Date post: | 07-Feb-2017 |
Category: |
Economy & Finance |
Upload: | erin-kerrigan |
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Dealerships Are Far Too Valuable To Be Sold Any Other Way
February 2, 2016
Picture of first presidential debate
Buy/Sell Activity TodayAn Increasingly Crowded Field
Public Dealership Stock Index Compared to the S&P
3.9x higher
Public Dealership Stocks Outperform the S&P 500 Wall Street Thinks Auto Retail is a Great Investment
Source: Yahoo Finance for data through 12/23/15
+319.0%
+82.2%
Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 1580
130
180
230
280
330
380
430
480
S&P 500 Public Auto Dealerships
Dec 15
Average Dealership Return on Equity
25.3%
Industry Consistently Produces VERY High Return on EquityHighly Attractive to Outside Capital
Source: NADA
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
24.3%
30.7%
27.6% 25.1% 24.3% 23.5%
22.7% 22.0%
12.4%
18.0%
24.8%
28.0% 27.8% 29.0%
31.9% 33.3%
EXTERNAL FACTORS
Industry ConditionsOEM PerformanceFinancial Markets
Domestic Economy
INTERNAL FACTORS
Current ProfitsManagement
FacilitiesSales Effectiveness
Biggest Driver of Buy/Sell Market – External Factors Internal Factors Are Irrelevant, if External Factors Aren’t Strong
Source: NADA
Kerrigan Advisors Blue Sky Multiples – 3Q 2015 Top Volume Franchises Command Higher Multiples
Kerrigan Advisors Blue Sky Multiples – 3Q 2015 Top Luxury Multiples Have Few Limits
* Note: Jaguar would command the lower multiples and Land Rover would command the higher
Average Blue Sky Multiple
AdjustedBlue Sky Multiple
Earnings Growth
Expectations
Buyer Demand
Real Estate
Market Vehicle
Preference
Higher Multiple
Lower Multiple
LowGrowth
LowDemand
High Rent/Building Project
FranchiseUnsuitable
FranchiseHighly
SuitableHigh
GrowthHigh
DemandLow Rent/
Image
Drivers of Franchise Multiple Variability Four Key Factors
2010 2011 2012 2013 2014 2015E 2016E
11.6M
12.8M
14.4M
15.5M16.5M
17.5M18.0M
Annual Vehicle Sales Sales Growth Rate
12% 10%
13%
8%6%
6%
3%
Annual Auto Sales and % Growth
Return to 18.0 Million Sales Means Slower Future Growth Sales Rebound Near Completion?
Source: Automotive News and Kerrigan Advisors Analysis/Estimates
Public Dealership Groups’ Average P/E Multiple
22.2x
Public P/E Multiples Down 40% Since 2010 Leading Indicator for Private Multiples?
Source: Yahoo Finance
“And we've been able to make these acquisitions at significant discounts to where we trade. So, we feel like when we
make those buys, we gain an arbitrage
opportunity on day one.”
Craig T. Monaghan, Asbury Automotive
2012 2013 2014 2015e 2016e
13.3x
15.6x 16.0x
13.3x
10.7x
Future of the Industry – Hard to Call Often Full of Surprises