Why Dealership Buy-Sell Activity Surged 21% in Q1 2026

Dealership mergers and acquisitions continue to accelerate despite economic uncertainty. In this episode, Ryan Kerrigan, Managing Director of Kerrigan Advisors, examines the forces driving a surge in dealership buy-sell activity and what the latest trends reveal about the future of automotive retail.

Kerrigan discusses why franchise sales increased 21% year-over-year in Q1 2026, how public dealer groups are fueling acquisition activity, and why dealership valuations remain strong despite affordability challenges facing consumers. He also explores how AI, geopolitical risks, tariffs, and new retail competitors are reshaping how investors evaluate dealership assets and long-term growth opportunities.

Key discussion points:

• Why franchise dealership transactions jumped 21% in Q1 2026
• The role of public dealer groups in driving M&A activity
• How vehicle affordability challenges are impacting consumer behavior and service retention
• Why AI and automation are beginning to influence dealership valuations
• The impact of geopolitical uncertainty, tariffs, and industry disruption on buy-sell activity
• What recent changes in franchise valuations reveal about brands like Kia, Audi, and Nissan

Kerrigan provides a market-driven perspective on dealership valuations, consolidation trends, and the factors shaping the automotive retail landscape in 2026.

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Transcript

Welcome And Market Snapshot

Jim Fitzpatrick 0:06

Welcome to Inside Automotive with Jim Fitzpatrick. Despite ongoing economic uncertainty, dealership buy-sell activity continues to make headlines, and some interesting trends are emerging across the market. Here to walk us through some of these things. Uh, we're seeing right now is Ryan Kerrigan. You've seen him here before at CBT News. He's the managing director of Kerrigan Advisors. Welcome, Ryan. So glad you could take the time out of what appears to be a very busy schedule to join us on the show.

Ryan Kerrigan 0:36

Yes, indeed. Thanks, Jim. Great

Q1 2026 Blue Sky Report Surge

Ryan Kerrigan 0:38

to be here.

Jim Fitzpatrick 0:38

Sure. So just released your first quarter 2026 Blue Sky Report. Can you share with us what you're uh what you're seeing in the buy-sell market today?

Ryan Kerrigan 0:47

No question. Uh yeah, happy to do so. That just went out on Monday of this week, and uh the buy-sell market is hitting on all cylinders. Uh, you mentioned at the top when we started here, some very obvious headwinds, some things that could be slowing us down. We are not seeing it in the buy-sell market in terms of activity or in terms of valuation. Yeah. So in the in the blue sky report, uh, hopefully everyone's getting that and reading it. Those that are involved in this industry, at least on the buy-sell side of things. Um, Q1, 21% more franchises sold in Q1 of this year versus uh a year ago. So, and last year was again another phenomenal record year of activity. So we just continue to see this uptick of activity. The publics are leaning in in a very, very big way, uh, deploying uh almost a billion dollars, about $800 million in capital in the first quarter. That's up like 4x over where they were a year ago. And we know um with some firsthand knowledge that the publics are all leaning in right now, looking to do acquisitions. So um, yes, hitting on all cylinders in the buy-sell

Affordability Squeeze And Sales Reality

Ryan Kerrigan 1:46

market.

Jim Fitzpatrick 1:46

Wow, that that is fantastic. Is it amazing to you? Maybe it's not after all the car business has been through in recent years and and over the last 20 years, but it's amazing to me how you know we're still at 16 million plus in terms of ASAR. Uh here we are in the middle of the year, which is is pretty an accurate number. But um, it's just amazing how affordability is is an issue, but yet it's not an issue. And all of these other things, what we see in the Middle East with the war, and and yet I just got off the phone with a dealer and he said, uh Toyota dealer, he says, Yeah, we have a 10-day supply of cars. We sell 300 cars a month. It's just we're we're doing great.

Ryan Kerrigan 2:22

Yeah, yeah. Um, so uh on the one hand, it is amazing that these clear issues, interest rates, uh, the you know, uh price of oil, all these kinds of things are allowing for what appears to be a very stable business and a booming business. Yeah, on the other hand, though, it is having its toll because the car business is not growing. America is growing, our population is growing.

Jim Fitzpatrick 2:43

Good point.

