TAMPA, Fla. – Performance Brokerage Services set a record with 94 transactions in 2024 helping dealers find buyers for their businesses.
But in recent months, those transactions have slowed and the values achieved have softened as well, according to Jesse Stopnitzky, director of Performance’s RV division.
“The financial statements that we review indicate 2024 may be even worse than 2023 in terms of profitability,” he said. “As such, we have a smaller buyer pool. Given the challenges surrounding the retail environment and the economy, many dealers are focusing on internal optimization as opposed to external growth.”
Stopnitzky, addressing an online audience during Wednesday’s State of the Buy-Sell Market webinar, said part of the holdup on any sort of recovery is a still looming sense of uncertainty.
Dealers realize the prices they benefited from during the pandemic are long gone and have found no sense in trying to predict or time the market to figure out the perfect time to sell.
National groups are still on the lookout for quality acquisitions that fit their long-term growth objectives. Performance is still conducting deals on what Stopnitzky calls “respectable levels” and regional groups are still looking for “tuck-in” deals that they can incorporate into their portfolios.
Although he said the company doesn’t typically deal in predictions, he expects a significant increase in buy-sell activity in the coming year.
Brad Stanek, a financial adviser with the Stanek-Haack Group at Morgan Stanley, urged dealers to take advantage of a better, but not outstanding, economy to grow.
“There should be some wind at our back as a small business owner. There should be some more friendlier tax policies, deregulation and maybe a few interest rate cuts are out there as well. Time will tell,” he said. “What I want you to keep in mind about the economy, at least in our opinion, it isn’t going to be there to bail out the dealership. You can’t expect that the economy alone is going to drive more buyers to your dealership and drive up your business in a remarkable way. It’s up to you to step in and take what is a reasonable but not great economy and turn that into a win through actions you take to grow your business and the value of the dealership. You control it, and I’ll take that any day of the week.”
Stopniztky cautioned dealers to have their team in place and to fully understand the value of their dealership before entering into any buy-sell discussions.
He said that over the past 30 years of history, the industry has not experienced the kind of uncertainty it has since just before the COVID outbreak up until now.
“Our evaluations help to determine which areas of the business underwent systemic and sustainable growth and which areas were attributable solely to COVID,” he said.
The third member of the panel, Raul Rodriguez, senior vice president of Blue Compass RV, told dealers his group is still looking to buy, but is being selective.
Blue Compass is one of the fastest growing dealership groups in the country.
“We’re very focused on quality and premium products,” said Rodriguez. “We’re very strategic in our process and how we think about acquisitions. It’s not just about adding dots across the country, it’s about adding businesses that fit from a market, brand, facilities, culture management perspective. It’s got to fit all of those criteria before we even get to a valuation discussion.”
Rodriguez said he could see Blue Compass doubling in size over the next three to five years on a prudent basis.
The dealership currently operates 100 stores in 33 states and Rodriguez said it has attempted to align itself with high-quality businesses that offer premium products.
Rodriguez also echoed Stanek’s take on the 2025 economic outlook.
“We don’t see a gargantuan leap coming this year, but we certainly expect some recovery,” he said. “I think that will lead to in general more transactions. But just having a realistic look at your sustainable earnings and when you will get there is a big part of the valuation discussion.”
Stanek urged dealers not to cut staff in order to secure a higher profit when selling their dealerships because less staff means less service and a decline in quality.
“You’ve got to make long-term decisions and act as if you were not going to sell even when you are committed to potentially going to market and selling,” he said.
Aged inventory arose as a major issue in deals that ended up not being consummated over the past year.
Stopnitky said in many cases potential buyers were not willing to take on the cost of the inventory.
“We strongly, daily, encourage clients to continue selling through their aged inventory, which everybody’s working on, and the unfavorable or used inventory,” he said. “This can become a serious point of contention between buyers and sellers. It can be a deal-breaker.”
Rodriguez said having a dealership’s “house in order”, including inventory and books and records, goes a long way toward clearing the way for a deal to be made.
“I can’t emphasize enough that if you don’t have your inventory in order there might not be a discount big enough to allow a transaction to work,” he said. “We’ve walked away from plenty where the focus of moving the level of aged inventory that was on hand was just too much of a distraction from running the business. I would say that as an industry we’re much, much better off than we were 12 to 18 months ago.”
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