Booms, Busts, and Big Sales: Top Trends Steering Today’s Dealership Buy/Sells | Alan Haig, President of Haig Partners
Car Dealership Guy Podcast
Booms, Busts, and Big Sales: Top Trends Steering Today’s Dealership Buy/Sells | Alan Haig, President of Haig Partners
Car Dealership Guy Podcast · Aug 21, 2025
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I'm not sure we've seen the bottom yet for Stellanus or Nissan.
We're seeing lots of encouraging signs from those companies.
But the sales are still declining.
And profits per store are still far from where they used to be.
And I think that for those brands, and we talked about that before,
for newer dealers, for independent dealers who want to become a franchise dealer,
those are good brands for them to acquire.
Because those folks that are independent are already good at the used business.
Today, I'm joined once again by Alan Haig, president of Haig Partners,
for one of our most requested segments covering the state of dealership mergers and acquisitions.
In this episode, we tackle a turbulent buy-sell market from dealerships
commanding record-breaking prices to brands struggling to hold their ground.
Alan breaks down the key trends, the biggest moves, and what's next for dealership M&A.
A big thank you to our sponsors for making today's episode possible.
Lotlinks, Busy Car, and of course, Haig Partners.
And now let's get into the show.
Alan Haig back on the CDG podcast. Alan, welcome back.
Thanks very much, Yossi. It's great to be with you again.
Great to have you back on. I had to do something a little fun.
I said, this has to be like your quadrillionth appearance on the podcast.
So I actually, I wanted to run some stats because I'm a nerd and I do these kind of things.
So I did run some stats and I wanted to share them with you.
First of all, fun fact, this is actually two years to the day or roughly to the day,
to the week of our first podcast together. So pretty incredible.
You first came on to share your insights into, you know,
dealership mergers and acquisitions just to the buy-sell environment August 4th, 2023.
Pretty crazy, right? I have more though.
Other cool things that I learned.
Literally on this podcast, we've gone through several cycles, OEM cycles as I like to call them.
When you first came on, we were talking about Ford's decline and then subsequent rise back up.
From there, we went to Stellantis, right? I viewed this as like, you know,
like market cycles were like, I know not everyone's watching right now, but
it's like they like overlap slightly. And so it's like Ford rose, then decline,
declined the rose, then Stellantis declined. And then you'll tell us a little
about how they're doing today. They have been rising, but we'll get more detail from you.
And we'll also talk about who's right now declining and where the opportunity lies ahead.
I think that's interesting. But get this, this is really cool.
I ran, we ran some specific stats about the episodes.
Total of seven hours of airtime together. It's a record.
Most used words, valuations, profits and Toyota.
They're all closely related.
I know, right? Literally. It's great.
Brand mentions. You've mentioned Toyota 47 times, Ford 39.
There's other brands as well, but these are the most significant.
And it makes sense, right? Given all the change there.
Blue sky multiple has been said 93 times and you average 11 times per episode.
Okay.
And final two, deal value discussed, at least where numbers were mentioned,
$20 billion in transactions. That's pretty cool.
Although we, you know, obviously not everything has a number attached to it,
but that's pretty cool. And the longest tangent, this one you have to guess, right?
You went on, you had a monologue about something over the last two years.
Now, I know we discussed a lot, but just take like, I just try to take a guess.
What did you just talk about for six minutes and 42 seconds without any interruption for me?
Was that electric vehicles?
It's actually pretty close. Hybrid strategy.
So, okay, okay.
Anyways, that's all I wanted for you.
That was, that were just some of the stats we ran.
So I found it pretty cool.
Six minutes, that means I have a voice for FM radio.
That's a long time that you're talking about one.
Six minutes and 42 seconds, mind you.
And you still have an audience that's listening.
I know it's pretty incredible.
And it's grown. That's the most amazing part, right?
Yeah.
So, Alan Haig, welcome back to the pod.
Again, it's great to be with you.
It's interesting to hear all those stats.
I wonder if my family hears me say the same things over and over again as well.
Hey, people, people literally text me and they're listening right now and they say,
you know, well, when's Alan back on?
Give us, give us the goods on the M&A market.
So, so we'll definitely do that today.
One thing we haven't done before we get into the,
I like to start with the pulse of dealership M&A.
You know, I say like the vibe heading into Q4.
What is, how is Haig partners doing your firm?
I haven't really asked you this question since maybe episode one or three.
I don't remember if I repeated in episode three,
but you know, we mostly only spoken about the industry.
Meanwhile, you've been really focused on growing your firm.
Of course, you know, working with more dealers and a lot has happened in the last two years.
How are you doing?
How's, how's your company doing?
What's new there?
Well, the M&A space has been a hot space.
I would say since really even before COVID hit,
but COVID really accelerated the pace of M&A.
We saw dealership values double and we saw M&A volumes double as well.
And we've been trying to get our fair share and maybe a little bit more
than our fair share of that, of that volume.
And we focus on representing mostly sellers and we work coast to coast.
We just added a teammate about a year and a half ago in Southern California, Jason Crouch.
We added another teammate in Texas about a year and a half ago, Dave Rowe.
Both of those gentlemen have long history of working with finance company serving dealers
and also working on Dave Rowe with CFO, the Sewell organization for years.
So we have a national presence and we also want to have some local support.
California and Texas are two of the biggest markets in M&A in our industry,
Florida being the third, which is where our firm is headquartered.
So we want to have a national presence, but we also believe having a little bit of local touch
will help the dealers and those markets to maximize the value of their businesses
when they choose to exit.
So it's been a good run for our firm.
We started with one person, you know, and now we're 15 or so.
