mercer capital's value focus: auto dealer industry | mid-year 2015

VALUE FOCUSAuto Dealer Industry

www.mercercapital.com

Overview Inside

The aptly named Great Recession hit the auto

industry and its dealers harder than almost any

other industry, save for construction and housing.

As unemployment rose, consumer spending

and home values plummeted. With little to no

discretionary income and no means to finance

car purchases, sales tumbled, margins were

squeezed, and GM and Chrysler filed for Chapter

11 bankruptcy. Recovery began in 2009, con-

fidence and disposable incomes rose allowing

consumers to fund purchases of more durable

goods, including cars. These trends are expected

to continue through 2019. However, the auto

dealer industry, though making a strong recovery

from the most recent recession, is facing pressures

from government regulation, shifting demand and

supply, and new market entrants.

More stringent environmental standards are

causing car prices to rise, the shift to internet for

information and purchasing is forcing margins

down (but also increasing volume), and demand is

shifting more toward hybrid, electric, and autono-

mous cars. The leading auto dealers are taking

notice of these shifting trends.

Macroeconomic Indicators

Productivity 1

Housing 3

Personal Consumption

and Confidence 5

NADA Dealer

Optimism Index 6

Energy 7

Auto Dealer Indicators

Average Dealer Profile 8

Vehicles and Price 10

Valuation Trends 11

Mergers & Acquisitions 14

Guideline Company Pricing 15

About Mercer Capital 17

Erickson Partners

Merges with Mercer Capital 18

Mid-Year 2015

http://www.mercercapital.com

http://mercercapital.com/insights/newsletters/value-focus-industry-publications/auto-dealer-industry-newsletter



Mercer Capital’s Value Focus: Auto Dealer Industry Mid-Year 2015

© 2015 Mercer Capital 1 www.mercercapital.com

Rising disposable income, a measure of consumers’ ability to support debt-funded purchases, is dependent on an economy’s productivity. While the aptly named Great Recession reached its official end in mid-2009, economic growth remains somewhat subdued. Although the housing market has strengthened, growth in the market remains weak. The unemployment rate reached pre-recession levels in December 2014, but labor force participation remains low and has continued to fall. Economic growth is expected to remain positive, though government spending cuts, political uncertainty, and rising interest rates are causes for concern. GDP growth expectations from private economists surveyed by The Wall Street Journal are on the order of 2.8% for the first quarter of 2015 and 2.8% for all of 2015. This compares to GDP growth of 2.3%, 2.2%, and 2.4% in 2012, 2013, and 2014, respectively. Although the Federal Reserve ended its asset purchases, a significant tightening of monetary policy (via an increase in the target federal funds rate) is unlikely in the short run until unemployment declines and inflation rises.

Macroeconomic Indicators // Productivity

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

GD

P (in Billions)

Ann

ualiz

ed R

eal G

row

th R

ate

Quarterly Annualized Real Growth Rate Annual Real Growth Rate

GDP (Current Dollars) GDP (Chained 2009 Dollars)

Source: Bureau of Economic Analysis

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Annualized Quarterly Change Annual Change

Source: Bureau of Labor Statistics

Gross Domestic Product

According to advance estimates released by the Department of Commerce’s Bureau of Economic Analysis, Real Gross Domestic Product, the output of goods and services produced by labor and property located in the United States, increased at an annualized rate of 2.3% during the second quarter of 2015. The increase was attributable to gains in personal consump-tion expenditures, exports, state and local government spending, and residential fixed investment. Federal government spending, private inventory investment, and nonresidential fixed investment spending decreased. Imports, which are subtracted from the national income and product accounts used in the calculation of GDP, increased.

