The Blue Sky Report®, published by Kerrigan Advisors, is the auto retail industry's most comprehensive and authoritative quarterly report on dealership M&A activity, as well as franchise values. It includes analysis of all transaction activity for the year, and lays out the high, average and low blue sky multiples for each franchise in luxury and non-luxury segments.

1. 2019 Annual Report March 2020
Contact Erin Kerrigan: (949) 439-6768 | erin@kerriganadvisors.com
Contact Ryan Kerrigan: (949) 728-8849 | ryan@kerriganadvisors.com
www.KerriganAdvisors.com | (949) 202-2200
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2. The Success of a Professionally-Managed
and Confidential Sales Process
13 DEALERSHIPS SOLD IN 12 MONTHS
© 2020 Kerrigan Advisors. All rights reserved.
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Daytona, FL Daytona, FLJacksonville, FLWesley Chapel, FL
Minneapolis, MNMinneapolis, MN Minneapolis, MNSacramento, CASacramento, CA
Central PALos Angeles, CA Denver, CO Chicago, IL

3. THE BLUE SKY REPORT®
2019 Full Year
3|
2019 was the second most active buy/sell market since 2014 with 233 completed transactions (see
Chart I), an impressive accomplishment for a market that got off to a slow start. In the first half of the
year, transaction activity declined 9.6% and the publics’ acquisition spending plummeted 59.3%. Going
into the second half of the year, the buy/sell market did an about-face. Transaction activity gained
momentum in the third quarter and boomed by the fourth quarter. 2019’s second half was one of the
most active on record. The buy/sell bulls had overtaken the bears resulting in a surge of deal activity.
At the outset of 2019, buyers seemed weighed down by economic uncertainty, global trade disputes
and 2018’s stock market declines. However, as the year progressed, buyers gained confidence in the
resilience of the dealership business model, particularly as earnings growth resumed and interest
rates subsided. After three straight years of declines, 2019’s average dealership profits reversed
course (see Chart II), achieving the third highest earnings level on record, just 5.3% below 2015’s
peak. This trend reversal, which started in April, gave buyers greater confidence in their expansion
plans and earnings growth expectations, leading to improved transaction pricing.
DEALERSHIP ACQUISITION ACTIVITY
Chart I
Total Number of Completed Dealership Transactions
Source: The Banks Report, Kerrigan Advisors Analysis
2019 was the second most
active buy/sell market in the
last five years, fueled by a
record second half. Kerrigan
Advisors expects deal
momentum to continue in 2020,
barring fallout from COVID-19.115 106 101 114 103
127
115 101
102 130
242
221
202
216
233
2015 2016 2017 2018 2019
First Half Second Half
Chart II
Average Dealership Annual Pre-Tax Profit ($ in Millions) vs. Annual Change (%)
Source: NADA
For the first time
since 2015, average
dealership earnings
increased after three
consecutive years
of declines. This
trend reversal drove
transaction activity
higher in the second
half of 2019, as buyers
became more bullish
on the industry’s
growth prospects.
$.87
$1.14
$1.23
$1.28
$1.38
$1.50 $1.47
$1.39 $1.36
$1.42
30.2%
7.9%
4.5%
7.7% 8.8%
-2.4%
-4.9% -2.6%
4.8%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
$ .
$ .2
$ .4
$ .6
$ .8
$ 1.
$ 1.2
$ 1.4
$ 1.6
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Pre-Tax Profit ($ in M) YoY Change (%)

4. THE BLUE SKY REPORT®
2019 Full Year
4|
11.8%
11.6%
11.4% 11.4%
11.2%
11.5%
2014 2015 2016 2017 2018 2019
The rebound in dealership earnings was driven by auto retail’s diversified business model, particularly
the higher margin business segments, fixed operations and used vehicles. These business lines grew
their gross profit 4.4% and 2.5%, respectively (see Chart III). As a result, the average dealership achieved
a record $7.05 million in gross profit and an 11.5% gross margin (see Chart IV) despite a 1.5% decline
in new vehicle gross profit. Auto retail’s ability to grow profits during a period of declining new vehicle
sales demonstrates the resilience of dealership profitability.
Chart IV
Average Dealership Gross Profit as a Percentage of Revenue
Source: NADA
In 2019, average
dealership gross profit
margins approached
2015’s level. Today’s
growth in dealership
earnings is a testament
to auto retail’s robust,
diversified business
model and the reason
so many buyers and
investors are seeking
dealership acquisitions in
today’s buy/sell market.
Chart III
Average Dealership Gross Profit by Department, $ in Millions
Source: NADA
Fixed operations and
used vehicle gross profit
rose 4.4% and 2.5%,
respectively in 2019,
driving average dealership
gross profits to record
levels, despite a 1.5%
decline in new vehicle
gross profit.
$1.84 $1.94 $1.88 $1.81 $1.76 $1.74
$1.58 $1.65 $1.69 $1.66 $1.71 $1.75
$2.82 $2.98 $3.20 $3.33 $3.41 $3.56
$6.24
$6.57 $6.77 $6.80 $6.88 $7.05
2014 2015 2016 2017 2018 2019
New Vehicle Used Vehicle Fixed Operations
+4.4%
+2.5%
“The diversification in our six core business lines [New, Used, F&I, Service, Parts, and
Collision] creates resiliency in our revenue and profit streams.”
Bryan DeBoer, President & CEO
Lithia Motors
Fourth Quarter 2019 Earnings Call

