Porsche still leads in auto dealership multiples

BVWireIssue #180-1
September 13, 2017

The value of a dollar of earnings of an automobile dealership is dramatically affected by the franchise that is generating those earnings. The strongest franchises continue to be the luxury imports, according to the “Haig Report, Second Quarter 2017.” Porsche maintains its “blue sky” multiple range of 7.5x to 9.0x, the highest range of all auto franchises.

CIMI method: In this industry, the blue sky multiple remains the most commonly used method for determining the value used in actual dealership transactions. Several years ago, Dixon Hughes Goodman LLP developed the “current industry market indicator” (CIMI) method, which is essentially the blue sky multiple method. The CIMI method estimates the fair market value of a dealership by multiplying the expected pretax earnings by an appropriate multiple to determine the amount of blue sky (intangible asset value) and then adding the adjusted net assets to get the fair market value of the entire company.

Timothy York and Adam Lawyer, both with Dixon Hughes Goodman, recently conducted a webinar that included an update on industry trends, such as:

  • Auto dealership volume, earnings, and price tags arguably are still near all-time highs;
  • The Trump administration is generally good news for auto dealerships due to reduced regulations;
  • Top three auto dealership disruptors are direct sales (Tesla), sharing (Uber), and self-driving cars; and
  • While luxury imports are still the most desirable auto franchise, they are losing steam to high-end domestics.

For more information, including a case study, see Valuing Auto Dealerships: Applicable Methods, Value Drivers, and Current Economic Environment.

Extra: The CIMI method, among other auto dealership valuation considerations, is also covered in the special report, What It’s Worth:  Automobile Dealership Value.

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