LKQ explores strategic sale after valuation gap triggers board review
Auto parts supplier trading 17% below analyst targets initiates comprehensive review with Bank of America as advisor
LKQ Corporation has launched a comprehensive review of strategic alternatives that could result in the sale of the $8.8 billion auto parts supplier, as the company's board seeks to unlock value not reflected in its current market valuation.
The Antioch, Tennessee-based company announced on January 26 that its board had initiated the formal review to identify the optimal path forward, which includes exploring a potential sale of the entire business. The move comes as LKQ shares trade at $34.03, approximately 17% below the consensus analyst target price of $41.19, and at just 0.62 times trailing twelve-month sales.
John Mendel, Chairman of the Board, said the decision emerged from the board and management's continuous evaluation of the company's performance and strategic positioning. The formal review was designed "to identify the optimal path forward to unlock value that is not currently reflected in the company's valuation," according to the statement.
Bank of America Securities has been retained as financial advisor for the review, with Wachtell, Lipton, Rosen & Katz serving as legal counsel. The company did not establish a deadline for completing the process and said it would not disclose developments unless appropriate or legally required.
The strategic review represents an acceleration of LKQ's ongoing portfolio simplification efforts. The company is already exploring the potential sale of its Specialty segment, a process that began in December 2025 and continues in parallel with the broader review. This follows the successful divestiture of its Self-Service "Pick Your Part" segment to Pacific Avenue Capital Partners, completed in October 2025.
LKQ's move comes amid broader consolidation trends in the automotive aftermarket industry. Sector analysts anticipate increased M&A activity throughout 2026, driven by aging vehicle fleets, elevated new and used car prices, and strategic buyers seeking scale through acquisitions. Private equity firms have been particularly active in the space, comprising a significant portion of recent deal volume.
The company, which provides alternative and specialty automotive parts across the United States and Europe, reported trailing twelve-month revenue of $14.1 billion and EBITDA of $1.64 billion. Its shares have declined 8% over the past year, contributing to the valuation disconnect that prompted the board's review. The stock's 52-week range spans $28.12 to $43.32, with shares currently trading below their 200-day moving average of $33.97.
Analysts maintain a positive outlook on the business fundamentals. Of the nine analysts covering LKQ, three rate the stock a Strong Buy and four recommend Buy, with two Holds and no Sell ratings, according to market data. The company is scheduled to report fourth-quarter and full-year 2025 financial results on February 19, with analysts anticipating adjusted earnings per share of $0.65 for the quarter.
LKQ's strategic position in the nondiscretionary replacement parts market could appeal to both strategic buyers seeking expanded footprint and private equity firms attracted to the company's cash flow characteristics. The aftermarket industry has proven resilient during economic downturns, as consumers maintain older vehicles rather than purchasing new ones.
The potential sale of the Specialty segment, estimated around $1 billion, could precede any transaction involving the entire company, allowing LKQ to streamline operations before presenting a simplified business to prospective buyers. The company extended its revolving credit maturity and term loan agreements in January 2026, providing financial flexibility as it navigates the strategic alternatives process.