Ryan Kerrigan on the State of Dealership Buy-Sell Activity

Ryan Kerrigan, managing director at Kerrigan Advisors, joins Driving Solutions to discuss why dealership buy-sell activity remains resilient despite ongoing industry uncertainty. He breaks down key transaction trends from 2025, including major multi-rooftop deals and continued consolidation among large dealer groups, while offering insight into how ownership dynamics are shifting across the industry.

Kerrigan also shares findings from the firm’s latest dealer survey, which shows improving sentiment and growing optimism heading into 2026. The conversation explores normalization of margins, rising Blue Sky valuations, and how EV market challenges and direct-to-consumer threats are shaping dealer strategy. From portfolio realignment to OEM developments and regulatory risks, Kerrigan outlines what dealers and investors should watch closely as the new year unfolds.

Key discussion points:

• Why dealership buy-sell activity stayed strong through 2025
• Consolidation trends and the growing scale of large dealer groups
• Dealer sentiment and profitability expectations for 2026
• Blue Sky valuation trends across franchise brands
• Risks tied to direct-to-consumer EV sales and OEM strategies
• Early signs of stabilization within Stellantis

Driving Solutions is the go-to podcast for dealership professionals who want to stay sharp, informed, and ahead of the curve. Hosted by Jim Fitzpatrick and powered by CBT News, each episode brings you real strategies, smart tools, and expert insights to help you run a more profitable operation.

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Transcript

Setting The Stage For 2026

Announcer 0:04

This is Driving Solutions exclusively on CBTnews.com.

Jim Fitzpatrick 0:09

Hey everyone, Jim Fitzpatrick. Thanks so much for joining me this morning on another edition of Driving Solutions right here at CBTnews.com. Despite plenty of headlines and uncertainty as we enter the new year, the dealership buy sell activity remains strong. To walk us through what's driving the market and what this new year could bring, I'm joined by Ryan Kerrigan, who you've seen here before on CBT News. He's the managing director at Kerrigan Advisors. Welcome into the show, Ryan. Good to see you.

SPEAKER_00 0:35

Thank you, Jim. Happy New Year.

Jim Fitzpatrick 0:37

Happy New Year to you as well. I don't know how much how long you continue to say that, you know, into the video.

SPEAKER_00 0:42

Yeah, we're still inside the first 10 days of the month.

Jim Fitzpatrick 0:44

Exactly. It's the first time I'm seeing you since the new year. So let's try. Let's go with it. That's right.

SPEAKER_00 0:49

Yes.

Big Closings And Cross-Border Moves

Jim Fitzpatrick 0:50

So let's uh let's talk about this um situation. Um congratulations on uh on a Stellar 2025. I had the opportunity to speak with uh Aaron before we broke for the break, and you guys have just pushed just posted another record year at Kerrigan Advisor. So congrats on that. And uh you closed some notable deals. What what were some of the most recent deals closed?

SPEAKER_00 1:10

Yeah, good, good year. Um 57 franchises, 2.7 billion in client revenue, and well over a billion dollars in client proceeds. So a really strong year uh for us as a firm and for our clients. Um and so, yeah, so thank you for that. Yeah, in terms of kind of some of the more recent deals that we closed, so towards the tail end of the year, All-Star Automotive Group out of Louisiana, that was uh 12 rooftops, 16 franchises, one of the larger groups uh sold this past year. Uh that was built by Matt McKay, very impressive group, beautiful facilities. David Hudson uh was the acquirer there. So Hudson is a very fast growing group backed by a very significant family office. So it was great to work with David on that. Um, we represented the sale of Arlington Toyota, which is a uh suburb of Chicago, so up near O'Hare's second generation Toyota uh dealership, um, beautiful facility. Andy Moore out of Indianapolis came into Indiana, I'm sorry, into Illinois for the first time. So his first store in Illinois, um very, very nice transaction. Uh the CarPros divested stores in Washington State. So they had three stores in Washington State. We had a chance to work with the Phillips family once again in that divestiture. That was interesting because Go Automotive out of Canada came in, so they are now in the United States. So we're seeing more of that cross-border activity. We were talking a fair bit about that three, four, five, six years ago, less in recent years, but that may be a harbinger of something that will come back onto the table. More from perhaps cross-border activity between Canada and the U.S. Um, and then some divestiture work down in your neck of the woods in Atlanta. The Hennessy family sold off one of their smaller stores in South Atlanta.

Jim Fitzpatrick 2:54

Yep, great group.

SPEAKER_00 2:55

Um, great group, great family. Yeah. Asbury, some divestitures we worked on with them, both in Georgia and in Utah. So Q4 was uh was a busy quarter.

