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Unique Issues in Retail Auto Joint Ventures

In a previous post (see: 2017 in Review: Trends in Retail Auto Mergers and Acquisitions), I highlighted the increasing prevalence of joint ventures (JVs) in the auto industry either as an approach to succession or as a way for individuals, family offices or investment entities who are new to the retail auto industry to get their start. Whatever the purpose of a JV, such partnerships are likely to encounter unique challenges in the retail auto space — challenges that partners do not commonly face in many other industries.

To be successful, all JVs, regardless of industry, require thoughtful planning and open discourse among the players. What is unique with JVs involving auto dealerships is that the interests of a third party — the vehicle manufacturer — must be considered. This is somewhat akin to the liquor industry or other industries where there is a “privileged license”Joint Venture ImageFor a retail auto Joint Venture to work well, the partners need to carefully think about and discuss

Attention Business Owners: Plan for Your Succession Now

Nobody likes to think about estate planning. Not only does the phrase evoke a sense of drudgery, but many people literally associate it with death. Clearly nobody wants to think about their own death, especially when there are deals to be done, customers to please and reputations to build. The visceral aversion to sitting down and thinking about what happens after is certainly understandable.

Photo by Benedikt Matern – sourced on Unsplash

The counterpoint to this clear and convincing emotional logic is inevitability — the day will come when you will not want (or be able) to operate your dealership(s) in the way you have in the past. Hopefully the decision to walk away is voluntary and you do so on your terms with rosy prospects on the horizon. Unfortunately, the decision to bid farewell to your dealership may not be in your hands, but whether it is or isn’t you can have much more control over the outcome by

2017 in Review: Trends in Retail Auto Mergers and Acquisitions

In any industry, an annual retrospective reveals trends that signal a shift away from the past and toward the future of the industry. A look back at 2017 in the retail auto sector calls attention to some trends that were expected and others that appear to be prognostications finally coming true.

Let’s take a moment to review some of the most important developments in the auto retail sector in 2017.

The Value Disconnect

The ongoing battle between buyers and sellers with respect to the value disconnect continued in 2017. We have seen some movement perhaps, to sellers looking at 2017 performance and realizing that while an auto dealership is still a good business, the sales increases were not the same as in recent years past. This may have had the effect of driving more sellers to market thereby creating volume in 2017.

Photo © Justin Luebke on Unsplash. | Used with permission.

Succession Planning or Lack Thereof

For years pundits and anyone watching the industry have been forecasting mergers and acquisitions (M&A) activity would rise to some degree because of family succession. It took some time, but in 2017 this appears to have started. This type of transaction has taken many forms. Some family sellers have determined the next generation will not (or cannot) operate the business, so they put the family business up for sale. In other instances, no “next” generation is available to take over, so the owner looks to transfer the business to trusted management or a third party. Unfortunately, I have also started to see forced sales because the owner either

Understanding The Complexities of Running an Auto Dealership

Auto Dealership Complexities

I was speaking with a neighbor this week, and I mentioned I was heading to the 2017 NADA Convention and Expo (the annual trade and education event for the National Auto Dealers Association which gets underway today in New Orleans). I attend this event because a significant number of my clients own, operate, or invest in auto dealerships and other related businesses. I was struck by how little my neighbor knew about what it actually takes to operate a dealership, much less multiple dealerships. Since we are friends and I had some time, I tried to enhance his understanding while reminding myself of why I find my work so rewarding.

The normal impression of a dealer is a person who merely “wheels and deals.” While every dealer I have met is certainly a skilled negotiator, the strong and lasting dealers are, first and foremost, managers of highly complex businesses that including many moving parts and skilled players.

The Parts

In practice, a dealership is a conglomeration of several businesses

Self-Driving Vehicles: Excitement and Apprehension

The concept of self-driving vehicles fascinates me. By combining various technologies, including computers, a global positioning system (GPS), and robotics, scientists and engineers are beginning to accomplish what most people could never have imagined — a car that can drive itself from point A to point B.

Combine that with the emerging Internet of Things (IoT) — where machines can communicate with one another — and blockchain technology — a shared ledger system that can record transactions and track assets across business networks — and you can envision a day when you will be able to order a car online and have it deliver itself to your home, stopping for fuel along the way.

I love the prospect (especially when I am stuck in traffic) of eventually having my own, impersonal chauffeur available 24/7/365 that will never fall asleep at the wheel. However, I also feel some

Top 5 Don’ts When Negotiating the Sale of an Auto Dealership

You own a car dealership, and you want to sell it. Of course, you want to get the best price and terms possible. The question is, how? In my previous post, Top 5 Do’s When Negotiating the Sale of an Auto Dealership, I presented the five best practices to negotiate the sale of a car dealership and get everything (or nearly everything) you want. In this post, I help you steer clear of common pitfalls that can sink the deal or keep you from getting what you really want out of it.

Selling An Auto Dealership

1) Don’t hide from the reality of what your company is.

The strengths of your auto dealership are easy to see, because the dealership is your business and you have put your heart and soul into it. What is more difficult is to see what may not be working as well as it could, or areas where your business is challenged. Challenges may be limitations in terms of personnel, location, business environment, or even personal bias.

Since prospective buyers will

Top 5 Do’s When Negotiating the Sale of an Auto Dealership

You own a car dealership, and you want to sell it. Of course, you want to get the best price and terms possible. The question is, how? Here, I present five best practices to negotiate the sale of a car dealership and get everything (or nearly everything) you want.

Handing over the keys when selling an auto dealership.

1) Take an Honest Look at Your Dealership
Before telling anyone that you are thinking about selling your dealership, scrutinize it from the perspective of a potential buyer. You will be dealing with prospective buyers whose prime objective is to point out everything that is wrong with your dealership in an effort to justify paying less for it. Evaluate your dealership honestly and fix the problems or at least prepare a response to issues that will likely be pointed out during negotiations.

2) Know What You Want
Understand your ultimate objective. That’s easy, right? To get the most money. Well, price maximization is certainly a major consideration and is perhaps the