.3%.
— Floorplan interest expense has swung from a credit of $119 per vehicle in 2015 to an expense of $121 so far in 2019.
— The average dealership pre-tax profit for the 12-month period that ended Q3 2019 was $1.40 million, up 2.9% from year end 2018.
— Average estimated blue-sky value per dealership increased 2.9% in Q3 2019 to $6.7 million compared to $6.5 million at year-end 2018.
— The average stock price for the six publicly traded franchised auto retailers is up 79% in 2019.
— Most investors now believe that, for the foreseeable future, threats from autonomous cars, ride sharing, and electrification will not have a measurable impact on dealership values.
Views from Kerrigan Advisors
The team at Kerrigan Advisors said the dealership buy/sell market is now poised to register another 200-plus transaction year in 2019.
According to the firm’s Third Quarter 2019 Blue Sky Report, Kerrigan Advisors indicated the growth in the buy/sell market is supported by a healthy U.S. economy, led by consumer spending and spurred by a reduction in the Federal Funds Rate by a quarter percentage point — the third such rate reduction since July.
And Kerrigan Advisors added that also fueling the strength of the buy/sell market is strong dealership earnings growth, largely driven by used vehicles and fixed operations.
“The industry’s ability to grow earnings despite flat new vehicle sales really shows the resilience of the dealer model,” said Erin Kerrigan, founder and managing director of Kerrigan Advisors. “That impresses investors and, with more sellers coming to market, buyers are here, seeking acquisitions and investment in auto retail.
“We see an expanding pool of well-funded buyers that will easily absorb the increase in sellers — and keep the buy/sell equilibrium into 2020,” Kerrigan continued in a news release.
In addition, the Kerrigan report that’s available here also identified the following three trends, which are expected to impact the buy/sell market into the first quarter of 2020, including:
• Top franchises still receive multiples on pro forma earnings
• Image requirements are a wild card in today’s buy/sells
• Buyers increasingly focus on management in transactions
Ryan Kerrigan, managing director of Kerrigan Advisors pointed out that the buy/sell market and the strength of the economy has also influenced the acquisition strategy of U.S. public dealership groups.
“Even though the publics reduced their acquisitions spending in 2019, we believe this was a byproduct of the 2018 decline in their market capitalizations,” he said.
“Considering their year-to-date valuation rebound, we expect the publics’ U.S. dealership acquisition spending to rise over the next six months, as evidenced by Asbury’s recent announcement of its billion-dollar acquisition of Park Place Dealerships,” he went on to say.
Other highlights from the Third Quarter 2019 Blue Sky Report by Kerrigan Advisors included:
• Average dealership blue sky values increased 2.9% in 2019 due to improvements in earnings and relative stability in average blue-sky multiples.
• Volkswagen’s lower end multiple increased from 2.0 to 2.5. This is a result of several positive indicators for the franchise, including rising buyer demand, 2019 sales growth and the OEM’s renewed focus on dealership profitability.
• Chevrolet and Ford’s high-end multiples were downgraded from 5.0 to 4.5 and their low-end multiples were downgraded from 4.0 to 3.75. Buyers’ willingness to pay higher multiples for these franchises is beginning to diminish in part due to their increasing reliance on truck sales, which are considered more economically cyclical.
• Nissan’s low-end multiple was downgraded this quarter from 3.0 to 2.5. This decline reflects the continued challenges faced by the franchise, both from an OEM management standpoint and a buyer demand perspective.
• The multiple outlook for Audi was also downgraded this quarter. Audi sales are underperforming the luxury market in 2019, down 5.3% year-to-date, versus a luxury sales decline of 1.3%. Kerrigan Advisors expects Audi’s expensive facility requirements, as well as declines in dealer profitability are the primary reasons for the negative sentiment.
• In the third quarter, buy/sell activity picked up with 59 transactions closing, as compared to an average of 51 transactions for the first two quarters of the year.
• The average dealer is tracking to an impressive 9.3% earnings increase and is approaching 2015’s peak profit level of $1.5 million on an annualized basis.
