The $1.3 Billion Dealership Deal

Ryan Kerrigan, Managing Director of Kerrigan Advisors, joins Inside Automotive to discuss the record-breaking $1.3 billion acquisition of Hennessy Automobile Companies by Group 1 Automotive and what it signals for the future of dealership buy-sell activity.

The transaction—the largest 10-store dealership deal by dollar value in automotive retail history—highlights the growing demand for luxury franchises and the continued strength of the M&A market despite economic uncertainty. Kerrigan explains why premium luxury dealerships are commanding record valuations, how Blue Sky values have reached unprecedented levels, and why generational ownership transitions are fueling more transactions. He also shares insights into the accelerating pace of dealership consolidation, the evolving role of public and private dealer groups, and why the buy-sell market continues to outperform expectations.

Key discussion points:

•  Why the Hennessy acquisition set a new industry record 
•  The growing value and scarcity of luxury dealership franchises 
•  Record-high Blue Sky valuations and what they mean for sellers 
•  How family succession is driving dealership M&A activity 
•  Why dealership consolidation continues to accelerate 
•  The evolving relationship between public dealer groups and private capital

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Transcript

Why This Deal Matters

Announcer 0:07

Welcome to Inside Automotive with Jim Fitzpatrick.

Jim Fitzpatrick 0:11

Group 1 Automotive says it's focused on growing in strong markets with well-established dealerships and its recent agreement to acquire Hennessy Automobile Companies, one of Metro Atlanta's largest dealer groups, is a big step in that strategy. So what does the deal like this say about the state of the buy-sell market and where are the biggest opportunities for dealers today? Joining us now is Ryan Kerrigan, managing director at Kerrigan Advisors, who advised Hennessy Automobile Companies on this incredible transaction. Welcome, Ryan Kerrigan, to CBT News.

SPEAKER_02 0:43

Thanks, Jim. Good to be here.

Jim Fitzpatrick 0:44

Congratulations on the big news. Thank you.

SPEAKER_02 0:46

Yes, formally rolled out this morning. Um so very big uh announcement. So group one had to do an 8K. That'd just say before the market opened this morning, they put out the formal release. Okay. And then I was just with Group One and the Hennessy family and making the announcement to all the employees.

Jim Fitzpatrick 1:02

That's great. Well, congratulations on the deal. Do I understand this is a $1.3 billion transaction?

SPEAKER_02 1:07

Yeah, it's public, so we can now formally talk about it. Uh $1.3 billion, uh third largest transaction in the history of automotive retail. Wow. Um and it was 10 stores. And so if you look at the prior transactions, there were two larger than this. Uh one involved 60 stores, one involved 30 stores. And so for 10 stores, uh this is a high watermark to say the least.

Jim Fitzpatrick 1:28

There's no question about it. You have got the attention of the auto dealers right now that think 10 stores. I never thought that could reach you know a billion dollars. This is 1.3 billion. So talk to us,

Luxury Consolidation And Valuations

Jim Fitzpatrick 1:39

drill down on that. What why? Why is a why is a deal like this possible?

SPEAKER_02 1:42

Great question. A very special group. Uh the Hennessy's have built an amazing company here in Atlanta over the last 60 years. Uh, 10 stores, but 75% of their volume is premium luxury. Okay. They're all here in the Southeast in one MSA. Um, phenomenally run, incredible culture, spent the morning with the team, and um a very, very unique group. And so the numbers tell the story of just how unique the group is.

Jim Fitzpatrick 2:06

Right, right. Um in if how how big a deal is this compared to other uh stores or chains, you know, family-run dealerships like this?

SPEAKER_02 2:15

I mean, is it is it to X the norm or uh you know it it just it depends upon the mix of franchises, the size of the stores, and the locations. But yeah, I mean this this group was averaging 170 million in revenue per rooftop. Okay. Um particularly for luxury, that's it's a it's a very, very unique group. Um this is the And luxury is red hot right now.

Jim Fitzpatrick 2:39

So every dealer and every dealer group, every even publicly traded companies, obviously, they want to be in this luxury division, don't they?