So it's not, we're not a big shop.
Steel volume wise last year, I think we sold a little over 55 rooftops advised on the sales.
And this year, it looks like it's going to be higher probably in the mid 60s.
Deal value has gone down this year, just as a function of dealership profits come down
so to blue sky values.
So we're busier running faster, but we'll probably make a little bit less money this year.
Just like a lot of auto dealers are experiencing, our business closely tracks
the health of their retail business.
Yeah, it makes sense.
You mentioned Florida, California and Texas being the most prominent states for buy sales.
Is that driven by legislation or like, you know, governance where maybe in Texas and
Florida, it's so great and in California, it's so not great.
So they change hands, you know, very frequently or is it just simply volume of dealerships?
They're large states, lots of, you know, large populations, lots of dealerships.
It's, it's a lot of the latter.
You'll see that California, Texas and Florida have three of the biggest populations in the
U.S. So it's natural that they'd have more dealerships and that there'd be more volume
in those states.
I would say value wise, the value of stores in Florida and Texas
has just, I would say skyrocketed in the last 10 years due to population growth,
also due to business friendly legislation and good franchise laws in those states.
So we've had a lot of fun selling dealerships, particularly in Florida in the last couple
years.
We were able to set record high values for BMW and Honda and Toyota and Kia,
Mazda this year.
So that's a function of how high the profits have gotten in those, in those
dealerships located in Florida where you can have a high dock fee.
The real estate's not too expensive.
The labor costs are not too expensive.
And there are relatively low rooftops per capita, which means you have high volume,
which means you have high profits.
So it's a good, it's a good mix in Florida.
Texas has the same, a lot of population growth, no income taxes, very favorable
franchise laws, high profits per location, a lot of demand from buyers.
So that's a positive mix.
And I would say California has an improving situation also in terms of loose guy values,
largely due to the changes the new administration has made to EV requirements,
where they've kind of blocked California's ability to mandate that EVs have to be a
certain percentage of sales.
And also rolling back related to that, the CARB rules, California Air Resource
Board rules that were creating some kind of scary requirements for, for dealers to sell
a high percentage of their vehicles being EVs.
And so that's been rolled back.
And now whole brands are going to be able to make it.
I mean, it wasn't clear how Mazda would have survived in California, for instance,
because it didn't have any EVs in the time that had very few hybrids coming.
So I don't know how they would have competed at all.
So California now, I think has come back on the shopping list of some people
who were perhaps avoiding it or concerned about it.
And so we're quite active in California now.
I think we have clients that own around 15 to 18 rooftops that we're representing
in that market now and the valuations we're getting are attractive.
Other than California, or, you know what, before we get more detailed here,
let's, I want to start high level, like what's the general,
as they call it, the vibe of dealers right now when it comes to
buy, sell the industry.
As we're heading into Q4, anecdotally, what are you seeing out there?
Well, I think almost all dealers are relatively pleased with their performance
year to date in terms of profits.
I mean, we have been enjoying very high profits since COVID hit us in 2020.
And the new vehicle gross profits have been coming down kind of quarter by quarter.
But now they've basically leveled off.
And the total profits that dealers have been making peaked in 2023,
it's been coming down quarter by quarter, but it's kind of leveled off.
And the good news is it's leveled off at a value that's about 75% higher
than the profits we were making in 2019 before COVID hit.
So overall, industry is in a really good spot in terms of profitability.
And I think a lot of dealers were hoping that this year we'd see higher sales,
new vehicle sales.
We're down in the high 15s.
We used to be in the low 17s in terms of millions of new units sold per year.
So we were hoping this year we'd have an uptick towards 16, 16 and a half maybe.
And I think that dealers are finding that's probably not going to happen due to a number
of functions, largely due to affordability.
The value of our vehicle is still high.
The interest rates are still high.
There's now concern by some consumers, I'm hearing from my friends in South Florida,
their traffic is down and it's down partly due to ICE.
The immigration rates that are happening, there are a lot of consumers in South Florida that
probably aren't fully documented or their parents aren't or their kids aren't or something.
And so our friends in Florida have been saying that their traffic is down
because people are staying home or they're concerned about putting out a lot of money
to purchase a vehicle if they might get deported.
So we see little pockets like that where there's some concerns.
On the other hand, most people I'm talking to so far this year are flat or a little bit above
in terms of their profits compared to last year.
So we're in a good spot.
The tariffs haven't fully impacted us yet.
So I think dealers are wondering how are the factories going to move around their
production, the assembly, the parts, what brands are they going to promote,
what brands are they going to just kind of take out?
What's that going to mean in terms of pricing for vehicles for consumers?
Who's going to eat this tariff?
How much is it going to be?
So the second half of the year, I think a lot of dealers are showing up and wondering
what's going to happen.
It's impossible to project, I think right now, the next five months of our industry.
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You know, the first manufacturer that was significantly impacted by tariffs was
JLR, or I should say British manufacturers, right?
There was the 10% tariff that went into effect.
It was the earliest one.
And I'm curious to know if you've seen any significant impact to M&A evaluations,
right? The actual dealership evaluations driven by tariffs at this point.
But can you pinpoint like, hey, these brands this much due to tariffs specifically?
Are you seeing that yet reflecting the numbers as you're doing deals and transactions?
Very little.
We have one transaction, which I think I might mention on the last podcast with you,
where our buyer includes two really good brands, A plus brands, and an Audi store.
And this buyer has been concerned about what was going to happen with Audi,
because Audi has zero US production.
So Audi may be more impacted by tariffs than just about any brand that I can think of right now.
