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”For a retail auto Joint Venture to work well, the partners need to carefully think about and discuss
In the business world, a major force in deal dynamics generated from fear is zero sum thinking — the notion that in any transaction, one party’s gain is, by definition, the other party’s loss. This basic premise forms a simplistic foundation for socialism and communism— the premise being that there is a fixed amount of wealth, so if one person has too little others must have too much. The only solution offered by these economic models is to redistribute the wealth from the haves to the have-nots. Capitalism, on the other hand, is based on the premise that people can create wealth through innovation and investment, a non-finite model of wealth and value. The best solution this system can provide is to create opportunities for everyone to become wealthier, or at least less poor.
I do not want to spark a debate over the pros and cons of either system, and I readily acknowledge that the above is very basic differentiation of the models. Perhaps we need a little of both — compassionate capitalism. However, I would like to generate a discussion over zero sum thinking, because I have witnessed its potential for creating discord in business as well as in personal relationships. Whenever we begin to think that someone else is gaining something at our expense, we feel as though we are being cheated. We can even begin to feel this way when we fear that what we stand to gain from a transaction is less than what the other party stands to gain, even when what we stand to gain is what we wanted all along. Oh, the injustice!The question becomes how do we respond in these situations? The typical response is to feel disappointed and perhaps even angry, but that brings us no closer to our objective of getting a fair deal, or the deal we had hoped for when the process started. There are better options to zero sum thinking.
Find the Value
If you begin to fear that someone else is gaining or is about to gain something at your expense, ask yourself:
As I am working on several year-end transactions and stress mounts, I’m reminded of a past transaction that involved two parties who were eager to make a deal happen but became paralyzed at a crucial point by fear — not fear of each other, but fear of losing the deal. Neither side could bring itself to trust or empathize with the other. As a result, vapor lock ensued, and the deal died even after numerous issues they confronted resolved.
The fears of the parties doomed this deal. It was too far along and would have required at least one party to travel well outside its comfort zone, but what could have been done earlier in the process to change the fear dynamic that killed the deal?
Confronting the Fear of Losing a Deal
When I work on transactions, I quickly work to identify deal breakers. I notice them during initial client meetings and phone calls and as I
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.
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