Welcome to another edition of the Car Dealership Guy Podcast Recap—a rundown of key lessons from top operators, founders, and execs shaping the future of auto retail.
Today’s guest is George Karolis, President of The Presidio Group.
George breaks down the tension between record-high blue sky multiples and the rising cost of capital, offering a rare look at who is buying, who is selling, and why the "big get bigger" trend is accelerating.
M&A activity is at record levels and accelerating into 2026.
The industry closed out 2025 with 19 transactions through Presidio alone, and the pipeline for Q1 2026 is more than double what it was a year ago.
"Our business is on fire. We had a record year last year, 19 transactions. Really strong year for us and our pipeline for the first quarter alone is more than double it was this time last year."
Demand is strong, liquidity is high, and the pace of consolidation shows no signs of slowing.
Two-thirds of Presidio’s deals now involve portfolio management, not exits.
Coming out of COVID, about three-quarters of deals were full exits. Today, that's flipped; roughly two-thirds are now portfolio optimization moves by dealers who are staying in the game.
"About two-thirds of our deals are portfolio management type transactions with existing dealers that are growers that are optimizing their portfolio and selling businesses."
Smart operators are trimming underperformers and doubling down on what works, rather than selling everything and walking away.
Earnings quality matters far more than multiples.
Too many dealers obsess over what multiple they'll get or pay, when the real value driver is the sustainability and quality of earnings.
"Way too many dealers focus on the multiple, right? I want X times for my dealership. I paid X times for a dealership without focusing more on what the times is on the earnings, what that earnings part is."
Every dealership has a different earnings profile, and understanding what drives those earnings is what determines real value.
Technology is now a critical valuation factor.
Dealerships that deploy cutting-edge technology and maintain clean tech stacks are being valued differently than those that don't. It's no longer optional.
"Dealers that employ technology and are using cutting edge technology and are focused on it, that's a lever in terms of how dealers are valued and how they're performing."
In the survey, 93% of dealers said they plan to increase technology use, with AI and service efficiency tools leading the charge.
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Nearly half of gross profit goes to payroll, and there's an opportunity there.
George shared that approximately 45% of dealership gross profit is paid out to employees.
"Dealers that are going to win are going to find ways to be more productive, more efficient, maybe do more with less."
In other words, this makes productivity per person one of the biggest levers for profitability.
Brand and geography matter more than ever in valuations.
Not all brands are created equal, and not all markets are either. Buyers are becoming far more selective about what they'll acquire and what they'll pay.
"The story is all about brand and geography now more than ever. It has been in the past, but now more than ever."
In the latest dealer desirability survey, Toyota and Lexus still lead the pack, with Honda, Subaru, and Mercedes rounding out the top five.
California is one of the most active M&A markets despite dealer skepticism.
Despite many dealers saying they'd never buy in California, it's become one of Presidio's most active markets with strong transaction results.
"For as many dealers that say they don't want to buy dealerships in California, it's been one of our most active markets now... extremely active."
One out of every nine cars in the country is sold in California, making it too big to ignore regardless of perception.
Fixed ops, used cars, and efficiency are the path forward.
With new car margins leveling out and affordability pressures mounting, the dealers who win will focus on the sticky parts of the business and operational productivity.
"Story going into this year and into the future is about fixed operations, used vehicles, and efficiency and productivity focus."
Over 85% of surveyed dealers said parts and service will be key to sustaining earnings this year.
Buyers are taking a more disciplined approach as easy money dries up.
With interest rates no longer at zero and earnings normalized from pandemic highs, buyers are being far more selective about which deals make sense.
"We're seeing a lot more disciplined approach and we think this year and into the future is going to be the year of discipline by dealers."
Deals with issues that would have sailed through during the pandemic boom are now getting much harder scrutiny or passing altogether.
The industry remains 90% unconsolidated with decades of runway.
There are approximately 3,400 single-store owners and over 18,000 dealerships under 50 stores. At the current pace of roughly 400 deals per year, consolidation has 40 years to run.
"The dealership industry is extremely fragmented about 90% unconsolidated and so we see this sort of flywheel effect of consolidation continuing for a lot of reasons."
Meaning, this is shaping up to be a multi-decade transformation, not a short-term trend.