Ryan Kerrigan 2:44

Our miles driven is is growing, but the car business is not growing. So those things are driving price. And we know, and I'm sure I'm not the only one to talk about this, but price is a big issue in this industry. ASP of $50,000 plus, yeah, what you're getting for under $50,000 is not a lot. I had a rental car this past weekend. I was reminded what a $25,000, $30,000 car drives like. Um, and I was happy to give the keys back uh and get on that plane. The um, and a good brand, by the way. I'm not gonna call it out, but I'll say a good brand. Like, yeah, and I'm you know, but you're kind of reminded of where where those kind of entry-level cars are.

Jim Fitzpatrick 3:19

Yeah.

Ryan Kerrigan 3:19

And so, you know, it is having a toll, and there's a lot of talk about, for example, there was a Wall Street Journal article just in in the last week or so talking about the million consumers that would be buying new cars this year, but they're priced out. They're just priced out. Yeah. Or what they can buy, they simply don't want to buy. And they would rather keep servicing that car. So, yes, the business remains strong, and yes, we are stable in that SAR outlook, but we're not growing this business in the way that we could because of these costs.

Jim Fitzpatrick 3:52

Right, right. Good point, good point.

Big Deals AutoNation And Penske

Jim Fitzpatrick 3:54

Well, so what big uh deals are getting done? Tell me about your recent deal announcements.

Ryan Kerrigan 3:58

Yeah, well, so on Monday of this week, we announced we sold a very high volume Toyota store just outside of Atlanta, so down in Noonan. Um, so that was that went to Auto Nation. Um top, top tick the market from our perspective. I mean, really, really strong value. So I know we've got a very happy client in that regard. Auto Nation bought a phenomenal store, very high volume store, growing, uh great suburb um outside of Atlanta.

Jim Fitzpatrick 4:21

Yep.

Ryan Kerrigan 4:22

You probably saw that Penske um stepped in and did uh bought the two Lexus stores in Orlando.

Jim Fitzpatrick 4:27

Yep.

Ryan Kerrigan 4:27

$600 million, $670 specifically for two stores. I believe that's an all-time record. Um, that's all in. That's blue sky real estate, all that kind of thing. But for two stores, to my knowledge, that's an all-time record. Yeah. So big things are getting done.

Jim Fitzpatrick 4:42

Were there and were there two different sellers of those uh Lexus stores, or was it one seller?

Ryan Kerrigan 4:47

Single seller, yeah. As you may recall over the years, well, when Lexus rolled out their um they they rolled out, of course, originally, and then they often did add points. So when they went to do the second store in Orlando, and we've seen this, we've sold lots of these dual Lexus store combinations across the country, they were usually add points. And so the original dealer got the store and then had an ad point and had the two and and owned the Orlando market um before Lexus. And so, yeah, I mean, really, really big transactions getting done. Uh, as you and I talk over the summer months, I'll have some more specific things to talk about that I can't talk about today, but we've got some we've got some things in the works.

Why Buyers And Sellers Lean In

Jim Fitzpatrick 5:27

What's driving this activity?

Ryan Kerrigan 5:30

The um at the at these levels, it's buyers. Buyers are willing to step in and and again, I'm gonna focus on the stuff that we do. We are not selling Nissan stores that are struggling, rural Stellantis stores, etc. There's turnover there too, but those are different drivers. So I'm talking about the market of the big, profitable, solid stores where we're getting incredible value on behalf of sellers. Um, so I would say buyers are driving this. Buyers are willing to step in and they are willing to pay prices that sellers are are willing to accept. You always have to have them. But at this point, you can imagine a scenario where you read the newspapers, you're concerned about the future, you don't want to step in and pay premium prices for Mercedes stores, Porsche stores, Toyota stores, what have you. That is not the case. Um, folks are leaning in, they're willing to do it. And then on the seller side, I would say that more so than at any point than before, I would suggest that we have more discretionary sellers. And that is to say, sometimes the seller profile, it just makes sense. You're at an age, you're at hell uh a health point, um, you are uh at a lifestyle point, it just makes sense to sell. Yeah. And that we certainly that continues to drive MA. However, I would say we have more and more clients that simply look around and say, gosh, I mean, this is literally a conversation that I've had a couple times this year. Whoa, if my dealership group or if my store is worse is is worth this, and if you validate that it's worth this, I would like to sell.

