Auto retail's leading publication on dealership valuations and the buy/sell market

1. Second Quarter 2017 August 2017
Contact Erin Kerrigan: 949-439-6768 | erin@kerriganadvisors.com
Contact Ryan Kerrigan: 949-728-8849 | ryan@kerriganadvisors.com
19700 Fairchild, Suite 150 Irvine, CA 92612 | 949-202-2200 | www.kerriganadvisors.com
Securities offered through Bridge Capital Associates, Inc., Member FINRA, SIPC
THE
BLUE SKY REPORT
A KERRIGAN QUARTERLY
®

2. Kerrigan Advisors is pleased to work with the leading families in auto retail as their
exclusive sell-side advisor. If you are interested in learning more about our advisory
services to auto dealers and their families, please contact Erin or Ryan Kerrigan at
(949) 202-2200 to schedule a confidential conversation.
www.KerriganAdvisors.com
Securities offered through Bridge Capital Associates, Inc., Member FINRA, SIPC
The Shammas Family
in its sale of Downtown LA Auto Group, the 55th
largest Dealership Group in the US
and one of the largest transactions of 2017
“When we were deciding on our sell-side advisor, we were looking for
a firm familiar with marketing a group of well-established, urban auto
dealerships. We chose Kerrigan Advisors, because we felt Erin and Ryan
Kerrigan would provide us with individualized attention and guidance while
at the same time allow us to give our input in order to successfully sell our
family’s dealerships.”
Diane Shammas, Co-Owner of Downtown LA Auto Group
“The team at Kerrigan Advisors did an exceptional job managing the sale
of our group. From the initial sales presentation through negotiations and
the closing, Kerrigan Advisors was key to the success of this transaction.”
Carole Shammas, Co-Owner of Downtown LA Auto Group
Downtown LA Auto Group
KERRIGAN ADVISORS REPRESENTED

3. THE BLUE SKY REPORT® | 3
115
206
242
221
106 101
2013 2014 2015 2016 First Half
2016
First Half
2017
$1,382,379
$1,503,432 $1,466,799 $1,435,540
8.8%
-2.4% -2.1%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
2014 2015 2016 2017 LTM
The auto retail buy/sell market was very active in the first half of 2017. Of the 101 transactions closed during
the period, one quarter were multi-dealership transactions, representing 3.6 franchises on average. Blue
sky values remained high, though slightly below 2016’s levels. Lower blue sky values were driven by a small
decline in dealership profits (Chart II), rather than reduced blue sky multiples. Blue sky multiples remained
very strong throughout the first half of the year.
DEALERSHIP ACQUISITION ACTIVITY
Chart I
Number of Auto Retail Transactions Completed Since 2013
Source: The Banks Report and Kerrigan Advisors’ Analysis
Note: A transaction represents a single buyer and a single seller; however, one transaction can represent multiple
franchises and dealerships.
The buy/sell activity level for the first
half of 2017 remained high. Kerrigan
Advisors expects the second half of the
year to surpass the first half, resulting
in the 4th year of over 200 buy/sells.
Chart II
Average Dealership Earnings and Year-Over-Year Change in Earnings
Source: NADA and Kerrigan Advisors’ Analysis
Dealership earnings, while down slightly
on a trailing twelve month basis in 2017,
are still at historically high levels.