Nonfarm Business Productivity

According to the Bureau of Labor Statis-tics, seasonally adjusted nonfarm business productivity, as measured by the hourly output of all persons, increased at an annual rate of 1.3% in the second quarter of 2015. The increase was a function of the 2.8% increase in output combined with an increase of 1.5% in hours worked. Labor productivity, hourly compensation and unit labor costs also experienced increases, while real hourly compensation declined 1.1%. The productivity increase follows decreases in productivity of 2.2% and 1.1% in the fourth quarter of 2014 and the first quarter of 2015, respectively. Annual average productivity increased 0.3% in the second quarter of 2015 relative to the second quarter of 2014. Productivity increased 1.7% for the business sector

GDP

Change in Nonfarm Business Productivity

(inclusive of farming activity) in the second quarter of 2015. This was the result of a 2.8% increase in output and a 1.1% increase in hours worked. Manufacturing productivity, generally more volatile in its quarterly measures, increased 2.5% during the quarter.





Macroeconomic Indicators // Productivity (cont.)

1/19/061/20/061/23/061/24/061/25/061/26/061/27/061/30/061/31/062/1/062/2/062/3/062/6/062/7/062/8/062/9/06

2/10/062/13/062/14/062/15/062/16/062/17/062/21/062/22/062/23/062/24/062/27/062/28/063/1/063/2/06

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

160.0%

Dow Jones Industrial Average S&P 500 NASDAQ Composite Source: Bloomberg L.P.

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

Bureau of Labor Statistics

Equity Indices

Due to the Greek financial crisis spurring

a sell-off at the end of the quarter, the

Dow Jones, the S&P, and the NASDAQ

experienced losses during June 2015.

The Dow Jones and the S&P also posted

losses for the second quarter of 2015,

while the NASDAQ posted its tenth

consecutive quarterly gain. Driven by

signs of an improving economy and

the anticipation of the Federal Reserve

increasing rates, most U.S. Treasury

yields rose during the second quarter of

2015. The chart shows the relative price

performance of the Dow Jones Industrial

Average, S&P 500, and NASDAQ Com-

posite Indices.

Unemployment

According to the Labor Department’s

Bureau of Labor Statistics, the unemploy-

ment rate was 5.3% in June 2015, down

slightly from 5.4% and 5.5% in April and

May, respectively. Unemployment rates

increased steadily throughout 2008 and

into 2009, peaking at 10% in October 2009.

The October 2009 unemployment rate

represented the highest level since 1983.

Pre-recession unemployment levels were

reached in December 2014. The June

2015 unemployment rate is the lowest rate

since April 2008, though some experts

believe that is due to a shrinking work-

force. Excluding the recent trend, the last

time the labor force participation rate was

lower than its current level was 1977. As job

availability increases the labor force could

increase due to individuals reentering the

Equity Index Price Return

Civilian Unemployment Rate

workforce, which could lead to periodic increases in the unemployment rate in the foreseeable

future. Economists surveyed by The Wall Street Journal anticipate an unemployment rate of 5.1%

by year-end 2015 and a further decline to 4.9% by June 2016.





Traditionally, home owners have used home equity to purchase durable goods. When the housing market collapsed in late 2007, this method of

financing was effectively cut off. The housing market improved considerably from the depths of the financial crisis due to sustained reductions in

interest rates, though it remains well below highs seen in 2005 and 2006. Although the Federal Reserve has begun tapering the rate of asset

purchases, a significant tightening of monetary policy (via an increase in the target federal funds rate) is unlikely in the short run until unemploy-

ment declines and inflation rises. Further, home building activity has traditionally been a primary driver of overall economic activity because new

home construction stimulates a broad range of industrial, commercial, and consumer spending and investment.

“The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and

agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities

at auction. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain

accommodative financial conditions. When the Committee decides to begin to remove policy accommodation, it will take a

balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee

currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may,

for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.”

-Federal Reserve FOMC statement January 28, 2015

Macroeconomic Indicators // Housing

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

Jan-2

005

Jul-2

005

Jan-2

006

Jul-2

006

Jan-2

007

Jul-2

007

Jan-2

008

Jul-2

008

Jan-2

009

Jul-2

009

Jan-2

010

Jul-2

010

Jan-2

011

Jul-2

011

Jan-2

012

Jul-2

012

Jan-2

013

Jul-2

013

Jan-2

014

Jul-2

014

Jan-2

015

30-Year Mortgage Rate 10-Year Treasury rate Effective Federal Funds Rate

Source: Federal Reserve Economic Data

Key Interest Rates

The Federal Reserve’s Open Market Com-

mittee lowered its target for the federal

funds rate to a range of 0% to 0.25% during

the fourth quarter of 2008, representing a

total rate cut of 175 to 200 basis points

during the quarter. Target rates were held

steady during 2009 and have remained

unchanged through the second quarter

of 2015. This has kept interest rates low,

increasing the ability of households to fund

spending. The yield on the 10-year Trea-

sury note is expected to increase during

2015, which could cause consumers to

switch to used cars, as new car loans are

less affordable.