And the profits of this store as a percentage of the total profits is relatively low
of the group that we're selling.
But nevertheless, the buyer did assign Buschkei to it.
So we're supposed to learn this week if they want to move forward with the transaction or not.
So I think Audi has been hurt by this tariff situation, maybe more than other brands I can think of,
because they just don't have any US production.
And it could take two years for them to maybe Volkswagen will convert a plan in Tennessee,
for instance, to produce Audi's.
Porsche has no US production.
Porsche is going to get hit by a much bigger tariff.
They're likely going to shift their production mix.
Maybe they make fewer Taycans and more 911s.
And the market for 911 has been drastically undersupplied in the past four or five years
as Porsche was trying to move towards an EME strategy.
So I think some people are just saying, well, okay, if we don't have to sell Taycans
and we lose money on those and our customers are unhappy because they depreciate so fast
and we can sell some more 911s, that's okay.
The customers are going to pay a higher price for 911s because there's a waiting list for them.
So I think right now Audi's been hit the most, but in terms of other dealership values,
when I think all of us have to assume that the price of the vehicle is going to rise
by some percentage, two, three, four, five percent, we don't know.
But that's also about what they've been rising in terms of inflation the last few years.
It doesn't sound very, it doesn't sound out of market.
And we ran an A major like a poll where we pretty much shared a chart
where we shared the prices.
There hasn't been much change.
If anything, prices have declined since tariffs.
Yeah. So it's a good point, Josie.
No one really knows.
I mean, the factors, of course, are screaming about this,
particularly the ones that have factories in Canada or Mexico that right now,
they don't know what their future is going to be.
How can you manufacture vehicles there and try to import them
if there's going to be a 25 or 35 percent tariff?
But in terms of what consumers are paying right now, there's not been a big lift.
And I mentioned that South Florida traffic is down,
but nationwide spending in the month of July on all goods and services was up pretty nicely.
So it's like the customers, the consumers were waiting
to see what the impact of tariffs are going to be.
And that's been several months.
It's been April, April 2nd was, I forget, liberation day.
I forget what Trump called it.
May and June, there was a little bit of what's going to happen.
And then in July, people just brought their, their wallets out
and started spending again.
The same thing happened to dealerships.
So right now, we've not seen a big negative impact,
but we've also not seen the full impact of these tariffs.
Based on what you just said, is, is Audi a good deal right now, relatively speaking?
Like, is there some, a little fear there, given the impact from tariffs?
Or are there any brands that dealers are leaning into disproportionately
at a disproportionate rate due to tariffs?
Anything like that?
Well, aside from tariffs, Audi had been struggling in the US.
Their products had aged, you know, the, their major sellers of the Q5,
Q3 to A5, I think.
And those products were pretty old compared to their competitors.
So they have been steadily losing market share.
And I think the, the dealers were increasingly frustrating with,
frustrated with Audi.
So in this, our latest Hague report in Q2,
we lowered our blue sky multiple on Audi on the top and the bottom
of the range by one and a half turns.
That's the biggest move that I can remember as a library making for any brand.
And it's a reflection where some people just kind of said, you know what,
I'm kind of done hoping that the future would be better.
So I'll, I'll, I'll stick around this.
And I'm going to assume that Audi is just not as desirable as even close to BMW, Mercedes,
Porsche, Lexus, some of the, or JLR, some of its other competitors.
They haven't made the moves that the other brands did such as producing in this country,
you know, producing SUVs here.
So we were already, you know, looking at Audi with a lower valuation based upon what
our clients and buyers and other folks that we talked to were telling us,
the tariff situation isn't going to help.
But I also believe that the tariff story is not over.
It seems like it's just, you know, everything's open to negotiation.
I think the Audi people are in there trying to say,
Hey, if we build a plant in the future, if we commit to that,
we lower the tariffs today.
So I think the talks are still going on.
But that's the one brand we've probably seen the biggest impact on.
And, and even before that, it was starting to suffer.
More broadly speaking though, what's driving dealers nowadays to pursue acquisitions?
And I'm not referring to internal reasons, right?
Having, you know, excess cash, but I'm talking about more of like
exogenous factors, right?
Are there things out there that are, you know, giving dealers more of a push or kind of
forcing functions that are leaning them towards certain brands versus others nowadays specifically?
I think it's confidence.
You see, I think that dealers today, they've been hit by so many shocks over the last
10 years, whether it's the risk of electric vehicles, the risk of autonomous vehicles,
the direct to sales model, subscription, Carvana, tariffs, you go through all these risks that
dealers have seen and faced and they can't control any of those things.
They can't control the technology that's coming down the path, right?
What they can control is the people whom they hire, the inventory that they order,
the process they run at their stores, the service they provide to their customers.
And when they focus on their businesses and take care of those things,
the results are excellent, you know, the profits per store are really good.
And they look around and you mentioned aside from having a lot of profits,
but that's a big part of it because they look around and they figure out,
where else can I invest the $5 million I made last year after tax and get a desirable return
that's even close to what I could get from a car dealership?
You know, if you put it in the estimate, $500 is still there.
Yeah, and I think also every dealership that someone buys, a group buys,
it in a small way should strengthen all of the rest of their stores.
They're going to have greater capabilities.
They can leverage their scale a little bit.
They're bringing in more people to their organization.
So the folks who are getting a little bit bigger,
I think are also getting a little bit better.
And so that's a virtuous circle.
And for those dealers that are young and hungry, they have lots of capital,
they're able to buy these dealerships and get a good return.
And they don't see all these risks that haven't disappeared.
