Valuations are a key element in any merger/acquisition (M&A) transaction. When it comes to valuing auto aftermarket companies, many factors can influence a company's worth — and not simply its profitability.
Perhaps even more important these days is which sector of the aftermarket business you are in — tires/ service, parts/accessories, retail or wholesale (B2B) and brick-and-mortar versus e-commerce.
Each of these sectors has different valuations, so it's possible that a more profitable company that specializes in one aspect can be more valuable than a less profitable company in a different line.
For example, other things being equal, e-commerce companies tend to be worth more than brick-and-mortar operations. Branded retail is worth more than wholesale. Tires are more valuable than parts and accessories.
Understanding what buyers are looking for and putting the right deal in front of the right buyer is equally as impactful. It's important to understand these valuation trends in order to make informed decisions when it comes to selling your auto aftermarket company or buying one.
Let's take a look at some of the key factors that can impact a company's valuation in today's market.