Change in Key Interest Rates





Macroeconomic Indicators // Housing (cont.)

0

50

100

150

200

250

Jul-2

005

Nov-200

5

Mar-20

06

Jul-2

006

Nov-200

6

Mar-20

07

Jul-2

007

Nov-200

7

Mar-20

08

Jul-2

008

Nov-200

8

Mar-20

09

Jul-2

009

Nov-200

9

Mar-20

10

Jul-2

010

Nov-201

0

Mar-20

11

Jul-2

011

Nov-201

1

Mar-20

12

Jul-2

012

Nov-201

2

Mar-20

13

Jul-2

013

Nov-201

3

Mar-20

14

Jul-2

014

Nov-201

4

Mar-20

15

Housing Price Index SA Case-Shiller 10 City Index SA Case-Shiller 20 City Index SA

Source: Federal Housing Finance Agency and Federal Reserve Economic Data

Housing Prices

Housing prices have not yet recovered to

pre-recession levels but have increased

year-over-year since January 2011.

Change in Housing Prices

0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 2.0 2.1 2.2 2.3 2.4

Private Housing Starts Single Family Starts Source: U.S. Census Bureau Note: Permits at a given date are generally a leading indicator of future starts. Beginning with January 2004, building permit data reflects the change to the 20,000 place series.

Private Housing

Single Family Housing

Housing Starts

According to the U.S. Census Bureau, new

privately owned housing starts were at

a seasonally adjusted annualized rate of

1,174,000 units in June 2015, 9.8% above

the revised May rate of 1,069,000 units,

and 26.6% above the June 2014 level.

The seasonally adjusted annual rate of pri-

vate housing units authorized by building

permits (considered the best indicator of

future housing starts) was 1,343,000 units

in June 2015, 7.4% above the revised May

estimate of 1,250,000, and 30.0% above

the June 2014 level. In January 2015,

the Census Bureau redefined the uni-

verse of permitting authorities, an action

it last undertook in 2004. The 2014 data

set (Universe) reflects an increase in the

number of permit-issuing places and a

decrease in the areas where permits are

not required. The Census Bureau indi-

cated that the 2014 Universe should be

comparable to prior Universe vintages,

although the Census Bureau did restate

2014 housing permits statistics using the

2014 Universe of permit issuers.

Seasonally Adjusted Annualized Rates of New Housing Starts and Building Permits

(millions of units)





Increases in disposable income allow for increases in personal consumption, especially debt-fund purchases like cars. However, these

increases must keep pace with inflation. Further, increases in disposable income tend to increase confidence in consumers and business

owners. Confident consumers have more optimistic expectations of the future. They expect a stronger economy, lower unemployment, higher

future wages, and better ability to pay for debt-funded purchases. Similarly, confident businesses are a gauge of an economy’s ability to employ

labor productively in the future.

Macroeconomic Indicators // Personal Consumption & Confidence

Disposable Income and Personal Consumption

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$32,000

$33,000

$34,000

$35,000

$36,000

$37,000

$38,000

$39,000

Pers

onal

Con

sum

ptio

n (B

Illio

ns)

Pers

onal

Inco

me

Real Disposable Personal Income: Per capita, Chained 2009 Dollars, Monthly, Seasonally Adjusted

Personal Consumption Expendituress, Monthly, Seasonally Adjusted

Source: Federal Reserve Economic Data

0

20

40

60

80

100

120

Consumer Confidence Index NFIB Small Business Optimism Index

Source: Bloomberg, L.P.

