Communicate well with your banker during the buy/sell process for a better deal structure

By Herschel Gornbein, M&T Bank

The auto industry set a sales record last year. Lower gas prices and interest rates, in addition to employment gains, all contributed to this success. The industry also is continuing to consolidate. While this buying and selling of dealerships is causing the overall number of car dealerships to decline, it is fueling individual dealer sales volumes and profits.

An important player often overlooked throughout the buy/sell process is your banker and the expertise he or she can provide. Now more than ever, it’s important to have a close relationship with your financial source and involve them at every stage of the process.

Working with your Banker

It all starts with a strong working relationship with a Financial Relationship Manager (RM) who truly understands your business. Your Relationship Manager can be a valuable resource, providing insight into how the bank can help meet your financial needs.

As you consider new growth opportunities, work closely with your banker to help foster your relationship. Involving your RM early on can help you better understand your options and prepare you to make better buy/sell decisions. At the start of the process, have them review possible acquisitions and facilitate a smooth and timely transaction cycle. Your banker can also help to structure acquisition deals and get them approved and closed in a timely manner.

It’s also important for you to have a good understanding of your bank’s parameters for financing transactions so you can better structure deals and ensure that there is interest rate protection. Even if you have confidentiality agreements in place, it should not prohibit you from talking to your banker.

Communication in Action

Recently, M&T’s Dealer Commercial Services successfully closed a syndicated credit package for a client who purchased a dealership group with multiple franchises. In order to meet the needs of the acquisition and make available credit for future expansion, this syndication included seven different finance sources due to the exposure being greater than $1 billion.

Together, M&T and the customer, decided to:

Increase the total syndicated credit package exceeding $1 billion based on their anticipated financing needs
Include all dealership real estate, floor plan financing for their multiple franchises, and potential credit for future acquisition financing
Close the deal in Euros, rather than American dollars and use hedging Euro risk and interest rate swaps

These types of complex deals are excellent examples of the need for effective communication with your banker. It is crucial to ensure all the elements of each deal are developed effectively. In addition, the high volume of auto transactions also makes a strong relationship with your finance source a necessity to ensure deals are structured appropriately. The best way to do that is to involve your banker from the very beginning.

Based in Albany, N.Y, he can be reached at 518-464-6138 or hgornbein@mtb.com.