Erin Kerrigan on Valuations, Mega Deals, and Dealer Confidence

Dealership buy-sell activity is gaining momentum in 2026 as confidence in earnings, valuations, and capital availability strengthens across the automotive retail landscape. On this episode of Inside Automotive, Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors, breaks down what’s driving the next wave of dealership acquisitions and how emerging forces are reshaping transactions.

Kerrigan explains why improving dealer sentiment is bringing both buyers and sellers back to the table, setting the stage for increased consolidation and larger, more complex deals. She outlines where acquisition activity is most concentrated geographically, how capital markets are supporting growth, and why transaction structures are becoming more sophisticated. The conversation also explores how artificial intelligence is beginning to influence dealership operations and why AI-driven efficiency may factor more heavily into valuations over time. Kerrigan also shares insights into shifting franchise performance and what dealers should understand as buy-sell transactions increasingly resemble corporate M&A.

Topics covered include:

• 2026 outlook for dealership buy-sell activity
• Mega deals, capital access, and liquidity trends
• Regional consolidation and high-demand markets
• AI adoption and operational efficiency
• Shifting franchise valuations and dealer sentiment

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Transcript

Setting The Stage For 2026

Jim Fitzpatrick 0:07

Welcome to Inside Automotive with Jim Fitzpatrick. Hey everyone, Jim Fitzpatrick. Welcome into Inside Automotive, right here at the CBT Automotive Network. What does the 2026 buy-sell landscape really look like? Here to walk us through that is Erin Kerrigan. You've seen her here before on CBT News. She's the founder and managing director of Kerrigan Advisors. So welcome into the show, Erin. Thank you so much for taking the time out of what seems to be a very busy schedule over there at Kerrigan Advisors. You guys are like booked up with closings, so congrats on that.

SPEAKER_00 0:39

Thank you, Jim, and happy New Year to everyone, and congratulations to the Hoosier fans out there on the national championship game.

Jim Fitzpatrick 0:48

That's right. That's right. Wow, you're exactly right on that. So uh so let's let's kind of jump right in here. What are uh what are you expecting for 2026 with the buy-sell market? I mean, so much was happening as we've talked before when you were on in 2025, and you said things look like maybe more of the same.

Why Another Record Year Is Likely

Confidence, Earnings, And Valuations

SPEAKER_00 1:10

You know what? We do we do think it'll be more of the same. We do think that we're gonna continue to see an elevated level of transactions and and and maybe even more than 25, which every year we hit a new record. I think, well, we couldn't possibly hit a new record, another record, and yet we do the next year. Uh so it does look like we could have another very robust buy-sell market. And and the reason I think that are twofold. We do the do this survey, this Carrie Nealer survey, which I think you're gonna have questions for me on later. And and that survey uh we saw a really important change in the result of that survey. We've been doing it for seven years. And since 21, the sentiment regarding valuation and earnings was was more negative than positive. And that flipped in the most recent results. So now we have dealers are more positive than negative on valuation and earnings expectations. And dealers tend to have a sixth sense of these things and have been accurate in the past, very accurate in the past. In fact, when they when they projected in in 21 that earnings were gonna go up and valuations were gonna go up, and the vast majority thought that we hit the peak the next year, and then we went down as they projected decline. So I think this is an important moment. And I think with dealers feeling more positive about valuations and earnings, you're gonna have a few things happen. You're gonna have more sellers come to market because they're gonna say, Oh, okay, my valuations are gonna be stronger than they were at the bottom of earnings, which is around 24 for the industry. Okay. So now we have 25 as an uptick industry-wide. Of course, there are franchises that aren't that case, but industry-wide, an uptick in earnings. And so sellers feel more confident in their valuations and buyers feel more confident because they're going into a period where they feel their earnings are gonna start growing again.

Jim Fitzpatrick 3:15

Okay, okay. Do you think we'll see more group transactions and maybe even uh some mega deals?

Capital Markets And Mega Deals

Where The Action Is: The South

SPEAKER_00 3:22

I think it's possible. The capital markets are very, very strong. Okay. And so that means that dealers have not only have tremendous capital still on their balance sheets left over from the COVID era earnings, they also have access to financing for acquisitions, both from lower interest rate debt, as we've seen interest rates come down a bit here. And from for the for the publics, they they have they have access to the public markets. Their stocks are very strong. Uh, you also have bond issuances going on to finance acquisitions, both from the public and the private dealer groups. So I do think you're going to see more large group transactions. Again, getting back to what I said earlier, groups are feeling more confident about their value and are more and more willing to sell. Because the reason we saw fewer mega deals, I think, and and group transactions last year is was not a lack of demand, it was a lack of supply. And I think that supply is going to is going to open up in 26 and you'll see more large transactions.

Jim Fitzpatrick 4:35

Interesting. Very interesting. Where where are dealers most focused geographically?

SPEAKER_00 4:43

It is really pretty amazing. In 2025, the majority of transactions occurred in the southern US. 56%.

Jim Fitzpatrick 4:52

Wow.