Jim Fitzpatrick 7:01

Yeah.

Ryan Kerrigan 7:02

And and that that is driving some of this activity.

Jim Fitzpatrick 7:04

Sure, sure. I could see that. I could see that.

Tariffs Oil And Future OEM Strength

Jim Fitzpatrick 7:07

How are uh geopolitical uncertainty uh tariffs and and rising oil prices affecting dealer confidence and valuations for that matter?

Ryan Kerrigan 7:16

Yeah, yeah. So um dealer confidence remains quite strong. So there is a strong consensus that we're gonna continue to see strong profitability and even growing profitability this year. So there's a lot of faith in the business model.

Jim Fitzpatrick 7:29

Okay.

Ryan Kerrigan 7:30

One of the things that we're spending a lot of time thinking about internally at Kerrigan Advisors, though, is that if you think about Blue Sky multiples and all the various metrics that we look at, and why, for example, Lexus and Toyota traded a premium to some other brands and things like that. Um, a lot of those metrics are very rear view-facing. They're looking back at successful product launches in the past, successful market share gains in the past, et cetera, et cetera. And and that's that's the nature of business. You look at the metrics that you have access to. One thing that we're spending a lot of time thinking about is how are OEMs positioned to um to compete in the future. And so there's a recent report that came out by Alex Partners, for example, and they they labeled automotive as being the most disrupted industry right now amongst all of the various industries. All of these things that you're alluding to are things that are really, really changing the complexion. We've talked in the past, Jim, about, for example, the Chinese OEMs coming on strong, exporting now, uh, it was six million cars a year ago. I was it's a number north of six. I don't know the number offhand. Um, now a major player, for example, all of these things are impacting. And so we're trying to think about how are each of the OEMs positioned in this new world, and then how do how does that then translate into the quality of their product line, their pipeline, and then how that translates back into uh blue sky multiples. And there, I think, that will probably validate some great quality companies. There might be some surprises in terms of companies that are restructuring maybe in a way that are more positive, have a lower cost of labor depending on where they're producing. And there might be some brands, and I've got a couple in mind. We're not we have not done the work yet, so I'm not ready to make any announcements, but I think there's a couple marquee brands that we're probably gonna have some real questions about in light of where they sit competitively. So, you know, again, we we we take the data that we have, and that influences um, you know, the the brand values, the blue sky values, how transactions get done today. Yeah, um, but we have to be keeping an eye in a highly disrupted industry, according to this one report, the most disrupted industry, uh, as to where it's going.

Jim Fitzpatrick 9:34

Yeah, yeah, yeah, for sure.

AI And Valuations Margin Upside

Jim Fitzpatrick 9:36

So AI seems to be reshaping everything in auto retail. What does that mean for dealership valuations?

Ryan Kerrigan 9:43

Yeah, I it's really buoying uh valuations. Um, for those that are growing and those are optimistic and those are building dealership groups, they are they believe that they can bring AI into their businesses to improve margins. Uh, we did a recent OEM survey. Uh, the OEMs do see AI playing a very significant positive impact in retailers and and in margins. Group one, for example, just announced a 700 person uh headcount saying that they were going to be automating things using AI and generating $50 million a year in incremental profitability as an example. So, you know, we are certainly not the only industry that's reacting to AI, but we remain a very kind of paper-intensive, process-driven, people-intensive model. And so I we are we are the kind of business that can really tap these things. And buyers believe that they that they can layer in AI type savings uh when they're underwriting deals. That obviously helps

Carvana’s Stellantis Franchise Play

Ryan Kerrigan 10:40

valuations.

Jim Fitzpatrick 10:40

Yeah, for sure. Um, talk to me about Carvana um uh and about their entry into new car franchise dealerships uh as of late. Um this is this is something that the industry has been watching and kind of scratching their head, going, okay, where where is this going? It looks like it's it's predominantly or maybe all uh Stellantis dealerships, right?

Ryan Kerrigan 11:01

Yeah, yeah, thus far Stellantis. They've made a big play. They've multi- they've um surprisingly purchased multiple Stellantis stores. Yep. Um they started down in Arizona, um, Casa Grande, 50 miles outside of Phoenix.