SPEAKER_02 2:46

It's exactly right. I mean the luxury space is consolidating even faster than the rest of the industry. So if you look at the opportunities to play, if you want to get in with with uh uh Jagland Rover, with Porsche, with Mercedes, with Lexus, there are increasingly few places to play. Yeah. And so for the publics, for the large private consolidators, um, when these opportunities come up, people take a look at them very, very seriously. Sure. They're small dealer networks, much smaller networks than the volume players, um, and they are increasingly consolidated. So the opportunities get fewer

Buy-Sell Market Strength In 2026

SPEAKER_02 3:16

and far between. What does this say about the broader picture for the buy-sell market? Buy sell market continues to be strong. Um we are tracking, so 2025, again, record year 2026 is tracking a little bit ahead of 2025. So the market remains incredibly strong. And you and I talked about this last time. I mean, there there are some headlines that would call in a question like, is this sustainable? And you look at where interest rates are, and now we've got oil prices, we've got uncertainty. There are things that have historically plagued the automotive market, and we're just not seeing it. Yesterday you may have seen Lithia announce earnings, for example. Uh, they came in incredibly strong. The shot, uh the stock shot up 19% yesterday. The Kerrigan index that we track, all the publicly traded auto retailers, um, was at a uh a record yesterday. So there's just incredible strength, notwithstanding some of the macroeconomic issues that would you might think hold back the industry, and it's just not happening.

Jim Fitzpatrick 4:08

No question about it. Affordability, we we we we think and we feel as though this is a big issue, which it is, which it is. Um however, uh the no it seems like nobody told the publics because they keep plowing along. Yeah, right. Yeah.

SPEAKER_02 4:22

Well, and you know, again, most of our work, so most of the buy-sell activity is private to private. So it's large private um consolidators buying out other private companies. So we see a lot of data that's not public. And for many of the private groups, they continue to tick along at record levels of profitability. So it's it's there's a lot of strength in this market. Yeah, there are pockets, of course, there are places to play, there are certain franchises and OEMs, no no surprise, that are struggling. So it's not across the board, but but the industry as a whole is very, very

Why The Hennessys Sold Now

SPEAKER_02 4:52

strong.

Jim Fitzpatrick 4:52

What what uh if you can talk about this, uh the the Hennesses, what what led them to put this the these stores on the market at this particular time?

SPEAKER_02 5:02

Yeah, um uh they've been in the business for over 60 years. Um there was a transition from the second generation, which has run the business now for 40 years, to the third generation. Um it's a big family. I mean, there's just a lot of folks in the third generation, the fourth generation. That gets it's a very tricky thing to do. Right. Um, and just in light of a very, very attractive offer from Group One in this case, they decided that it was best for their family to make this this um transaction happen.

Jim Fitzpatrick 5:33

How long how long does a deal like this take? I mean, is this something where you start this conversation years ago, or is this something that that is in the last six months to a year, or what was it?

SPEAKER_02 5:43

This happened very, very quickly. So we've we've known the family for a long time, but in terms of understanding their interest in in possibly selling the business, that all happened inside of 2026.

Jim Fitzpatrick 5:54

Okay, really?

SPEAKER_02 5:54

And we initiated conversations uh with a handful of players in May. Okay. Okay. So just 60 days ago.

Jim Fitzpatrick 6:00

Okay. Were all of the people, were all the players, if you can divulge this, publicly traded companies that you were talking to?

SPEAKER_02 6:06

Or you know, I won't say a lot. We we did talk to a very uh select number of players that could do something of this size, including a couple of the publics.

Jim Fitzpatrick 6:13

Yeah. Their stocks are doing well, which gives the publics, obviously, that that uh extra horsepower, if you will, right, to step up on some of these transactions, right?

SPEAKER_02 6:22

The windows open right now. That's exactly right. On large transactions, particularly with publics, there are windows that open and closed. The windows open right now. Um the publics have all indicated strong interest in doing large transactions right now. So that's unique.

Jim Fitzpatrick 6:37

There's a moment in time. Sure, sure. Now, if I'm a dealer listening to this conversation right now, I'm thinking, well, I've got 10 stores and I've got a lot of I've got a lot of luxury brands. Okay. Um I think I'm gonna call Ryan and see if I can snag a billion dollars. Is it is it that easy to do?

SPEAKER_02 6:53

Um it's it's never that easy. Um but um yeah, I mean for uh this is a remarkable time to be a dealer. You know, a metric that that we now talk a lot about that is relatively new to the industry, it's not something we used to talk about years ago, and that is the uh blue sky is a percentage of revenue.

Jim Fitzpatrick 7:09

Okay.

SPEAKER_02 7:10

And the blue sky is a percentage of revenue for great franchises and great markets, even good franchises and good markets are is at all-time highs. And so you start looking, for example, at deals are getting on 30, 40, even 50 percent blue sky to revenue. Those are metrics that just were not part of the industry parlance a decade ago. And so, yeah, uh dealerships are incredibly valuable today, uh, more so than ever. Incredible.