Disposable Income and

Personal Consumption

Real personal income and personal

consumption have both been steadily

increasing year-over-year since 2010,

partly due to growth and partly due to

Federal Reserve policy keeping inflation

near 0.0%. Further, disposable income is

expected to continue rising through 2015.

Confidence

Both consumer and small business con-

fidence has been trending upward since

the Great Recession. This confidence

will drive demand for cars.

Change in Confidence





Macroeconomic Indicators // NADA Dealer Optimism Index

0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 180.0

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0

Mar-03

Mar-04

Mar-05

Mar-06

Mar-07

Mar-08

Mar-09

Mar-10

Mar-11

Mar-12

Dec-12

Dec-13

Increase No Change Decline Index Value

Source: NADA Data

NADA Dealer Optimism IndexNADA Dealer Optimism Index

According to the 2014 NADA Dealer

Optimism Index, fewer dealers believed

profits would continue to rise as of

December 2013. However, the same

survey showed dealer confidence has

surpassed pre-recession highs, and cur-

rent profits are expected increase.





Energy prices not only impact the price of manufacturing a car, but also the running price of a car, as consumers must fill up on gas regularly.

Increased environmental regulations have improved fuel economy of most cars but have also led to higher prices at the dealership. Conse-

quently, consumer demand has shift toward more fuel efficient, typically smaller, vehicles.

Macroeconomic Indicators // Energy

0

20

40

60

80

100

120

140

160

Cushing, OK WTI Spot Price FOB (Dollars per Barrel)

Source: Energy Information Administration

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

Dol

lars

Per

Gal

lon

New York Harbor Conventional Gasoline Regular Spot Price FOB U.S. Gulf Coast Conventional Gasoline Regular Spot Price FOB Los Angeles Reformulated RBOB Regular Gasoline Spot Price

Source: Energy Information Administration

Spot Oil

Oil prices have steadily increased since

2009 to historically high levels through

the first half of 2014, shifting consumer

demand to hybrid and electric vehicles.

World crude oil prices decreased sharply

throughout the second half of 2014.

Gas

Gas prices have mimicked oil prices,

rising to historical highs in the first half

of 2014 before dropping sharply through

December.

Spot Oil Prices

Gas Prices





Macroeconomic measures including employment, productivity housing prices and starts, interest rates, and disposable income have provided an

environment conducive to car purchases. However, rising prices, downward pressure on margins, and changes in demand have caused shifts

in automobile demand.

Auto Dealer Indicators // Average Dealer Profile

9.0

9.5

10.0

10.5

11.0

11.5

12.0

2002

20

03

2004

20

05

2006

20

07

2008

20

09

2010

20

11

2012

20

13

2014

F2015

F2016

F2017

F2018

Passenger Cars Light Trucks Total

Source: IHS Automotive, formerly Polk

0

5

10

15

20

25

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

1996

19

97

1998

19

99

2000

20

01

2002

20

03

2004

20

05

2006

20

07

2008

20

09

2010

20

11

2012

20

13

Dea

lers

hips

(Tho

usan

ds)

Sale

s (M

illio

ns)

Cost of Sales Total Dealership Expense Pre-Tax Income Dealerships Source: NADA Data

Average Age of Vehicle Fleet

IHS Automotive, a global automotive

market intelligence firm, found that the

average age of all light vehicles hit a record

high of 11.5 years in 2014 due to rising car

quality; they expect this rate to slow as

new vehicle sales continue to recover, not

hitting 11.6 years until 2016 and 11.7 years

until 2018. Further, they expect this trend

to provide more opportunities for the auto-

motive aftermarket.

Dealership Sales

By the end of 2013, there was an increase

of 30 franchised dealerships, the second

consecutive increase, reversing a consol-

idation trend that started in 1987.

Sales rose 8.8% in 2013, the second

year in a row, above pre-recession

highs. However, net profit before taxes

remained flat at 2.2%. Current pressure

on margins stems primarily from the fact

that the asymmetric information that once

favored dealers is balanced by internet

sites such as Edmunds, cars.com, and

autotrader.com.

Average Age of Vehicle Fleet

Dealership Sales





Auto Dealer Indicators // Average Dealer Profile (cont.)

