The dealership M&A (mergers and acquisitions) sector has seen high levels of activity in recent years as the retail automotive industry has adjusted to evolving trends in profits, inventories, and consumer preferences. Whatever one’s experience in the car business, navigating this unique landscape without guidance can have unforeseen and unfortunate consequences.
On this episode of Driving Solutions, host Jim Fitzpatrick is joined by Sheldon Sandler, founder and CEO Bel Air Partners, a financial advisory firm serving the retail automotive sector. Now, Sandler shares his insights into what it takes to navigate the new dealership M&A landscape and how expert guidance can help dealers get the best deal possible for their business.
Key Takeaways
1. Sandler’s background in finance and experience with initial public offerings (IPOs) in various industries provided him with unique insights into the automotive business, leading to the establishment of Bel Air Partners. This firm focuses on helping private car dealers understand and navigate the dealership M&A market.
2. The dealership M&A market has seen significant changes, with recent trends showing a return to normalcy in inventory and profit margins. Sandler acknowledges that some dealers may regret not selling at the market’s peak, but he also points out that most dealers have remained more profitable than usual.
3. Sandler stresses the crucial role of a broker in managing the dealership M&A process, emphasizing the need for one who acts as a fiduciary, representing the seller’s interests. Sandler highlights the pitfalls of attempting to sell without professional help, including the potential for undervaluation and issues with OEM approval.
4. Sandler discusses how valuations in the dealership M&A process are local and can vary significantly, with buyer expectations playing a crucial role. The perception of a dealership’s performance potential can heavily affect the sale price, underscoring the need for sellers to identify and communicate the value and opportunities within their businesses.
5. Maintaining confidentiality and strategically selecting potential buyers are vital aspects of the dealership M&A process. Sandler illustrates the importance of managing information to prevent market rumors and ensure a smooth transaction, suggesting the use of “soft auctions” and due diligence in choosing buyers who are financially capable and likely to be approved by manufacturers.
"First of all, let's remember, dealers have the opportunity to sell their deals on their own, right? ...And sometimes they ask the factories to help them, which is a big no-no. Don't do that, 'cause it's not in the factory's interest to help you sell the deal for your highest price. They're going to try to find who they consider the most acceptable buyer." — Sheldon Sandler
