By Sally Lopez, Director of Information Technology, Rosenfield & Co.
As an Automotive Dealer Consolidator, whether you are a large or small group, in the public or private sector, one thing that remains consistent is the need for an Information Technology (IT) presence. The automotive industry continues to evolve, with consolidators acquiring, divesting and even merging. Through it all, IT plays a crucial role.
A thorough understanding of all aspects of a dealership’s operations is essential during the due diligence process of a buy/sell to truly know a dealership’s worth. All aspects of any dealership’s processes, from operations to finance, should start and stop with IT. Having a set procedure in place for evaluating all these areas makes for a much smoother ownership transition.
What does this mean and how does it relate to an acquisition or divesture? Easy, IT is the root of all things known to the dealers operations, whether it be the Point of Sale application the dealer is using, how he or she maintains and performs Payroll / HR, how and when the dealer does a Parts Physical, or even what provider that dealer is using to administer the dealership website.
During the due diligence process of a buy / sell, all these IT aspects must each be completely understood.
Upon news of a dealership acquisition, the IT staff of the acquiring party should be one of the first departments that goes onsite. Some initial Items the IT team should accomplish are: Walk-throughs of the facility(s); interviews of each department head i.e. Controllers, General Managers, etc., to understand all facades of the dealer group(s) being acquired as it relates to Information Technology; and how the dealership runs its operations.
Having a representative from IT perform these tasks minimizes the operational risks, ensures accuracy as it relates to the overall process, and helps the selling dealer understand what to look forward to once acquired. While IT is onsite, or at a minimum on the phone or via email, there are many different areas that should be covered by the buying dealer. Not doing so can result in a poor transition.
Working with a complete IT Due Diligence Check List covering every aspect of the Buy / Sell is best. To give you an idea of a few key factors that the buying dealer needs to understand, I have listed some of the top 10 factors below:
- What are their finance / lease obligations for their IT Vendors / Applications?
- What if any are their IT Staffing Department Overviews?
- What is the Topology of their Network Infrastructure?
- What Dealer Management System (DMS) are they on?
- How many 3rd Party Applications do they run and is there integration to the DMS?
- What kind of Telecommunication Vendor(s) do they use?
- How many PC’s / Printers are actively connected?
- Are there any agreements for Software /Hardware Licensing? If so – what and with whom?
- Who hosts their Email Exchange?
- Who hosts their Domain URL’s and what if any are their Brand requirements?
Obviously, there are more questions and details on the IT Due Diligence Checklist. But these 10 areas are the starting point. Being able to understand how each due diligence check list items look like or transitioning the data into the buying dealerships operations is what you’re trying to obtain for a successful stop or end result.
Having an IT representative perform these Due Diligence Checklist items offers that specific skill set to do the start and stop process successfully. For me, having the privilege of being a part of well over 100 successful Buy / Sell processes, knowing that start, middle and end result has become second nature.
While each can be unique, ultimately having a “cookie cutter” approach to your process can make the transition for the Buyer, the Seller, and all employees involved that much of a more positive experience. The stress of the process and the upcoming changes that both sides endure can be overwhelming. If you can master the IT portion of your buy /sell due diligence, then everyone involved can feel confident that all processes and data from their dealer operations are handled efficiently and effectively, to the benefit both parties.
Sally Lopez is Director of Information Technology, Dealer Services at Rosenfield & Co. She has 28 years experience in the automotive industry. Lopez can be reached at sally@rosenfieldandco.com or 1-888-556-1154.
Rosenfield & Co., with offices in Florida, New Jersey, and New York, is a full-service CPA firm.
