Capitalize on the Changing Structure of Auto Retailing The auto retail market has remained strong in recent years – despite a turbulent economy – leaving many dealers in a surprisingly secure position. While that may be welcome news today, it’s only natural to wonder what tomorrow might hold for your dealership. You’ll need to adapt to keep up with recent technologies converging on the business. That includes retooling the services you offer and training your staff as more electric vehicles (EVs) become available. Servicing automated vehicles will add even more complexity and require additional skills. Don’t forget the rise in online customer shopping and buying. There’ll be more rebuilding needed to restructure your entire sales process from top to bottom using the latest technology. These changes will all require investment, management time, and organizational energy. Larger dealership groups with more scale and greater access to capital should have no problem making these changes, but such opportunities could present significant challenges for smaller dealers. This combination of capital needs and major technology-driven change in a fragmented industry like auto retailing creates the perfect conditions for consolidation. If you’ve ever thought about acquiring other businesses or selling and transitioning your own, now’s the time to consider your options. Take advantage of the thriving buy-sell market Start by analyzing the state of play with mergers and acquisitions in auto retailing. Buy-sell activity in the auto retail market is booming right now. Dealership profitability continues to outperform expectations, and there’s plenty of available capital to put to work for your business. Public dealership companies want to expand, family offices are looking for investment opportunities, and private equity (PE) firms like the high rates of return on equity in the auto industry. Blue sky values remain high for top franchise brands, with sales volume – a driver of brand value – pushing the leading premium and mainstream brands above their competitors. Import brands are favored over domestic brands, and buyers today are more comfortable with longer payback periods following acquisitions. “We’re seeing more and more private equity, family office, and institutional investment in the automotive retail business, which for decades was closed to outside capital,” explains James Taylor, head of Automotive at Truist Securities. “As we move forward, we're going to see even more of this type of capital infusion. Businesses will likely stay private, but the capital will be coming in from outside the automotive industry.” Consolidation will continue as dealerships expand through acquisitions, and outside investors move more capital into the business. As the size and scale of a dealership offers even greater competitive advantages, the number of owners may decline faster than the historical 2% annual rate. Consider transitioning your business. Do I stay in the business or exit? By Truist
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