Products and Services Segmentation

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sale

s

New Vehicle Used Vehicle Service and Parts Source: NADA Data

Products and Services Segmentation

From 2005 to 2010, the percentage of

sales from used vehicles and service and

parts segments of the industry rose, as

financing new vehicle purchases became

more difficult. Since then, new vehicles’

share of sales has gone up, but has not

recovered to pre-recession levels.





Auto Dealer Indicators // Vehicles and Price

Vehicles and Price

0

100

200

300

400

500

600

700

800

900

1000

$26,000

$27,000

$28,000

$29,000

$30,000

$31,000

$32,000

$33,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

New

Veh

icle

s So

ld P

er D

eale

rshi

p

Aver

age

Ret

ail S

ellin

g Pr

ice

Average Retail Selling Price New Vehicles Sold Per Dealership

Source: NADA Data

Vehicles and Price

Through the end of 2013, prices were

forced up by rising oil prices and

increased environmental regulations.

Average vehicles sold per dealership

continued to rise even as the number of

franchised dealerships increased.





Valuation Trends

-25.00%

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

6/30/14 8/31/14 10/31/14 12/31/14 2/28/15 4/30/15 6/30/15

Auto Components Automobile Manufacturers S&P 500 NASDAQ Composite Dow Jones Industrial Average Source: Bloomberg L.P.

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

6/30/14 8/31/14 10/31/14 12/31/14 2/28/15 4/30/15 6/30/15

Ford Motor Co General Motors Co Honda Motor Co Ltd Toyota Motor Corp Tesla Motors Inc Nissan Motor Co Ltd

Source: Bloomberg, L.P.

Index Performance

OEM Stock Performance

OEMs and Indices

Auto components have continued to outpace auto manufacturers

reflecting continued increases in consumer spending on maintenance

compared to pre-recession levels.

Nissan, Tesla, and Toyota are outperforming Ford, GM, and Honda. Sig-

nificant events in the last year influencing stock prices include a drop in

oil prices, the Takata airbag recalls, and new EPA emissions standards.





Valuation Trends (cont.)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Chrysler Ford General Motors Toyota

Honda Nissan Volkswagen Other Imports

Source: NADA Data

Brand Market Share By Unit Sales

In 2012, Chrysler was the only member

of the Detroit Three whose market share

rose. Of the three major Japanese

brands, Nissan’s fell while Honda and Jap-

anese brands gained market share. Other

imports have been gaining market share.

Brand Market Share By Unit Sales





-40.00%

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

6/30/14 7/31/14 8/31/14 9/30/14 10/31/14 11/30/14 12/31/14 1/31/15 2/28/15 3/31/15 4/30/15 5/31/15 6/30/15

AutoNation Inc Penske Automotive Group Inc Sonic Automotive Inc Group 1 Automotive Inc Asbury Automotive Group Inc Lithia Motors Inc

Source: Bloomberg L.P.

Auto Dealership Stock Performance

Publicly Traded Auto Dealerships

“We are pleased with how the AutoNation brand has been embraced, as

well as the continued rollout of AutoNation Express and the progress of

all our digital initiatives. Over 20% of our sales were generated through

AutoNation websites for the first half of the year. The first phase of Auto-

Nation Express, where a consumer can identify a vehicle, reserve that

vehicle and put a deposit on that vehicle, was completed six months

ahead of schedule. AutoNation is committed to providing transparency

and delivering a peerless customer experience through initiatives such

as AutoNation Express.” Mike Jackson, Chairman and CEO of Auto-

Nation. “AutoNation Reports Record Second Quarter EPS from Continuing Operations.” 22 July 2015.

“We just completed the best quarter and six-month period in the his-

tory of our company. The performance of our business continues to

demonstrate the flexibility and resiliency of the company’s brand mix

and business model. The record second quarter results were driven by a

7.5% increase in retail automotive unit sales, a 50-basis point increase in

automotive retail service and parts gross margin and a reduction of 110

basis points in selling, general and administrative expenses as a percent

of gross profit.” Roger S. Penske, Chairman of Penske Automotive

Group. “Penske Automotive Reports Record Second Quarter Results.” 29 July 2015.