Jim Fitzpatrick 11:14

Um this is where Carvana is headquartered, right?

Ryan Kerrigan 11:17

Yes, yep, they are based out of Arizona, you're correct. Um, they've done a quick 20x on new car sales volume in that store. So they took a uh a store, a small store and a very much a secondary market well outside of the metro, and it's now the highest volume Stellantis store in the United States. Okay, so it just shows kind of how they can move the needle very, very quickly. They have followed up with the acquisition of multiple other Stilantis stores. So yeah, it this is something that that we're watching. It's intriguing, it's interesting. Um, clearly, some of the things that they can do with Stellantis in terms of access to product and moving the needle like that are things that you couldn't do with other brands. Um, and I suspect that there's going to be a lot of hesitation by other OEMs to engage in that kind of thing. But certainly they're they're doing some very, very interesting things. And let's go back to that AI conversation that we just had. They are not staffing that store with an expensive general manager, a bunch of GSMs, all the traditional structure. Yeah. They are a highly, highly tech enabled company. Yep. No surprise. And so they're generating that in a very different way. So it's something that we're watching, we'll see where they go. I think the biggest question is it's it's it's as much about what Carana would like to do and what they'll be allowed to do, because obviously the OEMs have um a lot of say in how how these vehicles are retailed, access to inventory, things like that. Yeah. In the case of Stellantis, we know there was a lot of inventory to be pushed. Um, and so there was flexibility with that OEM in stepping into a mega volume game. That won't be quite the same case. So there'll be an interesting conversation between Carvana and other OEMs if they're even willing to talk to each other about expanding that.

Jim Fitzpatrick 13:01

It is amazing how the um the industry, the retail automotive industry, can learn so much from seemingly outsiders like Carvana or even Carmax for that matter, and others that are out there that that we, you know, we we we see what they're doing, and then we adopt it, or some adopt it, you know, in running their stores and and figure out that wow, this is actually a better way to run it, or a better customer experience for the customer. Because I think dealers in many cases get these blinders on to go, well, I run my dealership the way my father or mother ran the dealership, the way and they you ask the parents, they go, Well, I ran it because of the way my mother or father ran the dealership. And it's it's it's amazing to see some of sometimes a fresh look or a fresh set of eyes look at our industry to go, you know, we could actually do that experience better. And uh and Corvana, I think, is a perfect example of that, right?

Ryan Kerrigan 13:54

Could not agree more. Uh, our industry has been quite slow to adapt and adopt. I agree with that. Part of it's the structure. I mean, it's a regulated industry. We've got these defined PMAs. I mean, there are some things that limit sort of the ability to be creative. Sure. But that business model, I mean, let's look at, for example, consumer pricing as an example. I mean, the automotive industry stuck with a relatively uncomfortable negotiating type pricing policy well beyond when other industries had let go of that kind of thing.

Jim Fitzpatrick 14:25

Yeah.

Ryan Kerrigan 14:25

Um, and we still have it today. It uh it's changed. I think uh mo the experience today is very different to the degree that there's some back and forth on pricing. It's not an overly convoluted thing, it's just a customer's got to get comfortable with a certain car at a certain price. Yeah. Um, but even so, like we we have been slow to to to it to adapt. I agree, and and outsiders in some cases have brought some real value to the business.

Jim Fitzpatrick 14:48

Yeah, for

Blue Sky Moves Kia Up Audi Down

Jim Fitzpatrick 14:49

sure. Um, did did you have any blue sky multiple changes in your recent report?

