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2016 will see fewer dealership acquisitions

Posted by Michael Thomas at

DETROIT -- The hot dealership acquisition market is likely to slow in 2016 as retailer profits get squeezed by plateauing new-vehicle sales.

Some of the industry's most prominent dealership acquirers say they expect to do fewer deals this year because they are unwilling, in the face of slipping profits, to pay prices that would presume a continuation of 2015's robust profit margins.

But sellers aren't ready to lower their asking prices just yet. Stock prices of the six publicly traded dealership groups have taken a severe hit in recent months, implying that Wall Street expects lower profits from them. For Craig Monaghan, CEO of public retailer Asbury Automotive Group Inc., the implications are "that most car stores in the country" also have lost a significant percent of their value. "It may take awhile for the buy-sell market to come to grips with that new reality," Monaghan said. He added that Asbury has the option of buying its own stores at a now-discounted price via share repurchase. "This is really important. We can buy our own stores, and the market sets that price. And why would we pay more than that for someone else's store unless it's significantly underperforming?" -- which would mean that the store has considerable upside earnings potential.   more...

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