• 86% of dealers expect the valuation of their dealerships to increase or remain the same in the next 12 months according to the 2019 Kerrigan Dealer Survey results released in October.
• Dealers have successfully shifted their focus from new vehicle sales (5.4% average gross margin) to used vehicle sales (11.4% average gross margin), resulting in improved dealership profits, despite declining new vehicle sales. The average dealer is approaching a 1:1 used to new vehicle ratio, having increased the used to new ratio by 9.8% since 2018.
• On average, dealers saw fixed operations revenue grow 5.1% through the third quarter of 2019. As a result, fixed absorption (service and parts gross profit as a percentage of total fixed overhead expense) increased to the highest level since 2010. Today, dealers are less reliant on the new vehicle department to cover the costs of running their business.
• The fastest growing auto retail groups have greater than 11 dealerships, while those groups with fewer than five dealerships are on the decline. “As the auto retail industry evolves, scale will be a key differentiator and size could be the biggest driver of success,” the report said.
The National Automobile Dealers Association (NADA) recently released a guide designed to help owners, principals and their advisors gauge what their business truly might be worth.
In an effort to assist dealers to understand the process of valuing franchised dealerships as well as the various factors that influence rooftop value, NADA explained that its guide covers such situations as:
— Buy-sell transactions
— Estate and gift tax planning or reporting
— Ownership succession planning
— Owner buy-in or buy-out
— Tax reporting due to entity restructuring
— Litigation settings including divorce and dispute
NADA mentioned its guide also delves into the importance of analyzing historical earnings and cash flow, estimating future cash flow and determining a reasonable return on investment.
The association noted its material describes the steps in the appraisal process, outlining the income, market, and asset-based approaches to valuation.
Furthermore, NADA pointed out the guide provides numerous examples, formulas and worksheets as well as addressing special valuation considerations such as:
— Discounts for non-controlling interests
— Valuation of personal versus corporate goodwill (Blue Sky)
— Valuation for key employee ownerships
— Valuation for federal tax matters, including the relevance of IRS Revenue Ruling 59-60
And finally, the guide also examines changes resulting from the Tax Cuts and Jobs Act of 2017 and suggests strategies to maximize dealership value and prepare for exit.
NADA members can find this guide by going to this website.
Along with a pair of other dealership transactions involving Kerrigan Advisors, one of the dealer groups honored during the Used Car Awards given during Used Car Week 2019 recently added to its portfolio of rooftops.
HGreg.com — the Tier 3 Dealer Group Award Winner in a program sponsored by TradeRev — recently completed its acquisition of one of the largest Nissan dealerships in the U.S. from AutoNation. Now known as HGreg Nissan Kendall, the dealership is located at 17305 S Dixie Hwy, in Palmetto Bay, Fla., southeast of Kendall.
With this important acquisition, HGreg.com expands its portfolio of Nissan dealerships to two in Florida and six nationwide.
According to HGreg.com, the value of the transaction is estimated at $75 million including property, upgrades and facility improvements as well as inventory.
“Since opening our first location in South Florida in 2010, we’ve been building something very special in the region,” HGreg.com president John Hairabedian said in a news release. “We’ve set out to redefine the industry through a new customer experience that is built around convenience and choice, and it’s resonating with consumers.”
The dealership features a 71,500 square-foot building and 14.25 acres of property. The dealership also enjoys a direct pipeline to the large selection of pre-owned vehicles available through the growing HGreg.com network in south and central Florida.
“We look forward to bringing to life our slogan of ‘Car buying, redefined’ to the Kendall area,” Hairabedian said. “We’ve built our business model to accommodate the customer journey, which also includes our website, 100,000 square-foot regional warehouse and concierge-like service for the millions of people who visit south Florida throughout the year.
“We invite anyone who doesn’t yet know us to pay us a visit to learn more. We’re open for business and ready to serve, from the trade-in phase to post-purchase servicing,” he went on to say.
