Sense of Urgency Pervades Q3 Dealership Acquisitions

IRVINE, Calif. — Kerrigan Advisors reports a total of 58 U.S. auto dealership transactions were completed in the third quarter, down 10% from the year-ago period but an 18.4% increase from the prior quarter. The buy/sell firm’s latest Blue Sky Report predicts dealers will add to a five-year streak of 200-plus acquisitions.

Read: Pace of Dealership Acquisitions Slows in Q2

“Based on the first three quarters, 2019 is pacing to be another 200-plus transaction year, likely matching 2018’s high activity level. Kerrigan Advisors expects the third quarter’s deal momentum to increase in the fourth quarter as buyers and sellers are more motivated to close before year end,” the report states, in part.

“Supportive credit markets are the backbone of a healthy auto retail market.”

Analysts pointed to a healthy economy as one of the key factors driving the dealership buy/sell market, citing a 2.9% gain in annualized consumer spending. Growth in consumer spending has helped offset “weakness” in the commercial sector, “weighed down by trade disputes and a slowing global economy.”

The report also pointed to a series of cuts to the Federal Reserve’s target interest rate as a key factor driving shopper behavior and dealers’ long-term outlooks.

“Supportive credit markets are the backbone of a healthy auto retail market, both for the consumer (auto loans) and the dealer (floorplan),” analysts wrote. “Not surprisingly, with an improved interest rate outlook, the average dealer reported strong earnings growth through the third quarter of 2019, continuing last quarter’s trend.”

Read: Fed Triggers Third Interest Rate Cut of 2019

Originally posted on Auto Dealer Today