SDR’s Mike Grande discusses the latest M&A trends in the auto dealership market and what they mean for dealership owners
In the latest issue of CIADA Insider Magazine, a publication from the Colorado Independent Automotive Dealers Association, Mike Grande, Director at SDR Ventures, provides his expert insight behind the upward trend of M&A activity in the auto dealership market.
“A good portion of the strength in today’s auto market is clearly the result of making up for lost sales during the economic downturn,” Mike says. Since the economic downturn, revenue for dealers has grown approximately 28 percent per year; this has led to greater incentives for buyers to acquire dealerships.
Mike points out that dealership owners are in a good position to monetize their investment due to the economic upswing. Current financial conditions have made it more expensive to build brand new dealerships, but they have also made financing institutions more willing to lend to those looking to acquire. These two factors, combined with the fact that there are more buyers than sellers, has created favorable market conditions for owners.
For those looking to buy, there is a major advantage in acquiring well-established and well-run auto dealerships that survived the economic downturn. Forced into a “sink or swim” ultimatum during the recession, the auto dealerships that survived have consolidated costs and maximized profitability. Buyers should keep an eye out for dealerships with high earnings and a track record of profitability. “A well-run service department will contribute significantly to gross profit while increasing store traffic even more than the best advertising campaign,” Mike adds.
Check out Mike’s full commentary in CIADA Insider Magazine on page 20.