4. THE BLUE SKY REPORT® | 4
Auto sales in the first half of 2017 are 5%
higher than the trailing five-year average.
The high-level of buy/sell activity year-to-date coupled with robust transaction values, particularly for sizable
groups, presents a conundrum to some industry commentators, particularly against a backdrop of declining
year-over-year auto sales. Understanding the resilience of the buy/sell market requires some perspective.
SAAR, though down, remains within a historically high range. In fact, auto sales in the first half of 2017
were above the trailing five-year average (Chart III). Dealerships today are highly profitable, with the average
dealership earning $1.4 million in the last twelve months, per NADA. In addition, the US economy is thriving
with low unemployment, improving GDP growth and rising consumer confidence.
Chart III
US Light Vehicle Sales, First Half
Source: NADA
With this perspective, today’s buyers are aware of the unique opportunity created by the slight downshift in
auto sales, and the continued entrance of sellers with strong franchises in prime locations. These sellers,
many of whom do not have a succession plan, are focused on timing. They want to sell at today’s higher
values and are motivated to do so, particularly as the headlines turn negative. From the buyer’s point of view,
the prospect of acquiring rare auto retail assets, particularly large groups, is driving continued interest and
activity, even in the face of a slowing auto market.
“It is our opportune time to grow, because if you think about acquisitions, they usually only
become available every generation or two.”
Bryan DeBoer, CEO, Lithia Motors
2nd Quarter 2017 Earnings Call
As a testament to the activity level, Kerrigan Advisors’ Buyer Database continues to expand with an increasing
number of buyers contacting our firm seeking sizable acquisitions throughout the US. While these buyers
understand the cyclical nature of auto retail, they are also aware of the counter cyclical measures dealers
can take to sustain profitability, namely reducing variable expenses and growing higher margin business
segments. This flexibility enables dealerships to remain profitable even when the new car sales cycle turns.
7,272,541
7,820,966
8,164,647
8,523,058 8,641,718
8,456,896
1H 2012 1H 2013 1H 2014 1H 2015 1H 2016 1H 2017
Average
First Half
(2012-2016):
$8,084,586

5. THE BLUE SKY REPORT® | 5
300
350
400
450
500
550
600
Jan 16 Apr 16 Jul 16 Oct 16 Jan 17 Apr 17 Jul 17
Wall Street also appears to believe in auto retail’s resilient business model. After a knee jerk reaction to the
onset of the new vehicle sales plateau, auto retail stocks are once again trending upward, albeit in a volatile
manner. The Kerrigan Index, which includes the seven publicly-traded auto retail stocks, is up 20% since its
January 2016 low. Both public and private investors are increasingly attuned to the investment opportunities
presented by auto retail’s fragmentation (the average US dealer owns less than three dealerships). This
fragmentation will likely ensure continued consolidation for the foreseeable future. Auto retail investors believe
today’s industry leaders will become tomorrow’s innovators, best positioned with the resources and scale to
thrive as the industry evolves.
The Kerrigan Index™
(7/31/17)
507.23
YTD Change -6.8%
Change from Peak
(6/5/2015)
-28.5%
THE
KERRIGAN INDEXTM
Chart IV
The Kerrigan Auto Retail Index
January 2017 – July 2017
Source: SEC Filings and Kerrigan Advisors Analysis
“I think the industry, not just Penske, but the industry is very flexible.”
Roger Penske, Chairman and CEO, Penske Automotive
2nd Quarter 2017 Earnings Call
Methodology
The Kerrigan Auto Retail Index (The Kerrigan Index™) is composed of the seven publicly traded auto retail companies with operations
focused on the US market, namely AutoNation, Penske, Lithia, Asbury, Group 1, Sonic and CarMax. The purpose is to track this
group of companies to identify and assess the drivers impacting changes in their valuations, with implications for both public and
private auto retailers. The Kerrigan Index™ is weighted by the market capitalization of each company and benchmarked at
100 on 1/3/2000.