SPEAKER_00 4:52

So there is a flight to markets that are easy to operate in, that are growing, that and and so I think almost it seems like every dealer I speak to wants to have a store in Florida or Texas. And so uh that that continues to be the the the major epicenter of of consolidation. That being said, we still do see a lot of regional consolidation. So if a dealer has is building up their group and they're in uh let's just say Iowa, they want to own all the stores in Iowa. So you do see the largest groups in each market trying to continue to grow their share in the markets in which they operate. That being said, as I said, the the most demand and the most buy sells occur in the southern U.S.

Jim Fitzpatrick 5:46

Okay. It's all those baby boomers that own dealerships or in the industry that want to retire to uh Florida or the warmer states, Texas, no taxes, you know, no federal or no uh state income tax, you know. So there's a lot, a lot to uh a lot to be said for the South, right?

Population, Taxes, And Growth Logic

SPEAKER_00 6:03

I think so. I think it really it taxes have a lot to do with it and population growth. It's just, you know, if you're in a market with population, inherent population growth, so net migration in, you even if we ever at some point hit a recession, you have the you typically you usually have the wind at your back. You can handle the bumps in the road sometimes a little bit better because people are still moving there, yeah, versus places that are seeing much less population growth. It's harder to to handle some of the um economic, the general national economic trends.

AI’s Coming Impact On Valuation

Jim Fitzpatrick 6:38

Sure, sure. Now, at NADA this year, everybody is gonna be screaming AI, you know, too. I mean, that that's those are the two um, it seems, letters that are that everybody's focused on in this industry right now. AI is gonna take it over and run more dealerships better and whether it be fixed ops or variable ops or marketing or head head count, reducing it, whatever it is. It's uh, oh, AI's got an answer for that. How do you see AI playing into the valuation equation?

Franchises On The Rise And Slide

SPEAKER_00 7:08

It's really interesting. You know, we're always trying to think a few steps ahead as to where the market's going, and we have yet to find buyers saying, you know, how do you how are you how do how should I look at this deal with once AI is implemented in the business? And what are the expense reductions? That being said, I don't think it's far off. I've had some very interesting meetings with some of the top dealer groups in the country who are very much investing in AI and seeing the bottom line impact of improved efficiency in their organization, uh, both from increasing sales and also reducing expense. So it's it's it's a twofold improvement. And I don't think we're far off from buyers starting to look at deals and say, okay, I'm a much larger group. I'm employing all these new whiz-bang tactics and and technologies. The the group or the store I'm acquiring does not have this. So when I pro forma the earnings for this acquisition, they're going to be higher. And I do think we're we're at the precipice of that becoming part of the equation in valuation. We're not there yet, but I do think that's coming.

Jim Fitzpatrick 8:25

Okay. Okay. What did your survey show in terms of franchises on the rise?

SPEAKER_00 8:31

Well, this was super interesting. And it and it could be a product of the tariff policy in the US. Domestics all saw valuation improvements.

Jim Fitzpatrick 8:41

Okay.

SPEAKER_00 8:42

And that's relative to imports who did not see valuation improvements. And that's pretty interesting. I mean, obviously Toyota was already super high valuation expectations, so it didn't have much room to grow. But uh domestics had a lot of improvement opportunity and and they improved a lot. And I'll give you an example. Chevrolet is now this one of the top ranked in terms of valuation increase expectations.

Jim Fitzpatrick 9:08

Wow.

SPEAKER_00 9:09

And surpassed Hyundai.

Jim Fitzpatrick 9:11

Really?

SPEAKER_00 9:12

Which I think is quite notable and certainly something.

Jim Fitzpatrick 9:16

Wow. Chevy over Hyundai.

SPEAKER_00 9:19

Yes. In terms of expected valuation increase. Okay. So so that's interesting that more dealers are expecting Chevrolet to increase in value than they're expecting Hyundai.

Jim Fitzpatrick 9:32

Is that a byproduct of of Hyundai kind of getting like maxed out and and Chevy having such so much room to grow that you do you know what I mean?

Stellantis Sentiment Rebound

SPEAKER_00 9:43

Well, I I think it's I think Hyundai has seen has been declining at for uh in terms of expected valuation increase. Okay. And I I what we see is the trust level in Hyundai has gone down as well. That's one of the our survey questions, too, is your how much do you trust this OEM? Okay. And that has declined. I think the the facilities are are challenged to some degree for Hyundai. Now Chevrolet's has a new facility, so maybe that'll come into play next year's survey.

Jim Fitzpatrick 10:11

Yeah.

SPEAKER_00 10:12

And and just just what we hear from dealers is sometimes there there they can be a challenging OEM to work with, the Hyundai um franchise. So I think it's playing out in the in the results.

Jim Fitzpatrick 10:26

Yeah, gotcha. Were there any franchises that buck the positive trends?

SPEAKER_00 10:31

Um yes, uh, unfortunately, besides Hyundai, obviously, that also was not um doing quite as well. Um the Volkswagen group, their their franchises did not perform as well. And this is even uh uh Audi and Porsche. So VW, Audi, and Porsche saw their worst performance in the survey uh since 2019. And Porsche and Audi actually led the industry in percentage point change of dealers expecting a decline in value.

