By Stephen Dietrich, Greenberg Traurig LLP
I have recently been having conversations with different groups of owners, operators, or investors in the dealership space. The topics of these conversations range far and wide depending on the participants, but given my heavy involvement in the buy/sell space, buying and selling dealerships is a topic that usually surfaces. A theme that I keep hearing in these discussions, in presentations, and in my daily practice, is talent. By talent I mean the human capital capable of running a dealership.
Other topics in the buy/sell space such as availability of deals, availability of capital, finance partners, who is buying, and price arise with different individuals. Talent is a concern common to virtually every person involved in the industry, however, regardless of whether I am talking with a seller, buyer, lender, partner or investor.
I realize this is not a revelation to the industry, but what I am sensing is that the focus on talent and the seeming lack of available talent, is intensifying. It has long been known by successful owners and investors that talent is an absolute requirement for success. This is necessary in any industry for an investment and operation to be viable. The heightened sensitivity to the lack of talent tells me that several of the other factors involved in the trading of dealerships are not as pressing.
This would mean that deal flow is at least adequate for people who are looking for deals to find something to purchase. It would also mean that financial capital, whether that is equity, investment partners, or debt are also seemingly available. It may also mean that pricing is beginning to normalize (I realize that may be more of a wish on my part rather than reality).
As I have worked on mergers and acquisitions in the dealer space and other industries, I have observed that the issue that is spoken about the most often is typically the issue that is creating the largest obstacle at the time for deals to get done.
So, as I hear more and more the frustration with buyers regarding finding or retaining talent, or investors not being able to invest because of a gap in talent to operate the investment, and even some families not being able to pass down the business because the family does not have the talent to sustain the business, I am beginning to believe that currently the biggest obstacle to a more freely-trading dealership market is the lack of human capital.
I find that very interesting because I believe that there is ample good talent in the industry. It seems we are at a point where the supply and demand are not able to meet appropriately. I believe that one of the main reasons this issue is more difficult to resolve than others is because it is humans involved. Acquiring talent is not a fungible exercise. There are relationships to be built and that takes time and effort. The results may be easily quantifiable, but understanding how two or more people are going to be able to own and operate a business when they have not worked together before, or at best have not worked together as partners before, is a much different exercise in diligence.
I wish the solution were as easy as setting up a website such as dating site match.com to match talented operators with people looking to invest in stores or grow current groups. Absent an auto operator match.com, the likely solution to this issue is for talented individuals to learn more about the industry and the people who are involved in the buy/sell world.
There are many individuals that I would put in the “talent” pool who are actively engaged in building networks and looking to broaden exposure to the opportunities, but I suspect there are many more “talented” people who are too focused on their daily work and responsibilities to venture out. With respect to the folks looking for talent, there certainly are traditional ways of communicating and finding talent, unfortunately those often include luck or a good referral.
I think the referral network is a great place to start. An alternative thought would be to try and determine where the talent may gather, and work to develop educational or promotional events at those places where talent congregates (whether in person or online).
With respect to a current dealer looking to grow, the talent acquisition process may be a bit easier if the current owner is willing to invest time and resources to develop a bench of individuals. There are several organizations that work to develop inside talent and actively work to attract talent from the outside. A big part of these efforts is to set talent identification and development as a goal and engage in the effort.
A significant component to the effort is to be able to clearly define a path of upward progress and reachable goals to the talent. This is not easy, but it can reap rewards when an owner can easily integrate new acquisitions with cultivated talent. Then, the word of mouth that the group offers such career development opportunities will hopefully attract the next generation of talent.
There is not an easy answer to the talent question and there are competing views of how to acquire the talent. The line breaks down essentially with one side being the grow and develop talent and the other side being find the talent and be willing to pay (in some fashion) for the talent. It is not unlike the dilemma faced by most sports teams and their acquisition of talent, but this is it in our backyard.
Stephen Dietrich is a partner in the Greenberg Traurig LLP law firm’s Denver office. He can be reached at 1-303-572-6502 or DietrichS@gtlaw.com.