“We are pleased to report another record-setting quarter. The combina-

tion of continued solid top-line growth in the United States and the United

Kingdom, combined with improved expense leverage, delivered all-time

record adjusted diluted EPS of $1.98. We are particularly pleased with

our 14 percent increase in both U.S. and U.K. Same Store used vehicle

sales and the acceleration of our U.S. parts and service revenue, which

was up 8 percent on a Same Store basis. Finally, although overall market

conditions have continued to deteriorate in Brazil, the combination of our

brand profile and cost cutting initiatives allowed us to deliver a pretax

profit in that market this quarter, which is an impressive accomplishment

by our Brazilian operating team.” Earl J. Hesterberg, President and

CEO of Group 1 Automotive. “Group 1 Automotive Reports Record Quarterly Earnings.” 23 July 2015.

“I’m proud of our operations team for achieving the lofty goal of retailing

100 preowned vehicles per store per month. We have had quarters in

the past when we approached achieving this metric and several months

where we surpassed this metric, but it had never been achieved on a

quarterly basis. Generating this type of retail activity fuels our fixed oper-

ations and F&I areas where we are most profitable. We also worked

to build our fixed operations business in the quarter. In addition to the

benefits we experienced through the reconditioning work performed

to achieve the sale of 100 preowned vehicles per store per month,

we were able to grow overall same store fixed operations gross profit

$13.1 million, or 8.5%, compared to the prior year quarter. Fixed oper-

ations growth was achieved in our customer pay, warranty and internal

categories. This type of internal growth strategy is central to our One

SonicOne Experience (OSOE) initiative which is intended to grow the

topline revenue categories, generate retail activity, and realize benefits

over multiple gross profit streams.” B. Scott Smith, President of Sonic

Automotive. “Sonic Automotive, Inc. Reports Quarterly Adjusted Continuing Operations Earnings per Share of $0.46.” 20 July 2015.

Valuation Trends (cont.)





Mergers and Acquisitions

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

0

5

10

15

20

25

30

35

2009 2010 2011 2012 2013 2014 1H 2015

Tota

l Tra

nsac

tion

Valu

e (m

illio

ns)

Num

ber o

f Tra

nsac

tions

Total Transaction Value Number of Transactions

Source: Capital IQ

M&A ActivityWhile overall deal value was up in 2014,

the number of transactions decreased.

The number of deals in 2015 is on pace

with 2014, though overall deal value is

also down.




Dealer Pricing

Auto Manufacturing Pricing

30-Jun Price

$

52 Week Perf.

%

LTM

Ent. Value $ Mil

Debt / Equity

%

EBITDAMargin

%

EV / Sales

Multiple x

EV / EBITDAMultiple

x

EV / Nxt Yr

EBITDA Multiple

x

Price / Earnings

xCompany Name TickerSales$ Mil

EBITDA$ Mil

Ford Motor Co F 14.86 -9.63% 141,953 11,621 182,481 469.07% 8.19% 1.29 15.70 14.01 16.15

General Motors Co GM 33.33 -8.08% 152,764 12,316 106,845 152.27% 8.06% 0.70 8.68 6.72 12.34

Honda Motor Co Ltd HMC 32.22 -6.48% 117,006 13,725 nm 94.65% 11.73% nm nm nm nm

Hyundai Motor Co 005380.KS 121.69 -44.93% 82,266 9,198 74,161 93.45% 11.18% 0.90 8.06 8.60 4.77

Toyota Motor Corp TM 133.75 12.15% 243,687 37,549 nm 114.31% 15.41% nm nm nm nm

Tesla Motors Inc TSLA 268.26 11.91% 3,703 (85) 36,784 375.44% -2.30% 9.93 nm 39.14 nm

Nissan Motor Co Ltd NSANY 20.91 11.00% 103,397 12,882 nm 141.28% 12.46% nm nm nm nm