HGreg Nissan Kendall currently employs close to 100 people. The company said it will be looking to recruit additional personnel over the next few months.
HGreg.com owns and operates a network of eight dealerships in the state that includes HGreg.com pre-owned dealerships in Doral, North Miami, Westpark (Broward), Orlando and West Palm Beach, a new car dealership, HGreg Nissan Delray, in Palm Beach County, and a boutique pre-owned luxury car dealership, HGreg Lux, located in Pompano.
In Canada, under the HGregoire.com banner, the company oversees a network of 11 pre-owned and 10 franchised dealerships.
2 transactions involving Kerrigan Advisors
In other dealership transactions, Kerrigan Advisors represented and advised on the sale of Los Angeles County-based El Monte Honda, owned by Steve Nelson and business partners, to Washington-based Car Pros Automotive Group. This is the first Honda dealership for Car Pros, a West coast-based automotive group with six dealerships located in Washington and southern California.
Kerrigan Advisors also represented and advised Bredemann Lexus, located in Glenview, Ill., in its sale. The buyer was Glencoe, Ill.-based Fields Automotive Group, ranked No. 27 in Automotive News’ Top 150 Dealership Group List.
Opened in 1990, Bredemann Lexus is one of the first Lexus franchises in the U.S. and an award-winning dealership, receiving the Elite of Lexus Award 23 consecutive years from 1992 to 2015.
With this acquisition, Car Pros will now have six dealerships, including California stores, Kia in Huntington Beach and Glendale and Volkswagen in San Bernardino as well as Hyundai and Kia in Renton, Wash., and Kia in Tacoma, Wash.
“Car Pros is excited to expand our brand portfolio in southern California with the Honda franchise,” said Matthew Phillips, chief executive officer and owner of Car Pros Automotive Group.
These transactions marked the 81st and 82nd dealership moves Kerrigan Advisors has represented since 2015. It’s also the 10th Honda dealership sold by Kerrigan Advisors since July 2015 and the third Lexus franchise sold this year, making the firm one of the most active sell-side advisers in the auto retail industry.
“El Monte Honda has been serving the southern California community for decades,” Nelson said in a news release. “When it was time to sell, we needed an adviser who could discreetly and accurately represent the opportunity. Kerrigan Advisors has such deep experience representing Honda franchises, and they were able to successfully represent our interests and maximize the value of our business.
“My partners and I have operated many dealerships over the last 30 years,” Nelson continued. “This has been among the smoothest transactions we have been party to, which would not have been possible without Kerrigan Advisors.”
Kerrigan Advisors managing director Ryan Kerrigan noted, “Advising Steve and his partners on the sale of El Monte Honda was a real privilege. The buyer demand that we saw in the marketplace for El Monte Honda reflects the strength of today’s buy/sell market for top franchises, such as Honda.
“El Monte Honda is known for its professional approach to automotive sales and service, so we were determined to represent the partnership the same way and bring a buyer who would offer a continuation of those values,” Ryan Kerrigan went on to say.
Kerrigan Advisors founder and managing director Erin Kerrigan also elaborated about the Honda store transaction.
“El Monte Honda offered a unique opportunity to represent a top import franchise in one of the largest car markets in the U.S.,” Erin Kerrigan said. “It was important that Kerrigan Advisors identify the best buyer for El Monte Honda, particularly one that met all of our client’s valuation expectations and transaction priorities.
“I am confident that Car Pros Automotive Group will continue to build El Monte Honda into one of the strongest Honda dealerships in the area,” she continued.
Brent Smith of Manning, Leaver, Bruder & Berberich served as legal counsel to El Monte Honda. Christian Scali, Bert Rasmussen and Rita Campanile of Scali Rasmussen served as legal counsel and Jason Meersman of Rekdal Hopkins Howard served as an accounting adviser to Car Pros.
Meanwhile, the parties involved also recapped how the sale of Bredemann Lexus came to fruition.