I mean, risk is always going to be out there,
but it seems like the auto retail business model just manages to juke and jive its way
to a healthy return on investment.
So they want more.
That's a great point.
And you mentioned Carvana.
So get this, right?
Yesterday, I posed about a tip we received.
And specifically, the post goes,
overheard Carvana's Chrysler Dodge G brand store went from dead last
to number three in its district.
Phoenix dealerships are nervous.
Note that Carvana is also selling with no dock fees or dealer add-ons.
That doesn't mean back end.
It doesn't mean all back end or warranties or vehicle service contracts,
but certain add-ons.
Anyway, so some people were posting comments.
One follower mentioned, he said,
hey, this is available for all CDJR deals to see,
but note that they are selling G-Puel, but not other brands.
And also that they only sold 101 vehicles out of 618,
meaning extremely high.
They supply inefficient turn.
Okay. Anyway, I got a DM at night from a,
well, I'm not going to say who,
but someone that has internal data and they specifically told me
they said, hey, that's wrong information.
Carvana is crushing at the first franchise store.
We know Carmax ran this experiment,
ended up divesting, but Carvana has kind of leaned in here.
And I'm getting to the punch line.
There's a punch line here.
So Carvana, they only had 180 on the ground to start July.
They sold 101.
And by end of this month,
they'll like August,
they'll likely have the biggest new car inventory in Arizona
for CDJR.
It's a really big deal.
By the way, this is all, this is all just in my DMs.
Like this is not even public, right?
And the reason they sold mostly Jeep last month
and not Rams because the Rams are taking longer to get there.
So they're not even there.
So I think the bottom line here,
as you mentioned, Carvana is,
Carvana has done something very interesting at the store
by deploying their, again, it's still not,
it's not called Carvana auto sales,
but the point is they are deploying certain things
that Carvana asks such as no dock fees and whatnot.
And the store is crushing it.
By every measure, I mean,
it seems like the store is doing extremely well.
And here is the crazy part.
Our large Carvana investor, and I mean large,
we're not talking millions here.
We're talking big money, hundreds of millions,
if not billions actually, frankly.
He sent me a text and he wrote fun data point
on Carvana's new business.
And then he wrote all the cars.
So what that signals to me, again,
I'm speculating, totally speculating,
but I think this signals potential.
And again, this is just an investor
and I'm not going to name them.
This isn't any public information.
This is just banter.
But the point is this signals to me that,
you know, Carvana, it seems like there may be
long-term interest here to continue pursuing this experiment.
It's not rocket science.
I mean, you've clearly bought one,
but do they want to continue buying more?
Has anything about Carvana, has any of these,
have you had any conversations with dealers
about this kind of stuff?
Is this even being,
are dealers even discussing it with you in your circles?
I don't think it's very well known that they own that store.
You know, I remember years ago,
this is probably 10 years ago,
when I first heard of Carvana
and I was looking at buying a Jeep Wrangler
for this vacation house we have here in Massachusetts
and my wife and daughter wanted a two-door model
and there were very, very few of those around.
One of my friends had a store.
They had a couple in stock.
So I, you know, went and looked at it or at them
and then a friend of mine says,
check out the Carvana website.
I went to the Carvana website
and had 37 in stock in my area
and the photographs they had were amazing
and fully described.
They had the original menroni sticker
you could click on
and they would bring the vehicle
to my driveway the next day.
And I remember thinking,
this is unbelievable from a consumer standpoint.
I didn't know if price-wise it was competitive or not
but the convenience and the description
of the vehicle was a lot better
than franchise dealers were doing at the time.
So I could see Carvana wanting to play in the new car space
and of course, Carvana makes a lot of their money
on the finance side.
So I don't know if that's what they're doing now too.
If they're just pursuing a volume model,
there are other dealers that have done that over the years
where, you know, there's the Dave Smith store out in Idaho,
you know, where they were selling
and they still are selling tons and tons
of domestic domestic vehicles.
So it's an experiment for them.
I read an analyst report,
Adam Jonas recently covered them.
They're very bullish on the future of Carvana.
I think they view that the stock could almost double
in the next year based upon their progress.
And so I don't know anybody who's betting against Carvana.
If you did bet against Carvana,
you lost your shirt recently
because the stock price has gone up so much.
So this is yet another threat, if you will,
to franchise dealers.
Maybe it's also, you know, competition steel, sharp and steel.
So maybe this will be a lesson, if you will.
If you're watching Carvana,
take a small store and make it into a big store.
You wonder, could a franchise dealer do that as well?
Does it require the might of Carvana?
How are they doing it?
How are they getting the new car customers?
There's another factor that too, though,
is that, you know, they're choosing to do so right now
with Stilanus, which has got a surplus
of new vehicle inventory.
I don't know if they bought a Toyota store in today's world.
They'd be able to get the inventory to do what they're doing.
So, you know, I think it's smart what they did
to buy a Stilanus business
because they can get all the inventory they want
and experiment with this and see what works.
It's impressive to see that they've grown so quickly.
It doesn't surprise me.
They have probably the best website and auto retail
that I've seen, including with the public companies,
in terms of the ease of interacting with it as a consumer.
And they do something really clever,
which is when they show you all the vehicles available,
many of them are kind of grayed out.
You can see it, but you can't actually click on that vehicle.
And it says that another customer is in the process
of purchasing this vehicle.
If they don't do so, we'll let you know and you can buy it.
But that gives you the impression
that this inventory is going fast.
I got to get in there and buy this.
I've seen customers on the lot looking at the vehicle
you're interested in.
It kind of reminds me of that.
I mean, listen, the best websites, the best experiences online
are simply mimic the nature, the human nature
of an in-store physical experience.
