The landscape of retail automotive mergers and acquisitions (M&A) is experiencing notable growth in 2024, even as profitability within dealerships begins to return to levels seen prior to the pandemic. According to a report from Haig Partners, a total of 92 dealership rooftops changed ownership in the third quarter of 2024, representing a 10% increase compared to the previous quarter. This trend has contributed to a year-to-date total of 389 dealerships sold, positioning 2024 to be the fourth-busiest year for M&A activity in the auto retail sector.
Private firms are significantly influencing this market, accounting for an impressive 96% of all dealership acquisitions during this period. In contrast, publicly traded automotive groups have shifted their focus towards optimising operational efficiency rather than pursuing expansion through acquisitions. Notably, only four rooftops were acquired by public companies in the third quarter of 2024, highlighting a strategic pivot towards internal improvements.
A key indicator of dealership value, known as blue sky values, has declined from the peaks observed in 2023. Specifically, the average valuation of publicly-owned franchised dealerships dropped by 12% year-over-year to approximately £21.3 million. Certain brands have exhibited stability during this period; however, Mazda has emerged as a particularly strong performer, with its blue sky multiples rising to between 3.5 and 4.5 times earnings. This performance is attributed to a remarkable 25% increase in sales and a 55% growth in throughput since 2019.
Despite a year-over-year decline of 28% in dealership profitability, overall figures remain above the levels recorded before the pandemic. Specifically, new vehicle gross profits saw a drop of 5.4% in the third quarter of 2024, yet they continue to be approximately 30% higher than the averages observed in 2019. Additionally, profits from used vehicles and fixed operations have demonstrated impressive resilience, contributing to a level of stability despite the ongoing market normalisation.
Looking towards the future, dealerships appear to be well-prepared to navigate the evolving landscape. With profitability stabilising and changing demand trends, the ongoing strength of the M&A environment indicates a positive long-term outlook for the retail automotive sector. As businesses adjust to market conditions, the focus on both operational efficiencies and strategic acquisitions seems likely to shape the future dynamics of automotive retail.
Source: Noah Wire Services