Ryan Kerrigan 14:54

Yeah, we did. Um we continue to see real strength on Kia. Um you know, Kia, um, although they share that that Hyundai product line for the most part, their business model, their partnership with dealers is really paying dividends, and we're just seeing continued interest on the part of dealer groups wanting to grow with Kia. So we did bump up the lower end of the Kia multiple, and then we did a notch down Audi. Um Audi is, and this goes a little bit to that conversation that I mentioned earlier, but we're really thinking about where is where is the industry going? How do we think about the future state of how these OEMs are positioned? Um, Audi finds itself in a tough position. Um, inventories are mounting, margins are down. Uh they're again they're facing a new competition back home. They have that very expensive uh German manufacturing base, very high quality, but certainly not positioned well for cost. And it's translating into some challenges, particularly now with new US tariffs, um, into some challenges. They're because they're not as much as they try to be, most American consumers are gonna put Mercedes and BMW in a slightly different category than Audi. So maybe they've got a little more pricing flexibility than Audi does, and that's starting to translate now into some challenges. So some great products for sure. Um, you know, I've had a chance to be in and drive by some Audi stores just in the last couple of weeks, some beautiful stores, some beautiful products, but the business model is being challenged, and we did knock them down. Yeah. The other thing I would note is we did put um we took Nissan, we had a negative watch on Nissan. Um they're now steady. Um, and Nissan is by all accounts seems to have found a bottom um in their challenges. You saw, for example, in the first quarter, um, US car sales were up uh over nine percent year over year. So they were the biggest gainer. Now that came after some some market share losses in the in the prior couple of years, yeah, but they were up uh over nine percent. And so we we feel like there's some stability there. We took our negative watch off of Nissan.

Jim Fitzpatrick 16:52

Yeah, that's good. That's good. I'm sure that that's uh uh that's a huge relief for a lot of Nissan dealers that are out there. I know a number of uh my some of my friends that have Nissan stores, it's the only store they have. And uh they you know they they acquired them in recent years, and uh they don't want that store that they don't want that franchise going away. So it's good to hear that they've hit, you know, they've they've found the bottom, as you say, and uh they're on their way back up. So that's good.

Ryan Kerrigan 17:18

Yeah, and they they really dominate in that lower um price spectrum that we talked about. So because affordability is such an incredible issue today in the U.S. auto market, um Nissan's a really important player um for those vehicles that are you know below that's that average ASP of 50,000. They're selling a lot of cars. Yeah. Um, you know, it I'm not probably not too much below 30,000, but certainly in that $30,000 to $40,000 range, they'd be selling a lot of vehicles.

Jim Fitzpatrick 17:44

Sure. Um, I know that you've been thinking a lot about obviously how to assess which franchises are best, as we just talked about, uh position for the future um given the disruption. Are there any others that you want to add to that list?

Ryan Kerrigan 17:58

You know, we're this is something that we're going to play with over the course of 2026. Um and so I would um probably a little bit too early to preview that. I would just say that, and again, I I mentioned this earlier, but I I go back to it. Like we don't typically think of our industry as being radically disrupted. The industry, of course, is always being buffeted by what's going on in the world. It's a massive global industry, but to sort of lead sort of the disruption scale is something new to all of us. So I just think it's a different frame of mind for all of us. I can tell you, Kerrigan Advisors, we're just trying to think very openly and creatively and not be blinded. Um, not not be tied into those kind of hidebound practices that are easy to do in a business model that's been around for a hundred years. So um we'll talk more on that in in uh in future

2026 Outlook And Closing Thoughts

Ryan Kerrigan 18:46

segments.

Jim Fitzpatrick 18:46

Okay, okay. What what is your outlook for the rest of 2026? Uh is it looking good?

Ryan Kerrigan 18:52

Yeah, yeah, yeah. I can I can speak um in terms of our pipeline, the stuff that we're actively engaged in, um, some of which is under contract um and is due to close, some of which is earlier stage in the process, but across the board, yeah, um, we are as busy as we've ever been. Wow. And if uh, you know, we we of course need time and stability in order to close deals. That's how it works. Um but nevertheless, assuming that the macroeconomic picture stays intact, we will certainly have a record year at Kerrigan Advisors by a long stretch. And um, yeah, we're we're very, very bullish and positive on what's going on in the industry right now.

Jim Fitzpatrick 19:24

That is fantastic. Well, congratulations on all your success. That's awesome. Brian Kerrigan, Managing Director of Kerrigan Advisors. Thank you so much for joining us on the show. I know that our dealer viewers get a lot out of your visit each month with us, so thanks so much.

Ryan Kerrigan 19:37

Great. Thanks, Jim. Thanks.

Jim Fitzpatrick 19:44

Thanks for watching Inside Automotive with Jim Fitzpatrick.