By Champ Rawls
The automotive retail sector continues to be hot in the M&A industry. Larger groups are hungry to grow and therefore looking for strategic acquisitions. Smaller dealers are beginning to understand the multiples associated with their dealerships and are increasingly contemplating selling out.
In addition, family offices, private equity groups and other private investors are looking for ways to expand their portfolios. It is not rare to see such activity in the automotive retail sector. What is rare is the generational dealers, those who are two and three generations in, deciding to move on from the industry because they are disenfranchised by the grind with the customers, manufacturers, etc. and are not receiving the most out of all they have built. Likewise, new dealers who do not have the generational appeal to the business and see dealerships more as assets might look to exit if the right deal comes their way.
Regardless of who is looking to make an acquisition, the end goal is typically the same; The best deal for the right amount of money. This means the purchaser would like to get the biggest bang for their buck, and likewise the seller wants to get top dollar.
In order to ensure your dealership or group can negotiate for the price you want you must ensure you’ve built the most amount of value in your business. This is not isolated to relying solely on your balance sheet and goodwill. In fact, we argue in order to ensure you have (or are working towards) the highest value in your business, you need to be analyzing these areas of the Succession Matrix®:
- Owner Motivation & Perspective
Your motivation and perspective with respect to the business establishes the operating direction and performance expectations. Your view frames the values and practices of your business, which ultimately impacts profitability, efficiency, enthusiasm, innovation, customer satisfaction, and the sustainability of success.
- Personal Financial Planning
Having a personal financial wealth development and management strategy will provide you with the freedom to consider all viable exit strategies, without being forced into one based only on your financial needs.
- Business Structuring
The structure of your business has a direct impact upon items such as business taxation, gift and estate tax on business transfers, and access to cash flow by the shareholders. These agreements provide confidence in anticipated business value and ownership rights.
- Business Performance
Evaluating the performance of your business involves more than just looking at money and profits. Ensure your company and employees are working as effectively and efficiently as possible. Identify how your business is prepared for the future with respect to technology advances, market changes, contracting margins, and more demanding and sophisticated customers.
- Strategic Planning
The strategic planning process is a collaborative initiative in which you, family members, and key management discuss and confirm the vision and mission of the organization, as well as the resources needed to achieve business goals. Engaging in this process periodically provides the foundation for your business to be agile and flexible in the face of change.
- Leadership & Management Continuity
A great deal of the business value is locked in the resourcefulness, commitment, enthusiasm, and teamwork of the management team. The ability to optimize resources in your business to achieve performance goals is crucial to the current and future success of the business.
- Management Synergy & Teamwork
Teamwork is not a natural behavior in business due to the varied personalities. It is critical that you set the standard for teamwork. Encouraging all those involved to be team players, who all work in alignment towards achieving business goals helps drive continued value.
- Successor Identification & Preparation
Successor candidates may be key managers or family members. Some are obvious based upon their demonstrated performance and potential. Others must be identified and reviewed based on their talent and past behaviors. It is critical that you establish reasonable expectations for employment and performance accountability.
If part of your exit strategy is the consideration of selling, take stock of every area of your organization to ensure you are getting the most out of what you put in. A shortage in one of the areas above can lead to disaster in the moment you need solidification the most; during the sale!
If you are looking to purchase a dealership, consider the Succession Matrix® factors and identify areas in which you might see a weakness and therefore have an opportunity to negotiate, knowing that perhaps there is money on the table. As we said earlier, the “best deals” are the ones where attention to detail has been placed in the factors above.
Being a part of his own family’s business, Champ has a unique insight into the difficulties, challenges and triumphs families face when combining family and business. Champ Rawls has been officially associated with The Rawls Group since 2012, although it could be said he become a part of the team in 1984, when he was born into the family business. For more information visit www.rawlsgroup.com