“It’s never easy to decide to sell a dealership, especially one with such a long family history in the community,” said Joe Bredemann, dealer and co-owner of Bredemann Lexus and grandson of the Bredemann auto group founder, Joseph Bredemann II. “Joseph J. Bredemann II, a former blacksmith and wagon-maker, started working in the car business for the Busse Family in Park Ridge almost 100 years ago. Buick was established in 1912, and we added the Toyota franchise in 1976, and Ford in Glenview in 1990. That same year, we were proud to be awarded one of the first Lexus franchises in the U.S.
We will continue to provide the same high level of service to our valued clients at our three remaining dealerships, Bredemann Toyota in Park Ridge, Bredemann Chevrolet in Park Ridge, and Bredemann Ford in Glenview,” Joe Bredemann continued. “I’d like to thank Kerrigan Advisors for doing an exceptional job managing a competitive national sale process on our behalf, ultimately leading to our successful sale to Fields Automotive, another Chicago-based, family-owned group.
“We are confident the Fields management team, together with our former Lexus employees, will continue to provide the same level of unparalleled customer service that our Lexus clients have become accustomed to. We also could not be more impressed with the professionalism and diligence of Kerrigan Advisors,” he went on to say.
Through four generations, Bredemanns have served their community, with long-standing support to local charities and civic organizations, including Misericordia, the Park Ridge Rotary Club, The Juvenile Diabetes Research Foundation, The A.C. Nielsen Tennis Tournament benefitting the North Suburban Special Recreation Association, North Shore Community Services, Park Ridge Little League Baseball and the Park Ridge, Glenview and Niles Chambers of Commerce.
“The Bredemann family has been an important employer and contributor in Chicago and the northern suburbs for over 150 years. Their Lexus franchise has been award-winning since its start, so we were honored to represent the dealership in the sale,” Erin Kerrigan said.
“The Bredemann name, and their auto dealerships, symbolize integrity, fairness, philanthropy and first-class service. Finding a buyer with the same values who would carry on the Bredemann family legacy was an important goal of our sale process,” she continued.
Ryan Kerrigan added, “The Bredemann Family of Dealerships is one of Chicago’s most reputable. They have a policy of service excellence in all aspects of their operations, and a sincere commitment to their community. We’re honored to have represented Bredemann Lexus in this important transaction.”
William Kelly and Ira Levin of Burke, Warren, Mackay & Serritella, P.C. served as legal counsel to Bredemann Lexus. John J. Keating of Wipfli LLP served as accounting adviser to Bredemann Lexus. Stephen Dietrich and Sarah Seedig of Holland & Knight LLP served as legal counsel to Fields Automotive Group.
Contained in the same report that highlighted used-vehicle retail sales, the midyear version of NADA Data 2019 released by the National Automobile Dealers Association (NADA) highlighting the average earnings of employees at franchised dealerships.
This year’s report shows that, as of the end of June, the country’s 16,741 franchised light-vehicle dealerships in the United States directly employed more than 1.1 million Americans with an annual payroll of $66.6 billion — up nearly 2% from 2017 — according to the most recent data available from the Bureau of Labor Statistics.
“In addition to strong direct dealership employment, dealerships are responsible for hundreds of thousands of supporting jobs in local communities across the country,” NADA senior economist Patrick Manzi said in a news release.
“Dealerships spend billions of dollars in their communities on contracting and other services, further enhancing the economic footprint of the retail automotive industry,” Manzi continued.
The average annual earnings for employees at franchised dealerships is $72,800 in 2018, up from $71,916 in 2017, a 1.3% increase.
“Dealers are committed to their employees and strengthening the U.S. and local economies. Hence, for the past several years, dealership employees have seen steady increases in their incomes as well as in their total compensation,” Manzi said.
“In fact, jobs at dealerships offer higher salaries relative to other retail sectors, and dealers continue to boast one of the highest average salaries of all industries,” Manzi went on to say.
But NADA acknowledged franchised dealerships are struggling to keep their workforces strong, especially in the service department. It’s why the association rolled out the next phase of its Workforce Initiative back in February.