Jim Fitzpatrick 3:05

That's great. That's great. Congratulations. And uh so the consolidation trend continues?

SPEAKER_00 3:11

Yeah, uh we just do not see this changing. We we've been in this era of elevated transaction activity now for five years, and we did some analysis. It's pretty interesting if you look back, and there was a pretty we thought in that era uh leading up to 2020, and we talk about COVID all the time, that seemed to be kind of the the demarcation for all things, right? Yeah, and so in that pre-COVID era, um about two percent of franchises were turning um every year. And so that that implied an average, like a 50-year hold period for franchises, meaning these were generational things, which is we're kind of in the automotive business. We always knew that. And then starting in 2020 and now for five years, that has zipped up to four to five percent of franchises trading each and every year. So, just in that in that uh change, you're bringing average hold periods down by half. Right now, your average store, nationally speaking, is being held for 20 to 25 years. That's just a sea change in how we think about this industry. So we're in a very, very new world and we just don't see it changing.

Jim Fitzpatrick 4:16

That's great. That's great. What is the makeup of sellers versus buyers today?

SPEAKER_00 4:21

Yeah, so the market share of those that have one to five stores continues to shrink. So your primary sellers are those that have one to five stores. Now, of course, like I just mentioned, All Star, for example, 16 franchises. We certainly do represent larger groups that are selling. Um, but the most common sellers are those in the one to five. And then if we shift to kind of who's buying all these stores, you go to the buyer side, um, that's where you see the largest groups growing the fastest. So the share of dealership groups that have over 25 stores has been growing the fastest over the last decade. Um, the number of those groups has more than tripled. If you look at the uh folks that have kind of 11 to 25 stores, that group has more than doubled. And the group that has five to 10, that's gone up dramatically, all at the expense, market share speaking, uh at of those that have one to five. So you're just seeing this continued progression of those um selling their kind of one, two, three, four, five store groups to those that have more, and then they're getting progressively bigger. It it's been going on for a while, it's not gonna change.

Sentiment And Profit Outlook Improve

Jim Fitzpatrick 5:27

Okay, okay, gotcha. So it seems like a strong buy-sell market despite all of the noise that we hear from the you know, the media that's out there, the mainstream media that we hear so much about, but uh, and also some potential headwinds. But it but otherwise it seems like it's still a pretty strong market.

SPEAKER_00 5:44

Yeah, you know, the the financial press, the financial news, and we're certainly talking to people all the time outside of the automotive business. And so if you just read that, you're reading about you know, consumers being stretched and interest rates and car payments and um, you know, and and and tariffs and all that kind of thing. And so that continues to be very much in the mix. But, you know, if you look at it, uh, for example, so we just put out our dealer survey. So we get over 500 US dealers uh responding to our survey. And um dealer sentiment is quite positive. And so actually, for the first time in three years, dealers are more positive about the trajectory of current of their operations versus negative. So 29% of dealers of this over 500 that I just mentioned uh believe that 2026 um they're optimistic about operations, if you will, their businesses going forward uh versus those that are negative. And that's a that's changed. The last couple of years, it's not that the business was bad, it's just that we were still resetting off of those big, big COVID margins. Yeah. So there's an overall negative sentiment about the trajectory of the business on the part of dealers that we polled. And that switched this year. Dealers are feeling better this year than last year. So that that's that's a it's a great sign.

Jim Fitzpatrick 6:58

So the profit outlook is positive?

SPEAKER_00 7:00

Yeah, yeah. So specifically, um a third of dealers believe that profits will uh that their profitability will increase in 2026 over 2025. Okay. About half think it's gonna stay the same. And that's a big difference because just 14% of dealers last year at this time thought that 2025 would be better than the prior year. So a big shift upwards in terms of dealers believing that their profitability is going to be better this year versus last.

Jim Fitzpatrick 7:26

Sure, sure. Um, so obviously that's great news for the industry as we head into the new year. Um uh I mean that this is something really that so many dealers are focused on, you know, and and as you said, we're coming off of uh the COVID hangover, so to speak, and and uh we're comparing years past to current situations. But you know, with selling less cars in the industry um than trying to chase that 17.5 million SAR, dealers have found a better way to make more money on the vehicles that they are selling versus this constant race to the bottom to hit the OEM's numbers constantly on a on you know on an ongoing basis, right?

