By Mark Topping, MD Johnson, Inc.
A dealer recently called and ask if he could speak with me about a pending sale they were contemplating. They were about to do their sale documents and had a few questions. Once we started our discussion, it became very clear that they weren’t ready. It made me reflect on just how often this is what I find.
Many of you have either gone through a buy sell yourself or helped someone through one. Hopefully yours went well and you encountered none of the nightmares we hear about. Sellers often take years to decide if now is the right time to sell, but once the decision is made they want results fast.
I try to visit with dealers throughout the decision-making process, and to be a resource to them. One of the insights I share is that “the fastest way to get this dealership sold is to slow down”. Don’t go to the market until you are properly prepared.
What does that mean?
While every transaction is unique most will need to address the same issues. You make your living selling thousands of vehicles but selling your dealership is not like a car deal. You should ask yourself at least the following questions before you feel ready to move towards a sale: Have you had a professional valuation done on your business? Has your accounting team estimated your post-close net based upon selling at the valuation number? Is your legal team familiar with automotive sale transactions?
Each of those questions warrant articles on their own but my hope for this one is to help you be better prepared to sell if you decide to do so. I consider the following to be administrative housekeeping. It may seem like common sense, but the small number of sellers able to provide the needed information without alerting their management staff and creating unrest within the dealership tells me it is not as common sense as we think.
We anticipate information buyers will request and make sure Clients have it available even before we go to the market. You should have copies readily available of the following; Pay Plans, All Vendor Contracts (front, back and executed), Real Estate Appraisals, Environmental Reports, Past Surveys, Sales and Service Agreements, Year-End Fixed Asset Schedules, Financial Statements for the most current year and the 4 prior year-end statements, manufacturer reports showing your performance in the Zone, Region and Nationally; a contact list of all key employees of the Dealership including email, cell phone and home numbers; bank contact persons including address, direct office and cell phone numbers; manufacturer contact information of local, regional and national dealer development staff including title, address, direct office and cell phone numbers. MD Johnson, Inc. maintains this type of information for our Clients on a secure data site to ensure confidentiality.
If you develop a process now to maintain this type of information library, you will likely find it useful on a daily basis. But more importantly, you will not alarm your entire management team by asking them for information you rarely talk about when you decide the time is right to sell.
And while you are doing your administrative housekeeping, make sure your fixed asset schedule is maintained. You should make certain not only that recent purchases are added to the schedule but that any assets disposed of or not working are removed from the schedule.
Have you walked through the entire dealership with your eyes wide open? You know you will need to have a minimum of an environmental Phase I report done and likely a Phase II report in the event of a sale. Do you see oily shop towels laying around? Do you see oily seepage around sinks or drains? Do you have batteries sitting directly on the floor? That type of thing looks bad every day but can trigger more environmental testing and expense than if you had better housekeeping.
This may seem like a bunch of non-productive work that could just get done if, or when, you need it during a sale. I assure you this information is going to be needed so it’s not non-productive. You will benefit from doing this as part of your daily operations. But the most beneficial reason for gathering this information and being properly prepared goes back to my earlier comment that the Seller wants results fast.
When a potential buyer learns your dealership may be for sale and is exposed to a complete sale package it makes a statement. It says this dealership is not only for sale, it is ready for sale. It allows the buyer, and his or her legal team and accountants, to sit in one place and see the information that answers their questions and concerns. It assures them that you are a seller. It tells the potential buyer that if they are serious they better move quickly because whoever sees this next will have everything they need to make a decision immediately.
So, nothing sexy or fun here but remember, the fastest way to get results may be to slow down.
Mark Topping is a Transaction Manager at MD Johnson, Inc., a dealership transaction advisory firm. He can be reached at firstname.lastname@example.org or (360) 825-1756 or mobile (253) 820 9065.