Private Megadealers Hold an Edge
Going into transactions, mega-privates such as Larry Miller, Van Tuyl or Ken Garff often will hold an edge over public groups. Why? Because their ability to close transactions in a timely, efficient and protective manner makes them more attractive to prospective sellers.
While some of the publics maintain streamlined deal-review and negotiation processes, it’s tough to compete with some of the mega-privates who have a dealer-group president-owner spearheading all negotiations.
Also, when going head-to-head with privates on financial creativity with taxes, financing and extended perks, some publics simply can’t compete.
An additional consideration for some multipoint dealers selling to a public company is their ability to receive manufacturer approval on all franchises. Some publics have framework agreements with certain manufacturers that limit the number of franchises they can own or hinder approval due to substandard customer-satisfaction indexes or facilities. More often than not, a selling dealer group will avoid splitting up the enterprise going into the transaction.
Some dealers will approach the sale with a singular focus on achieving the highest selling number.
But others also are concerned with the legacy of their stores and the livelihood of their employees. Whether justified or not, selling to publics can raise concerns regarding the corporatization of dealerships and potential elimination of jobs. Helping some of these privately owned mega-dealers is the flexibility of their business model as they enter smaller, non-metro and rural markets outside the Sunbelt states.
A significant number of buy-sell store transactions are likely in 2014 compared with last year, with most of the volume coming from single-point styled transactions. But make no mistake, the publics and mega-privates will continue to consolidate markets.