Jim Fitzpatrick 11:02

Wow.

NADA Events And What To Expect

SPEAKER_00 11:03

Uh and that's I think that's pretty interesting. And all the franchises saw a decline in trust level, those those three franchises. So I think it's indicative, unfortunately, of the tremendous market share gains Chinese OEMs are making both inside and outside China, which is is really is really taking share away quite a bit from the Volkswagen group. Right. So I think that's having an impact on on Volkswagen's balance sheet, on their financial um wherewithal and their ability to invest in in their in their business. And of course, the tariff policy is at the in the US is also having implications considering they have very little manufacturing base in the in the U.S.

Jim Fitzpatrick 11:52

So I think it's a double whammy. Yeah, and the volatile situation um with Scout. And you know, those dealers are are like, What are you doing? You know, that what's going on?

SPEAKER_00 12:04

And then you add you add the Scout situation, yeah, which is certainly uh you can't ignore, and they just got their approval in Colorado. And so is Scout is is out there, and and so that's just another another example of where Volkswagen doesn't seem like a riskier investment opportunity as in terms of a an OEM, yeah, because there's just all these things going on with them that are are very challenging. So it'll be interesting to watch. Sure. Porsche obviously is still an iconic franchise amongst their franchises they own. And and I I wouldn't bet long term against Porsche. I think Porsche is an incredible franchise. However, Porsche's parent is definitely um having some challenges.

Jim Fitzpatrick 12:55

That's right, that's right. So who was the most improved?

SPEAKER_00 12:59

Well, you're not gonna believe this, but Stillantis was the most improved overall invaluation. They went from 76% of dealers expecting the value of a Stanley's franchise to decline to 50%. Now, 50% is still not great. Right. Uh however, it's it is it is the biggest percentage point improvement of any franchise in our survey year over year. And and it's interesting, I mean, this franchise, anyone who has this franchise knows it goes up and down. And there are years where you make so much money with a Stilantis franchise, and then there are years where you don't. And so it looks like we've maybe passed the peak of the negative side of that of that roller coaster, and we're now maybe entering a better, starting to enter a better period. And I think that's, I'm sure, great news to to all the Stillantis dealers out there who have had a pretty rough few years.

Jim Fitzpatrick 13:57

Yes, the Stillantis dealers that I've spoken to feel pretty positive about things. They feel the new leadership is certainly headed in the right direction. They know that it's going to take time to turn this uh this ship around, but uh, but they're feeling pretty positive about things in terms of readjusting the pricing, bringing some new lines back, doing away with some others that don't really sell. And uh so, all things considered, um, that kind of echoes the sentiment that I'm hearing from the Stillantis dealers that I talked to around the country.

SPEAKER_00 14:25

Yeah, exactly. So I think I think it's it's uh it's interesting. You know, back in it was 21, only 16% of dealers surveyed thought Stilllantis would decline in value. So Stillantis has had moments of grandeur and and and it it could go back, it could could return. That's right.

Jim Fitzpatrick 14:48

That's right. So we will will we see you at NADA this year in Vegas?

SPEAKER_00 14:53

Yes, yes. In fact, we will be at the Auto Team America Buy Sell Summit, and that is on February 3rd from 8 to 1. We would love to have all your viewers join, uh, dealer viewers join us, and I'll be leading a panel, uh, interviewing some of the larger consolidators on their thoughts on consolidation and just running a large group. What what are what are the pros, the cons? Is there really scale? And I think it's gonna be a really interesting panel. And then I'll also be leading a workshop on the fourth at 3:30 in the convention on the change, changes we've seen in the evolution in buy sells. I'll be doing that with Stephen Diedrich, who's one of the top buy sell attorneys in our industry. And we'll just be talking about how, you know, the old way of the back of the back of the napkin that so many dealers love to talk about. I got the deal done on the back of a napkin. You know, now when we're talking about hundreds of millions of dollars that many of these transactions represent, right, the back of the nap napkin strategy is is really gone. And so we we talk a lot about how deals are being structured differently, terms that that dealers would never have thought of that are now becoming quite commonplace. And the fact that really our buy-sale market is starting to look more and more like the rest of the MA world in corporate MA. Uh and and there's some nuances that we never had that the rest of MA, corporate MA had that is are starting to permeate into our industry. So I think it's gonna be a really interesting workshop for those that are interested in buy sells. And um, that's 3:30 on February 4th.

Jim Fitzpatrick 16:46

That's awesome. We're showing all the information on the screen here to make it nice and easy for you dealers to attend, which I highly recommend you do. Uh, Erin Kerrigan's events and her speaking engagements are always a must-see. So, Aaron Kerrigan, founding and managing director of Kerrigan Advisors, thank you so much for stopping in to CBT News. Very much appreciate the update from you. And uh, I know that a lot of dealers will be uh looking for you at NAD.

SPEAKER_00 17:11

Thanks so much, Jim. Happy New Year.

Jim Fitzpatrick 17:16

Thanks for watching Inside Automotive with Jim Fitzpatrick.