So you started a business
where you were selling these vehicles online, right?
And you know that creating that sense of urgency,
transparency, et cetera, it's not easy to do,
but I think they've done a really good job with it.
And again, I'm hoping that other retailers
will adopt some of the strengths of Carbonate
in order to compete with them.
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Yeah, I mean, for a long time,
there have been lots of e-commerce websites
that simply put these like fake,
oh, we don't X amount of people are viewing these,
and they're fake.
In Carvana's case, it's real.
As far as I know, it's 100% real.
We actually tried to replicate it,
and at the time, it was challenging
because you had to have these APIs ping something
at a certain, whatever,
someone was viewing it for X amount of minutes,
and so it's this whole process.
But the point is it's real,
and it replicates the physical experience
of a consumer seeing another person
looking at a car that they maybe want,
creates that FOMO feeling,
and then I go, hey, I want to buy it.
I'll take it before someone else takes it.
So speaking of Carvana
leaning into a franchise in this case,
which we've known about for months already,
and it seems like this experiment is playing out pretty well
by traditional dealership standards at least,
it seems like the public groups
have sort of leaned out of acquisitions this year,
or are not leaning in as far, I should say,
whereas private groups are continuing to accelerate
and gobble up as many stores as they can.
What's up with that?
Why are we seeing this shift
where privates are growing significantly more
into far as acquisitions versus publics?
It's a good point.
You're correct.
The number of dealerships acquired by public companies
is down this year.
Your date, they bought 13 last year
through the second quarter, they bought 22.
Overall M&A is down too.
Total stores sales are down about 39%
You know, I think the public companies are active.
We talked to them.
We're showing them opportunities.
And the public companies have got a couple of different ways
they can spend their capital.
One is through acquisitions,
one is through investing in their stores,
expanding their existing stores,
and the third is through stock buybacks.
And I think that they've been spending more money
buying back the shares than they have been
buying the dealerships.
There's been a little bit,
there can be sometimes a disconnect
between what a seller wants for his business
and what a buyer wants.
And if I'm a public company CEO,
and I'm not sure about what impact tariffs
are going to have on the future profit
and parity of dealership,
maybe I just wait a little bit.
Maybe I don't aggressively buy stores
in this environment until I see
how my stores are going to perform.
So I don't know that,
I mean, if you listen to the earnings calls,
you can hear some of that.
But everybody is saying we're interested in acquisitions
if we find ones that meet our ROI,
our return on investment requirements.
But I think that the tariffs have caused a slowdown.
Last year, there was the election cycle.
People weren't sure who the president was going to be.
Interest rates are still elevated.
So I think there are a number of small factors
that add up to buyers moving more slowly
in this environment.
Deals taking longer to close,
making it a little bit harder for there to be an overlap
between the bid ask spread.
You know, my first job,
I went very green to the first meeting
that I had in this investment bank firm I was with.
And the CEO, the chairman of the firm said,
okay, for everyone's new out there,
and there were, I don't know,
50 analysts and 50 associates that were new.
They said, the job in the investment bank
was to get the bid to exceed the ask.
Then your job was done.
And I think the ask right now
has been higher than the bid so far this year.
But as we see the year progress
and as profits are strong,
I think the bids are going to start to come up again.
And I think also if you're a seller,
there's also some caution for sellers.
You know, is this the right time
to sell your business and maximize the value of it?
Because profits are really strong,
but if buyers are waiting a little bit
for the impactful tariffs to happen,
maybe they're going to wait too.
The reality is the values we're seeing
for buyers and sellers that are in the market,
the values are strong.
I mean, we estimate, you know,
before we go to market,
often before we're hired,
we'll give a potential seller a range of blue sky
that we think their value will be in the marketplace,
what a buyer would pay for their business.
And we track the results compared to the estimates.
And this year, I think the actual results
people who have accepted blue sky offers
is more than 20% higher than the midpoint
of the range that we estimated them
before they went to market.
So we're pleased with the numbers we're seeing.
And I think our clients are,
if you have expectations that you're going to get paid today,
which your business has worked two years ago,
you're going to be disappointed.
That was a window that was open
and now it's still open,
but not at the same value.
So I think what we're seeing is a little bit
of return to the normal volume of M&A transactions.
You know, before the pandemic,
we were seeing 350, 400 stores trade per year.
We may get back to that level.
This year, so far, we've seen 190 stores trade hands.
So if you double that, you'd be at 380.
That's a little bit above what we were before the pandemic hit.
So some of this is a normalization in terms of deal volume.
Off the record, I have some dealers that are telling me about,
you know, more, they're seeing more distress deals.
Are you seeing that from your end as well?
Absolutely.
You know, we had the pleasure of selling some dealerships
to record high prices over the last couple of years.
And that's really fun.
The clients are thrilled, we're thrilled.
The buyers are excited to buy these stores
and we're making so much money.
But as the effects of the pandemic wore off,
a lot of stores began to tip over
from making money to losing money.
And certain brands in particular
have been suffering more than others.
So Nissan, Infinity, Stellanus,
those are brands where people have said,
well, I made some money during the pandemic,
but I don't see a path to profitability right now.
So I want to sell them.
So those have been some brands that I would say
have declined and valued quite a lot.
I'm not sure we've seen the bottom yet
for Stellanus or Nissan.
We're seeing lots of encouraging signs from those companies.
But the sales are still declining and,
you know, profits per store are still far
from where they used to be.
And I think that for those brands,
and we talked about that before,
for newer dealers, for independent dealers
who want to become a franchise dealer,
those are good brands for them to acquire
because those folks that are independent
are already good at the used business.
