Q2 Buy-Sell Summary and Forward Vision
First and foremost we would like to continue to extend our sincerest best wishes to the entire dealer network, your families, friends and of course your valued staff/family.
In April and May In both Canada and the U.S, we experienced a virtual freeze on all pending buy/sells as both parties took time to assess the potential impacts of Covid-19 on business. As June arrived, momentum shifted strongly to a more optimistic view for both buyers and sellers alike as dealers began to experience strong or best ever profits (Lithia for example had their 2nd best revenue quarter ever in Q2). As we anticipated in our Q1 update, as deals began to thaw in the latter half of Q2, there was no downward adjusted purchase prices on deals that were pending prior to the Covid-19 lockdowns. This was also impacted by a shift from a balanced market to a heavily weighted seller’s market.
In Q2, only a handful of the twenty-plus transactions that were set to close were completed with the vast majority being extended into Q3 and no cancellations. Overall, the entire buy-sell market was down in Q2 with a dramatic shift in activity commencing in late May/early June.
Throughout the quarter, the vast majority of inquiries we received was from very well capitalized dealers & groups hoping to acquire distressed dealerships though these opportunities seldom presented themselves. As we had predicted in our Q1 summary, with continued government support and stronger-than-expected sales, smaller groups/single point dealers who were considering selling prior to Covid-19 restrictions had shifted towards maintaining ownership for a more extended period of time or migrated entirely from selling to the acquisition phase. Smaller dealer groups and single point dealers continue to grow as a larger proportion of our buyers portfolio as they recognize that scaling has become increasing more relevant to future growth (grow or go).
In our prediction for Q3-2020, we anticipate a drastic increase in dealership buy-sell activity as well as flat-to-elevated values as compared to the same period in 2019. This will be a result of demand far out-weighing the anticipated lack of supply.
Tim Lamb Group and is the Largest Automotive Buy-Sell broker in North America and since 2006, we have assisted in over 1000 transactions totaling in excess of $10bn.