There are all types of risk you should be on the lookout for if you are engaged in a buy/sell agreement. This week we look at two areas of potential risks.
Real estate is a huge part of any dealership buy/sell. Once you are ready to close the real estate portion of the deal, watch out! There are many potential pitfalls in the items of record included in the preliminary title report. This week, The Scali Law Firm provides a list of items of record to pay especially close attention to. For example, make sure you aren’t responsible for mechanic’s liens for work done on the premises.
A seller of a dealership is usually asked in the asset purchase agreement to indemnify a buyer against any labor law-related lawsuits. These kinds of lawsuits can arise from many areas that you might not anticipate, writes attorney Oren Tasini in this week’s issue.
If a perspective buyer finds out about a potential problem during due diligence, your dealership’s blue sky value is going to take a hit, he points out. So carefully quantify any exposure and insulate the buyer well in the APA.
I write this from Beijing, where I am on a business trip. Besides steering ABSR, I do some consulting related to China’s auto business. One thing I am really noticing on the streets in this fairly well-off area of town – there are no domestic-brand passenger cars. All I see are foreign nameplates.
In the past, most of the foreign-brand cars would be Volkswagen or Audi or other foreign automakers who partner with a nearby local automaker. Now, however, I have seen at least a few of just about every foreign nameplate you can think of. I’ve even seen a couple of Bentleys. (They are imported, of course).
China is an important market for most foreign automakers, and passenger car sales have slowed to a crawl here. That’s why most see their earnings taking a hit right now. There is still plenty of demand left in China, though the days of double-digit growth have ended. So don’t be a Chicken Little and worry that the sky is falling.
Also don’t forget to check out this week’s Transaction News.
Enjoy!