Peugeot SA PEUGF na na 66,027 4,746 nm 83.36% 7.19% nm nm nm nm

Average 89.29 -4.87% 113,850 12,744 100,068 190.48% 8.99% 3.20 10.81 17.12 11.09

Median 33.33 -6.48% 110,201 11,969 90,503 127.79% 9.68% 1.09 8.68 11.31 12.34


30-Jun Price

$

52 Week Perf.

%

LTM

Ent. Value $ Mil

Debt / Equity

%

EBITDAMargin

%

EV / Sales

Multiple x

EV / EBITDAMultiple

x

EV / Nxt Yr

EBITDA Multiple

x

Price / Earnings

xCompany Name TickerSales$ Mil

EBITDA$ Mil

Traditional Auto Dealers

AutoNation Inc AN 62.98 5.53% 19,690 957 12,233 229.33% 4.86% 0.62 12.79 11.58 16.93

Penske Automotive Group Inc

PAG 52.11 7.15% 17,706 593 8,848 252.31% 3.35% 0.50 14.93 12.71 14.97

Sonic Automotive Inc SAH 23.83 -10.32% 9,296 285 3,198 295.53% 3.06% 0.34 11.23 10.35 13.42

Group 1 Automotive Inc GPI 90.83 8.72% 10,110 356 4,680 257.86% 3.52% 0.46 13.13 11.76 23.35

Asbury Automotive Group Inc

ABG 90.62 31.83% 6,054 305 3,938 387.93% 5.03% 0.65 12.93 11.26 22.77

Lithia Motors Inc LAD 113.16 21.22% 6,101 286 4,799 256.84% 4.68% 0.79 16.80 12.50 19.75

Average 72.26 10.69% 11,493 463 6,283 279.96% 4.08% 0.56 13.64 11.69 18.53

Median 76.80 7.93% 9,703 330 4,740 257.35% 4.10% 0.56 13.03 11.67 18.34

Used Auto Dealers

America's Car-Mart Inc/TX CRMT 49.32 24.70% 473 (4) 524 44.83% -0.80% 1.11 nm 9.15 15.18

CarMax Inc KMX 66.21 27.30% 14,533 1,137 23,303 289.68% 7.82% 1.60 20.49 19.61 23.40

Average 57.77 26.00% 7,503 567 11,913 167.26% 3.51% 1.36 20.49 14.38 19.29

Median 57.77 26.00% 7,503 567 11,913 167.26% 3.51% 1.36 20.49 14.38 19.29


Guideline Company Pricing




Sources

“IBISWorld Industry Report 44111: New Car Dealers in the US”

“IBISWorld Industry Report 44112: Used Car Dealers in the US”

“NADA Data” 2002-2014. http://www.nada.org/Publications/NADADATA/.



Mercer CapitalAuto Dealer Industry Services

Contact Us

Copyright © 2015 Mercer Capital Management, Inc. All rights reserved. It is illegal under Federal law to reproduce this publication or any portion of its contents without the publisher’s permission. Media

quotations with source attribution are encouraged. Reporters requesting additional information or editorial comment should contact Barbara Walters Price at 901.685.2120. Mercer Capital’s Industry

Focus does not constitute legal or financial consulting advice. It is offered as an information service to our clients and friends. Those interested in specific guidance for legal or accounting matters should

seek competent professional advice. Inquiries to discuss specific valuation matters are welcomed. To add your name to our mailing list to receive this complimentary publication, visit our web site at

www.mercercapital.com.

Mercer Capital has expertise providing business valuation and financial advisory services to companies in the auto dealer industry.

Mercer Capital provides business valuation and financial advisory services to auto dealerships

throughout the nation. We provide valuation services for tax purposes, buy-sell agreements,

partner buyouts, and other corporate planning purposes. Mercer Capital also works with owners

who are considering the sale of their dealership or the acquisition of other dealership(s).

Services Provided

• Valuation of auto dealer industry companies

• Transaction advisory for mergers, acquisitions and divestitures

• Valuations for purchase accounting and impairment testing

• Fairness and solvency opinions

• Litigation support for economic damages and valuation and shareholder disputes

Contact a Mercer Capital professional to discuss your needs in confidence.

