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- Why dealers aren’t flinching—what’s driving the buy-sell frenzy
Why dealers aren’t flinching—what’s driving the buy-sell frenzy
Featuring Alan Haig, President of Haig Partners
Welcome to another edition of the Car Dealership Guy Podcast Recap newsletter.
Today’s guest is Alan Haig, President of Haig Partners, who discusses why tariffs and an uneasy economy aren’t slowing down dealership acquisitions, why new GMs should consider taking on underperforming stores, where profits are headed through the end of 2025, and more.
1. Buy-sell activity continues to accelerate.
Coming off an excellent 2024, this year is shaping up to be another very busy one for Haig Partners.
“We had and still have a very full pipeline of dealerships that are pending closing. But certainly, the tariffs have caused some head scratching on parts of buyers. And even really for us when we're trying to value a business now, it's a little bit difficult for people that are considering selling their companies.”
Still, the calls keep coming—buyers are reaching out almost daily looking to acquire dealerships.
2. Market stability and uncertainty still yields some benefits.
The forecast for the automotive business right now is solid (with some uncertainty).
“The inflation numbers came down to just over 2% in the month of April, so the lowest had been in many years. We've had really high sales rates, especially in April, because people were worried about tariffs and they went out and bought a car...Then we get the cloudy part…consumer confidence is terrible right now.”
That, coupled with the impact of tariffs, is still creating a good market for buyers and sellers, but some confusion.
3. Keeping up with the level of interest is not easy.
The demand for stores is so high that companies like Haig Partners can be selective.
“I probably have four or five phone calls have come in the last few days that I haven't gotten to from people who said, ‘Yeah, I want to buy a store. And I almost don't bother calling them back because there's so many people that are already dealers, have already been approved, already have management teams, already know what the industry is that want to grow.”
For a buy, sell firm—it’s easy to minimize the risk of the investment in the current market.
4. The appeal of dealerships is simple to understand.
Interest in dealerships is being driven by several factors.
“There's a growing understanding amongst investor class that auto dealerships have an incredibly flexible business model. If the price of new cars goes up, what do dealers do? They're going to pivot. They're going to sell more used cars. They're going to focus more on parts and service work. They're going to try to buy more used cars from the service lane, etc.”
Dealerships are able to adjust because they have five or six different profit centers (sometimes more) in a single location.
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5. The numbers speak for themselves.
The revenue for dealerships remains strong—even post-pandemic.
“…before the pandemic, the average dealership was making about $2 million per year, the public company ones…During the pandemic, that number soared, was over $6.5 million in profits per location. We're now back down to around $4 million in profit per store.”
That’s about double what the profit was per store pre-pandemic.
6. Store valuations remain strong.
In general, the value of stores has come down a little as earnings have come down, but not by a lot.
“What we have seen is a lot of stores break. Many of the stores were profitable during COVID because every unit they sold, they sold a full sticker or higher. They weren't that focused on expenses. They weren't that focused on training, etc., when COVID went away and you had to start selling cars again.”
As Warren Buffett said, “Only when the tide goes out do you discover who’s been swimming naked.”
7. First-time owners are seeking out struggling stores to break into ownership.
Many dealers, even the highly successful ones, are selling brands that they think are going to take years to turn around.
“…They're calling us or other people and saying, hey, I don't want to sell my Ford or Chevy or BMW or Toyota, but I do want to sell my Nissan and my Infiniti and my Stellantis stores…The value of the blue sky of those stores has fallen more than any other brands I can really think of. Alfa Romeo and Maserati would be probably even worse.”
If you’re a talented general manager and you're looking for your first store, those are good places to start.
8. Sometimes value is in the eye of the beholder.
Sometimes a buyer's assessment of the value of a dealership is based on the perception of what they think they can make with the store in the next two or three years.
“…they're not valuing off today's earnings…they look at today's earnings and…sometimes it's painful for them to finance it because they have to go to the bank and say, ‘hey, I want to pay $5 million for this business. It's losing a million and half dollars a year right now, but here's my plan.’ And if the bank knows that dealer and the bank can look at the other stores that the dealer owns and sees cashflow, in almost every case they're making the loan.”
Financiers are banking on the dealer’s ability to turn the business around and the long-term viability of the store.
9. Tariffs won’t stop the momentum.
The major impact is going to be very short term.
“There could be more expensive vehicles over the long term with this 10 % tariff, but that will eventually be solved by shifting production around, changing the mix, etc. Or dealers will just…sell fewer Range Rovers but focus more on the used side.”
There's still enough confidence in the business model that no buyer has walked away from a transaction that Haig Partners is involved in.
10. Sellers still hold the upper hand.
Even with some broken stores on the market and blue sky values coming down modestly, most sellers aren’t desperate to make a deal.
“If you’re a seller and you don’t get the price you want, the penalty is you hold an asset that’s still producing a nice income for you… Holding the business for another six months or a year—when the decline in profit is leveling off—is a nice plan B.”
High profits, long-term confidence, and continued competition among buyers are keeping values strong.
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