They're good at acquiring used vehicles
from consumers, from other sources,
where they can make a healthy margin.
And if they can bolt that used car business
into a new car business
and get the fixed operations and more F&I,
lower floor plan costs,
that's a really good opportunity for franchise buyers now
to come into the franchise system.
During the pandemic,
when every franchise is worth a lot of money,
it was very difficult for independence to enter.
And now we're also seeing, you know, the factories,
they, some of them want to see new ownership
of their dealerships
because they've seen the new car sales decline.
They want some young energetic owner in there
who's going to be working 24-7
to build their business into a success.
So we're seeing turnover on some of those brands
at higher levels.
Nobody's rushing to sell LexaStore.
Nobody's rushing to sell a Porsche dealership
even though they're more challenged today than they have been.
Nobody's rushing to sell Mercedes or BMW dealership,
Toyota dealership.
A lot of those brands are just as good
or better than they have been for quite some time.
So that's, let's say,
you mentioned Stalantis, Nissan Infinity specifically.
They're still struggling.
I know Nissan, they just announced their revamped QX80,
which seems to be an exciting move for them.
We'll see when that actually makes it to market
and what impact it has on the stores.
In terms of brands where you're seeing the most interest,
has there been any movement there?
You just mentioned where people are not, let's say,
rushing to sell, but anything where you're particularly
seeing a rising interest other than Toyota?
Well, in our latest report, we made four moves.
I mentioned we lowered Audi by one and a half turns
at the high and low end of our range.
And that's the biggest move we made.
We did increase Toyota a little bit
on the bottom end of the range.
I think we increased it a half a turn.
So it's just seven to eight times now,
I think is our multiple.
We increased the bottom end of the range for,
or I think it's both ranges for Hyundai and for Kia.
Those brands continue to perform well.
They've got the mixed powertrain and EV, hybrid, etc.
So we increased both of those a half a turn
at the low end on the high end,
or just on the high end, excuse me.
So it's every quarter you see a little bit of movement
and the Asian imports are doing really well.
And so we see increased demand for them.
Last quarter, we highlighted General Motors, Chevrolet in particular.
Well, really all the brands were doing really well.
And dealers were telling us that they'd never seen a better product mix,
better product lineup for those brands,
even though they're really only have one car
or two cars left at Chevrolet.
They have a Corvette and a Malibu, I think that might be it.
So they're so heavy on trucks and SUVs.
But the quality, the margins that dealers are getting,
the fixed ops are amazing on the domestic side.
So we still see good demand for those brands.
I think that Mary Bear has done a great job slowly
making her business really profitable.
Jim Farley announced in the news recently,
they're going to be coming in with a new line of low cost EVs,
which I applaud because eventually this country
will need to be competitive with EVs,
with other global manufacturers.
And there is a need for low cost trucks for people to use.
So that could also increase sales.
I don't know if that would just be cannibalizing Ford sales.
I think it could increase their sales.
So there's some good news out there that we're seeing.
I was going to ask you about that Ford.
I mean, Ford had their big announcement with their low cost EVs,
this revised or updated EV infrastructure in general,
which could in theory cut their loss on producing EVs from like $44,000 to $22,000.
A lot of very positive signals as they claim, still a big loss of course.
I think it's too early to ask you if that's impacting the Ford M&A market
because this was literally just announced.
You can tell me if you think differently.
How do you just reconcile this?
Ford is at this point quadrupling down on EVs.
Toyota is still very hybrid heavy.
Is Toyota being too myopic at this point?
Will this hurt dealership values long term?
Obviously it's going to follow profits.
But I mean, listen, I got to tell you, I've tested a bunch of EVs recently.
I'm enjoying it.
I mean, you know, strong torque, quiet, they're becoming a little bit nicer.
If you have charging infrastructure near you, which I mean,
I do in the area we live, there's plenty.
I don't realize many don't.
But I would say from our first conversation two years ago to today,
a lot has evolved.
And I'm curious if other consumers out there feel that way as well.
But yeah, I mean, at what point is Toyota being too myopic?
Or are they leaning in just the right amount?
Because they are producing some EVs now, right?
So are they doing it at the right pace?
What's your take?
Well, we're about to get a very clear view of what the demand is for EVs in this country
because the incentives are disappearing.
There was a 75-hour tax credit for purchase of a new unit and a 500 or something for a used unit.
Bye, bye, bye.
Yeah.
So when that disappears, we'll see how consumers respond.
What is the true value or demand for that?
I think with the incentives, it was around 9%.
I think of new vehicle sales without it.
What's it going to look like?
And unfortunately, the vehicle category that's done worst with EVs
has been on the full-size truck side.
The Silverado EVs and the Ford Lightnings,
the actual sales of those units have been far less than what their factories were expecting.
And they've lost billions of dollars selling those units,
and dealers have lost billions of dollars selling those units too.
So will we see demand rise if the vehicles are less expensive?
Yeah, I could see that because I could see a lot of these vehicles being used by
local fleets, the Terminex truck, the grass guy, the pool guy,
all those people that are driving 40, 60 miles a day just kind of on a local circuit
go back home, plug in, not have any fueling charges, not having fuel maintenance charges.
I could see that being a whole category that people would want those vehicles.
But it's to be determined, you see, I don't think that anybody's looking at
this announcement saying, okay, now I'm going to go buy a Ford store.
I think that the dealers, the half Ford stores felt burned by Ford by how much money they had to
invest to create this charging infrastructure in their stores, and then the sales were never
there to support the investment. I think there's also some concern about the Ford quality.