Timothy R. Lee, [email protected]

Matthew R. Crow, CFA, [email protected]

Nicholas J. Heinz, [email protected]

Chad M. [email protected]

MERCER CAPITAL

Memphis5100 Poplar Avenue, Suite 2600Memphis, Tennessee 38137901.685.2120

Dallas12201 Merit Drive, Suite 480Dallas, Texas 75251214.468.8400

Nashville102 Woodmont Blvd., Suite 231Nashville, Tennessee 37205615.345.0350


BUSINESS VALUATION & FINANCIAL ADVISORY SERVICES

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Erickson Partners Merges with Mercer Capital

Mercer Capital, a national business valuation and financial advisory firm specializing in Cor-porate Valuation, Litigation Support, Financial Reporting Valuation, and Transaction Advisory Consulting, and Erickson Partners, Inc., a Texas-based Valuation and Litigation Support firm, announce their merger effective July 1, 2015.

Mercer Capital, with its strong presence throughout the Southeast and Midwest, and Erickson Partners, with its strong presence in Texas and Oklahoma, are a perfect fit.

Both firms maintain the highest standards of quality for financial analysis and client service and believe deeply in hiring and developing the best professionals.

“The culture of both firms is so similar and that was important to us. The professionals of Er-ickson Partners are well-known in the valuation profession as some of the best and brightest. Their work product and reputation are stellar. This merger not only allows us to broaden our geographic reach but also our industry expertise,” said Matt Crow, President of Mercer Capital.

Erickson Partners enhances Mercer Capital’s broad base of industry concentrations with their exceptional history working with and knowledge of professional sports franchises and the en-ergy sector.

“Over our 30 plus year history, Mercer Capital has developed several industry concentrations. By adding the knowledge, insight, and expertise of Don Erickson, Bryce Erickson, and the rest of the professionals of Erickson Partners, we now bring deep experience and insight to a broader range of industries than we could as separate firms,” said Chris Mercer, CEO of Mercer Capital.

“Combining with Mercer Capital, we will now be able to offer new or expanded services that complement our existing services, as well as additional industry expertise,” said Bryce Erick-

son, Managing Director of Erickson Partners. “In addition to our sports franchise and energy industry concentrations, we will be able to offer deep industry concentrations in construction and building materials, agribusiness, manufacturing and financial institutions, which includes depository institutions, insurance companies, fintech companies, asset management firms, and PE firms.”

“The combined firm will have over 40 valuation professionals positioned in five markets through-out the southwest and southeast. Such a deep bench will provide us with a tremendous op-portunity to better serve the expanding needs of our clients,” said Don Erickson, President of Erickson Partners. “Joining with Mercer Capital gives us national resources that will benefit our clients in Texas and beyond.”

About Mercer Capital

Mercer Capital is a national business valuation and financial advisory firm offering corporate valua-tion, litigation support, financial reporting valuation, and transaction advisory consulting services to a national client base. Clients include private and public operating companies, financial institutions, asset holding companies, high-net worth families, and private equity/hedge funds.

About Erickson Partners, Inc.

Erickson Partners is a professional valuation and advisory firm specializing in business valuation, litigation support, financial investigations and strategic corporate advisory services. Founded by Don & Bryce Erickson, Erickson Partners has served large and small clients by providing complex financial and economic analysis, leading to reasonable valuation opinions that withstand scrutiny.

BUSINESS VALUATION & FINANCIAL ADVISORY SERVICES

CONTACT US

Z. Christopher Mercer, ASA, CFA, ABAR

901.685.2120

[email protected]

Matthew R. Crow, CFA, ASA

901.685.2120

[email protected]

Donald Erickson, ASA

214.468.8400

[email protected]

Bryce Erickson, ASA, MRICS

214.468.8400

[email protected]

MERCER CAPITAL

Headquarters

5100 Poplar Avenue, Suite 2600

Memphis, TN 38137

901.685.2120

Dallas

12201 Merit Drive, Suite 480

Dallas, TX 75251

214.468.2120

Nashville

102 Woodmont Blvd., Suite 231

Nashville, TN 37205

615.345.0350


COMBINING CULTURES OF EXCELLENCE

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mercer capital's value focus: auto dealer industry | mid-year 2015

Economy & Finance