As the economy and the state of the RV industry rapidly change, so is the market for selling dealerships changing.
During a Tuesday webinar, Morgan Stanley Financial Advisor Brad Stanek, Partner at Performance Brokerage Services Jesse Stopnitzky and Lazydays CEO John North talked about the nature of buying and selling a dealership in an environment that is only a year or so removed from a name-your-price era.
In fact, Stanek said that in the neighborhood of 88% of dealers who sell their lifelong businesses end up being not fully satisfied with the results.
North said that is an important factor for Lazydays as it seeks to expand its footprint.
“We’re very focused on acquisition growth,” North said. “We had been doing a combination of both new construction and opening new locations from scratch and also doing some acquisitions when they fit our parameters. I think you’ll see us doing more acquisitions going forward.”
But the difficulty for many potential buyers is in calculating what is a fair offer.
From 2020 to 2022, dealerships were in many cases boasting record profits as new buyers came into the market following the COVID outbreak. Now that the market as slowed and interest rates have increased, sales have slowed.
For a buyer to only look at the past three years of records would not give them an accurate picture of a dealership’s worth because of the outsized nature of two of those years.
That is where advisors such as Morgan Stanley and Performance can be of assistance to both parties.
Stopnitzky said three points are important for anyone approaching the point of selling their dealership.
First, there is a decreasing buyer pool, with many dealership groups choosing to reinvest in the stores they already own than to buy new ones.
Second, interest rates have made it more difficult to secure loans for acquisitions.
And finally, more sellers are coming to the market, thereby softening the values of those being sold.
“National groups are still in the haul for quality transactions,” he said. “But it could be decades or generations before that kind of situation presents itself again.”
Stanek said all of that is in contrast to the previous three years which featured low interest rates, high profitability and huge amounts of excess cash.
“The projections as far as what the Fed is doing is keeping rates high – and the expectation now is there won’t be cuts until the second half of 2024,” he said.
There is still room for what are considered quality acquisitions, though. Dealers that have built up good will with a customer base over the years and have shown regular profitability are still to be desired.
Similar workshops featuring Stanek and Stopnitzky will be offered during the upcoming RV Dealers Convention/Expo on Nov. 6 to 10 at Paris Las Vegas. For more information, visiting the Convention/Expo’s workshop page.