There have been way too many recalls. And while that feeds your service department,
in the short term it's good. But if your customers get turned off by their constant
recalls and they defect to Toyota, it's been challenging. Ford recalls are breaking records
here. I mean, we cover them. And myself, as a consumer in the morning when we're covering
industry news, I'll go on our website, I'll read our news, I'll read our newsletter.
And I see Ford recall, Ford recall, Ford recall. It's definitely a pain point in a big way.
They got to work on this. I remember, I don't know how many years it was,
it was decades ago, but quality is job one. That was a Ford advertising mantra back in
the 80s maybe, I think it was the 80s or 90s. And rather than new products, I think
some dealers would say, hey, how about we fix ones we have so that, I mean, they enjoy
their recalls, don't get me wrong. But I think that when they hear the customer saying,
I can't believe I have to come in here again, is that going to hurt retention,
which is huge and harder than ever for factories and dealers to keep those customers
than it was before the loyalty is just less than it used to be. And if you have all these recalls,
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I want to circle back to underperforming stores because we spoke about, if you're seeing a higher
volume and you said you are, my follow-up to that is what's driving underperformance? Or is this
segmented to specific brands? Can you share more details there?
A lot of the health of a dealership has to do with its throughput. How many new units are
they selling? How many used units are they're selling? If you have high throughput, you
can have high profits. And if you have high profits, you can afford high quality people.
And if you have high quality people, it's easier to maintain and build profits. It's a virtuous
circle. And if you own a brand, let's call an Nissan, and they used to be, I don't know, 1200
units per year sold out of an Nissan store, and they lose enough market share. So now it's
maybe 900 units at that location. Your general managers may have left you. Your sales manager,
your FNI, your used car guy, your service department might have left because they're
making less money at that store as the volume declines. So as the desirability of the new unit
declines, so does the throughput location, so does the profitability per location. It all
connects. You're going to get fewer trades. You're going to have fewer shops or fewer
reconditioning because you have lower used car sales. You're going to have lower warranty
repairs because you have a lower new car sale. So it all circles down based upon your new car
volume. Now for volume brands like Nissan, they have far too many locations now given
the number of units they're selling in this country. And the same thing happened with Ford
and with General Motors and with Salinas. Their dealer networks are all built probably
from the 50s to the 70s when they were selling more cars than they are today.
And we're actually, we have a conference coming up in Las Vegas in September. One of our topics
is going to be how to create value in the Ford network through dealer consolidation,
where if they're six dealers in a metro, there's probably one guy who's in his 80s
and he has a piece of real estate downtown that might be better used as an apartment
building than a car dealership, work to buy that store and close it and share the,
share the customer list. And the surrounding stores will have an instant lift in profitability
without having to spend any more money on service stalls or advertisers or anything
else. They're just going to get more volume. So unfortunately, you know, when you get these
brands that decline in market share, it's very hard to sustain the profitability at the retail
level. And the former chairman at AutoNation had a phrase which I recall vividly, which is
there's a battle for talent and capital at auto retail. And that talent can bleed away
across the street. You know, the use car manager at Nissan becomes the use car manager at Honda
or Toyota or Mazda or Subaru or Kia or Hyundai. And he's taking with him knowledge and probably
some of his people, he's going to take some service riders too. And you can replace him,
but it's a little bit hard to hire somebody in a Nissan store today than it is a Subaru store,
just because the perception of one brand is doing well and the other one's suffering.
So unfortunately, when the new car volume starts to drop, it becomes a tough, tough
situation to turn around. And I know the team at Nissan is working very hard
to increase sales. And I know that Nissan's dealers are working hard to increase sales.
And a lot of that comes from product. And I am encouraged that the product I see coming
from Nissan, it does seem to be nicely styled. It seems to be nicely priced. They have a lot
of products below 30,000, which is what customers want today. So we're hopeful that Nissan will
recover. But in the meantime, a lot of dealers have said, I'm out. I don't have the talent
to run this business in a way that's going to make me a nice profit. So I'm going to sell it.
Yeah. That's also what I'm hearing. I mean, from dealers I speak with,
it's simply I'm really the number one thing I hear from Nissan is say too many dealers,
right? Like consolidate the dealer network, do you have too many dealers, too many points,
and it's just adversely impacting their sales. And it makes you wonder,
what is the best way to fix that? Because I think there's a bit of a conflict of interest,
you know, or not a conflict of interest, but it's expensive for Nissan to, you know,
reduce dealer count. Is there a better way to solve that dilemma?
I don't know that. I mean, General Motors spent a lot of money closing Cadillac stores and closing
Buick stores. And the results have been positive for the remaining Buick and Cadillac stores.
They're doing a lot better. And I think the goal there is when you walk into a Cadillac store,
it feels like a real luxury experience. It can compete with BMW or Mercedes or Lexus, etc.
Because they have a professional staff, they have a nice facility, they're in a good location.
And so it's been positive with General Motors have done. Ford has also been active in closing
points. And I don't know the direct impact I'm trying to get that data on, you know,
when you close one store, what happens to the other five, if you will. But I know from my days
at AutoNation, when we had a dealership, let's call it a Honda store in a metro, let's just
call it Atlanta. And if Honda decided to add another dealership near ours, contiguous point,
we would lose about 30% of the profit over the next three years.
So if the inverse is true, you know, if you have a competitor that goes away,
that you could pick up 30% profit over three years, that's very powerful way to
create value in the franchise system. If the franchise or the factory has the money to
support, or if it's, you know, actively supporting in other ways. I don't think Nissan has the money
today. I think that they're fighting to invest in product and incentives to benefit consumers.
