Car dealer blue-sky values remain at record levels, per Haig report

BVWireIssue #239-5
August 31, 2022

industry analysis
normalization, auto dealership, valuation methodology, blue sky

“Blue sky” values are 6% higher than at the end of 2021, and they are at the same level as they were at the end of the first quarter of 2022, according to the Q2 2022 Haig Report. Blue-sky value represents the intangible value of a car dealership. A blue-sky multiple is applied to normalized earnings, and then the tangible net assets are added in to get the fair market value of the entire enterprise.

Profitable road: Despite bad news in the economy and weak consumer sentiment, auto dealer profits remained high but growth in profits may be leveling off. M&A activity boomed in the first half of 2022, with 3% more dealerships sold compared to the record-setting pace of the first half of 2021. In these current conditions, a new risk has emerged: Car makers see a chance to restructure the relationship between consumers, retailers, and themselves. To stave this off, dealers will need to stress the value they bring to consumers and the car makers, says the report. To download the full report, click here.

Extra: Join Alan Haig and Nate Klebacha from Haig Partners for a BVR webinar, Auto Dealerships Are Running Hot: Key Valuation Metrics Unique to Auto Dealers, on September 14.

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