5. THE BLUE SKY REPORT®
2019 Full Year
5|
Buyers’ renewed sense of optimism, coupled with rising dealership earnings, resulted in a steady
increase in blue sky values throughout the year (see Chart V). Higher blue sky values were also
supported by lower interest rates, which buyers leveraged to finance an increasing percentage of
their acquisitions. Kerrigan Advisors believes buyers’ access to low cost acquisition financing was a
key driver of 2019’s buy/sell market and will continue to enhance 2020’s activity levels if the financial
markets remain strong.
Chart V
Average Dealership Blue Sky Value ($ in Millions) vs. Effective Federal Funds Rate (%)
Source: NADA, Federal Reserve Bank of St. Louis, Kerrigan Advisors Analysis
Note: The Effective federal funds rate graphed below reflects the rate at the end of Q1, Q2, Q3 and Q4 in 2019.
Blue sky values rose
throughout 2019, as
earnings increased
and multiples
remained steady. With
the decline in interest
rates, Kerrigan
Advisors expects
valuations to remain
high in 2020, as buyers
leverage the financial
markets to finance an
increasing percentage
of their acquisitions.
As with the private market, the publics also saw an impressive rebound in their valuations throughout
2019. After declining 29.8% in the second half of 2018, The Kerrigan Index™ rose an impressive
42.9% in 2019, outperforming the S&P 500 by 48.6% (see Chart VI on the following page). Wall Street
investors are clearly attracted to auto retail’s countercyclical dynamics and the industry’s ability to
grow profits even as new vehicle sales contract. Investors also see a tremendous opportunity for
earnings growth with continued industry consolidation.
$6.1
$6.2
$6.3
$6.4
2.41% 2.38%
2.04%
1.55%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
$5.9
$6.0
$6.1
$6.2
$6.3
$6.4
$6.5
Q1 2019 Q2 2019 Q3 2019 Q4 2019
Blue Sky Value ($ in M) Effective Fed Funds Rate (%)

6. THE BLUE SKY REPORT®
2019 Full Year
6|
With the rise in the publics’ stock prices, their average blue sky multiple ended 2019 46.7% above
the average private blue sky multiple (see Chart VII). This valuation spread rendered many private
dealership acquisitions accretive to earnings and a growth through acquisition strategy highly
profitable. Starting the year with Asbury Automotive Group’s $1 billion acquisition of Park Place
Dealerships, the publics’ US acquisition spending in 2020 could be one of the highest on record.
Chart VI
The Kerrigan Index™
(June 2018 – December 2019)
Source: Yahoo Finance, Kerrigan Advisors Analysis
Methodology:
The Kerrigan Index™
is composed of the seven publicly-traded auto retail companies with operations focused on the US market, including
CarMax, AutoNation, Penske Automotive Group, Lithia Motors, Asbury Automotive Group, Group 1 Automotive and Sonic Automotive.
The Kerrigan Index™
is weighted by the market capitalization of each company and benchmarked at 100 on 1/3/2000.
400
450
500
550
600
650
700
Jun-18
Jul-18
Aug-18
Sep-18
O
ct-18
N
ov-18
D
ec-18
Jan-19
Feb-19
M
ar-19
Apr-19
M
ay-19
Jun-19
Jul-19
Aug-19
Sep-19
O
ct-19
N
ov-19
D
ec-19
42.9%
Increase
614.49
12/30/2019
29.8% Decline
THE
KERRIGAN INDEXTM
Index
2019 %
Change
The Kerrigan Index™ +42.9%
S&P 500 Index +28.9%
Chart VII
Average Blue Sky Multiples (Private vs. Public) December 2019
Source: SEC Filings, Kerrigan Advisors Analysis
At the end of 2019, the publics’ average
blue sky multiple was 46.7% higher than
the average private blue sky multiple.
At these levels, many dealership
acquisitions are accretive to earnings,
potentially leading to more public
acquisition activity.
4.5x
6.6x
Private Public
46.7%
Higher