So I think the dealers that have Nissan stores today that, you know, for them to make a good
return on investment, they've got to be very good at used and fixed ops and FNI. And
unfortunately, I've heard the charge backs at Nissan stores have jumped considerably in recent
months, as some of their former customers are refinancing or selling out into different brands.
So it's just, they're facing a number of headwinds, product will fix it, the better business model
will fix it. And I'm hopeful that's what's going to happen here in the next 18 months.
Likewise, Alan, as we're, as we're about to wrap up here, what are you excited for for the next
three, four, five months? I wouldn't say Q4 just yet because we have
another month here, but what do you look personally excited for?
Well, on the business side, we want to close a lot of the transactions that we have under
definitive agreement. We've got 34 stores that we've sold year to date, and we've got 25 stores
that are under definitive agreement. I just checked, we've got eight more stores under letterman 10.
And we've got 36 other stores are representing where we're about to go to market or we're in
market. So professionally, I'd like to get those transactions closed on healthy terms.
We're also organizing a couple of conferences that we're going to be having in
September and then an NADA, which I believe maybe you'll be sharing some news about that,
Yossi. But on a personal side, I would like to raise a plug if I can, which is on November 3rd,
I'll be running in the New York City Marathon. And I'm going to be raising money for Memorial
Sloan Kettering Cancer Center. And for those of you who have had family or friends or
yourselves impacted by cancer and you want to donate to try to cure cancer or solve cancer
or treat it better, please go to fredsteam.org. And you can make a donation there. I promise you,
I won't be running quickly in that marathon, but I will finish it and be a great joy for me if
you would join in supporting Fred's team and raising money for Memorial Sloan Kettering.
That's awesome. We'll put this in the show notes as well. It's a good gesture and appreciate that.
Very cool. And I didn't know you were a runner, so that's cool as well.
So, Alan, close us up. I mean, give us your prediction. Three to six months. I don't want
to go a year out. Give us the next couple quarters. What are you sensing here is happening
next in our market? More stability and increase and decrease in M&A. What are you seeing?
I can't predict any increase in stability on the political front because there just seems
to be so much drama there. I think that we can assume that the invisible hand of the market,
Adam Smith's term, that the OEMs are going to figure out a way to change their model lineup,
change their inputs, where their manufacturing or the parts are coming from,
to minimize the impact of these tariffs on everyone's business.
I think that new dealer profits will remain high. I think that the demand for M&A will remain
strong. I think the public companies will continue to buy stores. The private consolidators are
going to keep going. I think that the challenges that we've had in the past on the technology
side for dealers are going to have to continue to adopt. You mentioned Carvana. They have,
in my opinion, the best website and maybe one of the best captive finance companies.
Dealers are going to have to find a way in Phoenix and any other place that
Carvana might buy stores to respond. I'm hopeful that the brands out there that are
struggling will adopt some of the strategies and tactics that the leading brands use to help
their dealers, Toyota, Honda, et cetera, where they have a good partnership between the retailer
and the factory, that others can adopt those methods so that the weaker brands can get stronger.
We're all about trying to pull those folks up because we feel bad for our friends that own
some of these dealerships where they spend millions and millions of dollars on them.
They spend dozens of hours every week struggling. They deserve to get a good return on their
investment on their time. I'm hoping the weaker guys get stronger and the strong guys stay
and this market that we've enjoyed that's been so strong the last five years continues.
Well said, Alan Haig, Haig partners. Alan, thanks for joining me again. This is great.
Thanks for having me, Yossi.
All right. Hope you enjoyed that episode. Please give the podcast a rating. Consider
subscribing to the show and check the show notes for links to what we talked about.
Thanks for tuning in. I'll see you guys next time.
About this episode
Alan Haig, president of Haig Partners, returns to discuss the current state of dealership mergers and acquisitions amidst a fluctuating market. The conversation covers the challenges faced by brands like Nissan and Stellantis, the impact of tariffs on dealership evaluations, and the contrasting strategies of public versus private dealership groups. Haig highlights the importance of dealership profitability, the effects of consumer behavior on sales, and the ongoing evolution of the automotive retail landscape, including the rise of companies like Carvana. Insights into future trends and the potential for recovery in struggling brands are also explored.
Original notes
Today I’m joined by Alan Haig, President of Haig Partners. We dig into why Stellantis and Nissan are still searching for the bottom, which states are commanding the highest blue sky multiples, the drivers behind Carvana’s first brick-and-mortar win and more.
This episode is brought to you by:
1. Lotlinx - Get the best possible market advantage on every vehicle transaction. Optimize operations and boost profits using artificial intelligence (AI) and machine learning. Learn more @ https://lotlinx.com
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3. CDG Recruiting – Hire top dealership talent, fast. From sales managers to GMs and C-suite execs, we’ve placed over 1,000 roles across auto retail. Ready to scale without the hassle? Visit https://www.cdgrecruiting.com to get started.
Make a donation to support Alan's NYC Marathon run and the Memorial Sloan Kettering Cancer Center here: https://secure2.convio.net/mskcc/site/TR/FredsTeam/FredsTeam?px=2806962&pg=personal&fr_id=4272
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Topics:
03:19 Current dealership M&A market outlook?
05:48 Regional market differences? (CA/TX/FL)
11:27 How tariffs impact valuations?
19:40 Will Carvana's new car experiment work?
25:16 Carvana's inventory innovation?
27:36 Public vs private acquisitions?
32:04 Underperforming brand opportunities?
37:12 EVs' impact on dealership values?
41:41 Best consolidation strategies?
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