Strong M&A Activity Expected to Continue

Every issue, “Automotive News” covers several dealership buy/sell transactions and it will not be slowing down any time soon. Experts and what we see every day tells us this trend will continue into the foreseeable future.

Not unlike several other business sectors in the U.S., the dealership buy/sell market is robust. The likelihood of an increase in the capital gains tax rate, an aging dealer body, strong multiples, plenty of buyers — including many first-time buyers — have resulted in a surge of dealerships for sale.

We are constantly talking to potential buyers and some are overwhelmed by the number of opportunities being presented to them. Market activity is such that they simply do not have the bandwidth to spend a lot of time on every deal that they see. While the dealership industry is more finite than general business M&A transaction activity, the process to be prepared is the same. And it’s a process that increases the value of your business regardless of wanting to sell or not.

So, what does set a dealership apart?

• A concise and easy to understand presentation of the financial history of the business, highlighting profits and cash flow
• Strength of the franchise and it’s desirability
• Market area and primary employers
• Tenure of employees, reputation of the dealership and community involvement
• Growth opportunities and outlook for the automotive industry. Growth potential is a key influencer of the valuation multiple.

You only get one chance to make a first impression. Being in a position to showcase your strengths, speak to your history and paint an accurate financial and growth picture will help sellers be at the top of a buyer list. It also typically leads to more interested buyers and a higher valuation for the business owner.

Tony M. Wolf

Consultant
tmwolf@bradyware.com