Scout’s Direct Sales Test In Colorado

SPEAKER_00 8:04

No question. No question. The the business is it's a much healthier business model today. Uh we know that overall profit margins are substantially higher. That's reflected in the blue sky values that we're seeing today. Um I'd say outside of maybe just two or three brands that are going through some tough periods, um, overall franchises are are very, very profitable across the board. I suspect if we could go back in in prior eras of automotive retail, you probably saw um more dispersion within the dealer body as to those who are making money, those that were kind of in the break-even uh mode, and those that were losing money. And I'd say outside of again of a couple of the franchises that um that everyone will know we're talking about, um, dealers are generally quite profitable, and averages, of course, are up substantially in the last five years. So there's a lot of health in the business for sure.

Jim Fitzpatrick 8:52

That's great. That's great. So speaking of brands, uh, this next this next topic, Scout Motors. So we've done you know a number of shows now with people within the industry, dealers, um, advisors and such uh consultants to the industry, where we've talked about this Scout Motors uh getting or Scout Motors getting a dealer's license in the state of Colorado. Yeah. Is that the canary in the coal mine? I mean, is this something that every single dealer or every state should be focused on right now, and every dealer in those states going, uh-oh, are we gonna be are VW and Audi and Porsche dealers gonna be competing with their own their own company out there?

EV Slowdown And OEM Write-Offs

SPEAKER_00 9:30

Yeah. Well, hey, we have to be watching this. This is the big deal. This is the so the the Motor Vehicle Board of Colorado did uh uh give a approval for Scout to be selling uh EVs, just EVs at this point in the state. It's a provisional approval. It's for less than 12 months, but it can be renewed. And we gotta watch it. Um the this is the first time that we've seen the legacy OEM petition and get uh get uh permission to sell directly to consumers. And so the question there, of course, is um, you know, assuming that this goes forward, assuming they keep this this license, does it expand? Does it go to hybrids? Does it potentially even go to ice? How successful is it? Does it go anywhere? There's a lot of what-ifs. But uh if there is traction here, this is a big, big deal because it changes a, I don't know, maybe not a century of precedent, but certainly uh as far back as you and I go in this industry. Um, and so it's just a massive change. I think the franchise laws in the United States were pretty formalized by like the 1950s, give or take. So, anyhow, it's been a long, long run of the current system as we know it.

Jim Fitzpatrick 10:37

Yep.

SPEAKER_00 10:38

And so this is a a very interesting direct challenge, and and we do have to pay attention to it.

Jim Fitzpatrick 10:43

Yeah, there's there's no question. And as you know, all of the OEMs, the other OEMs out there are taking a close look at this too, just in case they, you know, want to suddenly come up with another company and uh and sell directly to consumers. Because I mean this this is a wholly owned subsidiary of Volkswagen. And uh it, you know, it just many dealers are like, look, this doesn't pass the smell test. This is Volkswagen's other brand. And uh, you know, it's a legacy brand in Volkswagen. They're and they're competing with their own dealer body out there, and that's just not cool at any level, right?

SPEAKER_00 11:17

Yeah, yeah. Uh Volkswagen is is being very aggressive in this regard. They have a little less to lose in the U.S. Obviously, their market share. I think the U.S. is a meaningful market for them, but it's not nearly as important as the U.S. market is for the domestics, for Honda, for Toyota, for Lexus, for example. Um, they're taking a very aggressive stance here. Uh, it's it's something that we definitely need to pay attention to.

Jim Fitzpatrick 11:38

Yeah, and they they build the EVs. However, the EV market remains uh pretty weak. Talk to us about that.

SPEAKER_00 11:44

Yeah, yeah, it's kind of interesting. We're talking about this sort of like, you know, sort of direct challenge, if you will, uh to the franchise system, but at a time when the EV market remains incredibly more bound, right? And so you just saw, and this is something that uh as a firm we had anticipated, we thought that the EV push was gonna run into a brick wall, and it did. Um, we talked about the amount of money that the OEMs were accelerating, all of them, both the domestics as well as those outside the United States, to um accelerate their EV pipelines. And just you saw, for example, I mean, um General Motors just announced a$6 billion write-off in recent days of EV, EV. And I don't think that's the first one. Ford, a$19 billion write-off, and they canceled the F-150 Lightning, which was actually one of the higher volume, one of the more successful products, and something that they had absolutely sort of um, you know, uh backed up the biggest. It's it's it's frankly um sad to see sort of that level of work, that level of expense being just literally written off because of something that was pushed onto them and the market simply was not there. And those of us in the industry saw that coming. Um the OEMs, I you they were in a tight spot. They were being told from up above that they had to do this, they needed to make it work. Um, and all they could really do then was just throw gobs and gobs of money at something that ultimately the market was not there to support.

Kerrigan’s Pipeline And 2026 Focus

Jim Fitzpatrick 13:12

And they changed it in that amount of time, they got all of their dealers out there to retrofit their stores at a very, very high expense, you know, to have these chargers and uh and and retrofit the the service centers and showrooms and everything else um to accommodate, you know, this huge influx of EV sales that just never really came to fruition, right?

