In the busiest dealership buy-sell market in decades, luxury brands are red hot. The result: stratospheric prices for Mercedes-Benz, BMW and Porsche dealerships.
Typical blue-sky multiples for those three brands range from 7 to as much as 10 times adjusted pretax profit, according to the “2014 Year End Haig Report” released this week. After the third quarter of 2014, the report put the top end of those brands’ blue-sky range at 7 or 7.5 times earnings.
“I have never seen prices this high for dealerships before, and there’s a particular spike on the German luxury” brands, said Alan Haig, president of Haig Partners, a dealership buy-sell advisory firm in Fort Lauderdale, Fla., which puts out the report. “There’s a big bet now that the luxury market is going to grow faster than the overall market.”
Blue sky is the intangible value of a dealership, expressed as a multiple of adjusted pretax profit. Multiples — which can vary enormously based on a dealership’s location and other factors — are based on actual adjusted earnings by normally performing stores.