Jim Fitzpatrick 7:37

So a good time to sell if you are in that space.

SPEAKER_02 7:39

If if yeah, I again every every story, every dealer, every family has its own situation. But yeah, I mean, uh for a lot of folks, um, this is a very unique time to sell.

Jim Fitzpatrick 7:49

Yeah, that's

Penske Going Private And Why

Jim Fitzpatrick 7:50

great. Let's switch gears for just a second and talk a little bit about the Penske um potential of going private. Yeah. Uh that's a big transaction. That's big news, right?

SPEAKER_02 7:59

Yeah, no, that wasn't that was a very interesting announcement in recent days. Um, I think it makes a ton of sense. Um our some of our public companies operate in almost a quasi-private way. Penske, uh uh the between the Penske family and a big Japanese strategic investor, they really have control of that business they have for a long time. Um there is a generational transition going on, Roger Penske to his two sons. Yeah. And so, yeah, that was an it was an interesting um development and something that makes sense. And when you look, for example, even with the stocks uh, you know, having being up so strong yesterday, for example, they still trade as kind of value stocks. And so I think there is a question of you know, do they benefit from being public?

Jim Fitzpatrick 8:39

Yeah.

SPEAKER_02 8:39

Um it's quite expensive to be public. There's a lot of compliance and and cost that comes with that. And the primary reason you do that is to raise capital, to have access to the capital markets. Capital markets have changed a lot in recent years. And we're seeing, for example, in the technology sector, most of those companies choosing not to go public. They can they can tap plenty of capital, in some cases billions or tens of billions of dollars without being public. So I suspect that there's a re-evaluation going on by all the publics in our space as to what is the cost-benefit analysis of being public. And I'm certainly not making any predictions, um, but it wouldn't shock me if this du uh leads the path of other other publics uh pursuing this. Really?

Jim Fitzpatrick 9:19

Okay.

SPEAKER_02 9:19

It wouldn't shock me.

Jim Fitzpatrick 9:20

Yeah.

SPEAKER_02 9:21

Yeah.

Jim Fitzpatrick 9:21

Okay. Okay. Interesting. Interesting. And I know that you guys do a lot of work with the Hendrick Automotive Group. You guys were just up there and uh had the pleasure of interviewing uh Mr. Hendrick, right?

SPEAKER_02 9:30

Yeah.

Hendrick’s Ferrari Move And What’s Next

SPEAKER_02 9:31

Yeah, so uh Hendrick um just bought uh his first uh Ferrari franchise. So that was fun to do. That was a very notable transaction. Um it's a private transaction, so we don't talk about numbers, but that did set a high water mark for Ferrari. Um and that was accompanied by Portia um uh Bentley, Alfa Romeo, and I think there was one other franchise that I might be leaving out, but uh a phenomenal luxury platform, and he's gonna integrate that into his campus and his museum down North Carolina.

Jim Fitzpatrick 9:58

Do I understand he is the largest holder of Ferraris uh uh in terms of a collection outside of the dealership?

SPEAKER_02 10:05

I I don't know if he's the largest, but I will tell you that the collection is spectacular. That I can tell you.

Jim Fitzpatrick 10:12

Yeah, right. Yeah, that's incredible. So talk to us about uh for the people, for the dealers that are watching. Um in between now and the end of the year, more transactions coming. I mean it's a very vibrant buy-sell market, right?

SPEAKER_02 10:25

It is, it is. And so you know, we in terms of being engaged to sell dealerships, um, we have never had more rooftops under engagement. Uh everything from just kind of kicking off the process to getting close to having transaction announcements. So um our internal gauge is we have never been busier. We are engaged to sell a the highest number of rooftops uh ever. That is fantastic.

Jim Fitzpatrick 10:48

Wow. Okay. Congratulations. $1.3 billion deal for 10 stores, dealers that are watching. Uh uh, that that's an eye-opener right there. Uh congratulations to Kerrigan Advisors and Erin Kerrigan as well. She runs the real deal. I mean, she's she's she's the brains, right? Behind the whole deal. I can say that because my wife runs our company.

SPEAKER_02 11:08

I know who runs this operation.

Jim Fitzpatrick 11:10

That's exactly right. That's exactly right. Ryan Kerrigan, managing director of Kerrigan Advisors. Thank you so much, and again, congratulations. Thanks, Joe.

Announcer 11:19

Thanks for watching Inside Automotive with Jim Fitzpatrick.