SPEAKER_00 13:32

Yeah, yeah, no, that's exactly right. That's exactly right.

Jim Fitzpatrick 13:35

So talk to us about 2026. What do you have in store for Kerrigan Advisors?

SPEAKER_00 13:40

Yeah, um, we are entering this year with frankly the strongest uh set of projects um that we've had uh in recent years. So we are feeling very, very positive about 2026. Uh as you know, we tend to work on larger, higher value transactions. Um we we just have some some phenomenal projects, um, you know, the things that are really, really fun to bring to market. I mean, ultimately our clients are always sellers, but we're talking to the major buyers throughout the country on a uh daily and a weekly basis. And it's kind of fun to sort of feel like the candy shop and that we get to sort of come to market in 2026 with some really phenomenal projects, some some phenomenal stores, great locations, high volume in many cases, and and buyers are gonna be really, really intrigued. So we're we're really excited about 2026. Uh, we had a really strong closeout to the 2025, as we talked about. That's great. Um, had multiple new projects sign on in late 2025 and even here in the first week of 2026. And so we're we're uh we're prime for a big year ahead.

Jim Fitzpatrick 14:40

That's great. As I was saying to Aaron last time that she was on, um I guess you really owe it all to CBT News and all the times that you've been on for this incredible.

SPEAKER_00 14:50

We uh we could have done it without you, Jim. We could have done it without you. That's right. We can say that you was silent partner. We can say that you were silent partner in our business.

Stellantis Trajectory And Comeback DNA

Jim Fitzpatrick 14:59

So let me ask you this question. Um, I talked to a lot of Stellanus dealers over the years, and uh it's been quite a shift, you know, in the last 24 months from what they were telling me just a year, two years ago to today, you know, and I talked to a lot of the top uh uh Stillannis dealers out there, and they're feeling like there's a new breeze blowing, and it and they're feeling pretty positive about their uh franchises because of leadership change, because of some of the new products, getting back to the basics in uh Jeep and Dodge and what have you. What say you about the the Stellantis stores?

SPEAKER_00 15:36

Well, it it's good for everybody if they can get back on track. Um having that much industry inventory overhang and whatnot is not good for the entire dealer body. Right. Um goes beyond in Stellantis. And so um getting their house back in order, um, sorting out their prices. I saw, for example, Jeep is simplifying its uh its product line and bringing uh prices down. Um it's important. They had to do it, it was a real mess. Um, I I have not had the conversations that you just mentioned. I'll tell you one thing that I do do is uh there is a dealer uh who grew up in Stellantis, he's got multiple stores, so he can compare Stellantis to others. He's got um three Stellantis stores and then sort of a good representation of all the other franchises. And I use him as an uh as the um as my sort of canary in the coal mine because he's just been with them for so long and he's and he has the other franchises, so he's just a good sort of comparative analysis, and I ping him on a regular basis on exactly this topic. Yeah, so in talking with him just recently, I've not talked to him in January yet, but I did talk to him in December. Okay. And he's not quite there yet.

Jim Fitzpatrick 16:51

Okay. Yeah, I and and and uh I should you know probably have said I've spoken to a couple of Stellantis dealers that also are not on totally on board yet, they're still taking a wait and see. But uh it does seem as though they are working diligently to turn that ship in or you can get it headed in the right direction.

SPEAKER_00 17:07

Well, and hey, I've I've always been very confident that they would do it because if Stillantis, which was had different names over the years, but ultimately it's the Chrysler organization, yeah. If they're good at one thing, if they're experienced at one thing, it's comebacks. I was gonna say, yeah. It's literally in their DNA. If you follow that franchise going back as far as you need to, and it's one comeback after another. So I I throughout this last couple of years, my messaging to dealers is um they're gonna figure it out, they're gonna come back. Even in good times, it's never the easiest franchise to run, but uh, they'll be back. They're not going anyway.

Closing Thanks And Wrap

Jim Fitzpatrick 17:44

Yeah, they just need LeI Coca back at the helm. Yeah, right.

SPEAKER_00 17:46

Yeah, exactly.

Jim Fitzpatrick 17:47

And we could, you know, get out there and be American, buy American. So uh that's right. That's right. Ryan Kerrigan, managing director at Kerrigan Advisors. It is always great catching up with you and uh getting an update on the MA activity that's out there. So congratulations on an incredible year. Congratulations on a great uh sounds like a great first quarter. So thank you so much. Join us. Thank you, Jim.

Announcer 18:08

Thanks.com.