7. THE BLUE SKY REPORT®
2019 Full Year
7|
While private and public buyers remain bullish on the future of auto retail, a growing pool of dealers
has decided now is their time to exit. Most of these dealers are concerned about the expected
changes coming to the industry over the next decade and the threats to the franchise business model,
particularly legislation enabling direct OEM to consumer sales. In addition, some dealers are worried
about their ability to succeed as their competitors grow in scale (see Chart VIII).
1,237
1,598
1,708 1,775
1,991
2,134 2,155
2012 2013 2014 2015 2016 2017 2018
74.2% Increase
Chart VIII
Dealership Count of Top 100 Dealership Groups with over 26 Dealerships
Source: KPMG, NADA, Automotive News
Of the Top 100 Dealership
Groups, the number of
dealerships owned by
groups with greater than 26
dealerships increased an
impressive 74.2% in the last
six years. As scale becomes
an important competitive
advantage, more dealers with
five or fewer dealerships are
deciding to exit the business
(see Chart XXVI on page 22).
“There is a good supply of acquisitions in the U.S.”
Earl Hesterberg, President & CEO
Group 1 Automotive
Fourth Quarter 2019 Earnings Call
Kerrigan Advisors is also aware of dealers’ concerns about recession risk, recently heightened by
COVID-19 and 2020’s stock market declines and volatility. While 2019 ended with strong consumer
sentiment, low unemployment, and record stock prices, 2020 could prove more challenging as a
result of the unexpected shock of a global virus. At this juncture, this is a known unknown. Until we
have more clarity regarding the economic impact of COVID-19, Kerrigan Advisors expects the buy/
sell market to continue at current levels. The fundamentals of the economy are sound, dealers are
well capitalized, and consumers and dealers have access to low cost credit. We do not know how the
virus will change these positive characteristics of today’s auto retail economy.
In the event COVID-19 does affect car sales, auto retail has proven time and time again its ability to
remain profitable even in the worst of times (see Chart IX on the following page). In the depths of
the great recession, the average dealership earned $325,000 and achieved a 12.4% return on equity
(“ROE”). Few retail industries can achieve such high ROE during a crisis and bounce back as quickly
as auto retail. It is for this reason that buyer demand for dealerships is so high and we expect will
remain high in 2020, despite COVID-19.

8. THE BLUE SKY REPORT®
2019 Full Year
8|
With that backdrop on 2019’s buy/sell market, Kerrigan Advisors has identified the following three
buy/sell trends, which we believe will impact 2020’s buy/sell market. Notably, these trends assume
COVID-19 does not have a significant negative effect on US auto retail or the financial markets
supporting auto retailers and consumers.
Ø Dealers’ access to attractively-priced acquisition financing drives up blue sky values
Ø Buyers focus on geographic consolidation and regional dominance
Ø Professionally managed capital fuels growth of new dealership groups
The Blue Sky Report®
is informed by Kerrigan Advisors’ nationwide experience enhancing the value
of the industry’s leading dealership groups through the lifecycle of growing, operating and ultimately
selling their businesses. In the past five years, our firm has represented on the sale of the industry’s
largest transactions, including five of the Top 100 Dealership Groups, more than any other firm in the
industry. We do not take listings, rather we develop a customized sales approach for each client to
achieve their transaction and financial goals.
We have had the honor of advising auto retail’s leading families on their growth strategies, capital
allocation plans, operations, real estate and the sale of their valuable businesses. Our team oversees
and manages our client engagements from beginning through a successful outcome. In our view,
dealerships are far too valuable to be advised any other way.
We hope you find the information presented in this quarter’s report helpful to your business. We
look forward to answering any questions you may have regarding The Blue Sky Report, The Kerrigan
Index™ or Kerrigan Advisors’ strategic consulting, capital raising and sell-side services.
Chart IX
Average Dealership Pre-Tax Profit ($ in Thousands) vs. Return on Equity (%)
Source: NADA
$593.0
$325.2
$668.9
$874.1
22.0%
12.4%
24.4%
31.4%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
$.0
$100.0
$200.0
$300.0
$400.0
$500.0
$600.0
$700.0
$800.0
$900.0
$1000.0
2007 2008 2009 2010
Pre-Tax Profit ($ in 1,000s) Return on Equity (%)
Auto retail has proven its
ability to manage through
crisis and remain profitable
in difficult economic
times. In 2009 at the
height of the credit crisis,
the average dealership
doubled its profits and
achieved a 24.4% return
on equity. Auto retail’s
ability to adjust and remain
profitable is what makes
these businesses so
attractive to consolidators
and outside investors.

9. THE BLUE SKY REPORT®
2019 Full Year
9|
If you would like to receive the full
report including franchise blue sky
multiples, please email Erin Kerrigan at:
erin@kerriganadvisors.com
THE
BLUE SKY REPORT
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