6. THE BLUE SKY REPORT® | 6
With this backdrop, Kerrigan Advisors expects 2017 to be yet another record level year for buy/sell activity,
framed by the trends discussed in our prior reports, as well as the following three trends discussed herein. We
expect these trends to have a significant impact on the buy/sell market for the remainder of 2017 and into 2018.
ØØ Dealers take on majority and minority capital partners
ØØ Reinsurance profits increasingly factor into buy/sells
ØØ Retiring key operators prompt some dealers to sell
The Blue Sky Report®
is informed by Kerrigan Advisors’ experience representing our sell-side clients
in today’s buy/sell market, as well as research conducted by our firm. Kerrigan Advisors is the most
active, licensed sell-side advisor to auto dealers in the industry. Since 2015, Kerrigan Advisors has
advised on the sale of 59 dealerships, including four of the Top 100 Dealership Groups in the US. Our
firm works exclusively for sellers of higher value dealerships and dealership groups. We have had the
pleasure of working with auto retail’s leading families in determining the right time to sell and the most
appropriate buyer for their dealerships. We do not take listings or maintain inventory, rather we develop
a customized, professional sales approach for each client to maximize transaction proceeds. Our team
oversees and manages our client’s sale process from the beginning to the end of a successful closing.
In our view, dealerships are far too valuable to be sold 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’ sell-side and capital raising services for auto dealers and their families.

7. THE BLUE SKY REPORT® | 7
http://www.kerriganadvisors.com/theblueskyreport/

8. Kerrigan Advisors
19700 Fairchild, Suite 150
Irvine, CA 92612
949-202-2200
www.kerriganadvisors.com
Kerrigan Advisors is focused on serving dealership sellers. We customize
our sale process to maximize our client’s transaction proceeds. The firm’s
leadership has advised on over $3 billion worth of transactions in auto
retail, private equity and investment banking. We leverage our proprietary
Buyer Database and extensive industry relationships to identify the right
buyer for our client’s business. Our sale process is highly professional,
actively managed, competitive, and — most important — discreet.
We Serve Sellers. We Know Buyers.
Erin Kerrigan is Managing Director of Kerrigan Advisors, which she founded in 2014.
Kerrigan Advisors is the leading sell-side advisor to auto dealers in the US. Since 2015,
the firm has sold over 59 dealerships, including four of the Top 100 Dealership Groups,
representing over $1 billion in client sales proceeds. Ms. Kerrigan started her career
in auto retail as dealer operator of her family’s dealership, which she sold in 2006.
She is a recognized industry expert on dealership buy/sells, valuation, real estate and
private equity, and is a frequent speaker at leading auto retail events and conferences
held by JD Power, NADA, American Institute of Certified Public Accountants (AICPA),
National Association of Dealer Counsel (NADC), and the Canadian Auto Dealers
Association. She has also been a key note speaker for events hosted by American
Honda Motor Company, Audi of America, Bank of America, US Trust, Texas Automobile
Dealer Association, Ohio Automobile Dealer Association, Colorado Automobile Dealer
Association, Wells Fargo and SunTrust Bank. Ms. Kerrigan earned her undergraduate
degree from Northwestern University and her MBA from The UCLA Anderson School of
Management. She resides in Newport Beach, California with her husband and partner,
Ryan Kerrigan, and their three children.
Contact Erin Kerrigan: 949-439-6768 / erin@kerriganadvisors.com
Ryan Kerrigan is Managing Director of Kerrigan Advisors. Mr. Kerrigan oversees
strategy, finance and modeling for Kerrigan Advisors and leads the firm’s private
equity and family office advisory practice. He has extensive experience in private
equity investing, auto retail, management consulting and executive management.
In addition to his auto sector experience, he also served as Managing Director at
Serent Capital, a $250mm private equity fund investing in middle market companies
and as General Manager of his family’s auto dealership. Early in his career, Mr.
Kerrigan spent four years as a management consultant at McKinsey & Company,
where he advised Fortune 500 companies on growth strategies, organizational
issues, pricing and business valuation. Ryan has an MBA from Stanford Graduate
School of Business and an MSFS from Georgetown University’s School of Foreign
Service. He graduated summa cum laude from the University of Notre Dame with a
BBA in Finance.
Contact Ryan Kerrigan: 949-728-8849 / ryan@kerriganadvisors.com
The Leading Sell-Side Advisor
to Auto Dealers
The Leading Sell-Side Advisor
to Auto Dealers