To Sell or Not to Sell Your Dealership?

When a dealer decides to sell, they often want to act immediately. Unfortunately, they often aren’t prepared to move ahead.

Smart dealers consistently plan for a sale, even if they don’t intend to act immediately – or ever. That ensures they can more quickly and easily act when the time is right.

Consider these steps to take now, but certainly at least one to three years before you expect to sell.

Property Appraisal

A property appraisal takes at least three weeks to complete. I always recommend dealers have a property valuation every 24 to 36 months. The value of the property impacts your decisions and dealership valuation.

Also, if you own land, buildings and your operating company all under one corporation, you will have to extract the land and buildings from the corporation before you can sell them as assets. This extraction process can take up to two years.

You might also decide to sell your dealership but keep your land and building and lease them to the new owner. That option may result in hefty retirement income, depending on many subjective factors

Phase One Environmental Assessment

This step takes one to two months to complete and is critically important to complete before you list your dealership for sale. If you decide to sell without an assessment and you fail the assessment after a letter of intent is signed, you will have to pay a large renumeration fee. Also, failing an assessment is a potential deal killer.

Tax Planning

Meet with a tax specialist to talk about the tax implications of a sale. Should you do an asset freeze so you can pay capital gains? How will you bring money from your offshore reinsurance accounts into the country? An experienced specialist can guide you toward decisions that minimize potential tax burdens and put more money in your pocket.

Financial Performance and Valuation

Many dealers meet regularly with financial advisors to discuss their personal portfolio investments and performance. But how often do you assess the financial performance and value of your dealership? If you are considering selling, it’s important to have a professional assessment to determine the value of your business assets

Capital Investment

Are there any manufacturer-mandated upgrades that haven’t been completed yet? Do you plan to make any renovations that will make your dealership a more attractive acquisition? These can take months to complete. Review them now.

Succession Planning

Are your kids actively involved in the business? If you decide to sell, will they stay in the business or leave? If they want to stay, there is the option of making them minority shareholders, but they will have to be approved by the manufacturer. You want to make these decisions before you list.

Lev Kowalsky 2

Finally, what do you plan to do after selling? If you don’t have a plan, now’s the time to research hobbies or small-business opportunities that will keep you engaged. Also, prepare family members as far in advance as possible. Problems tend to occur when dealers don’t tell their families about sales until after the decision is made. 

Once you complete these preparations, you will have greater insight into whether you want to sell or not. If you decide not to sell, you will have a better understanding of where you stand financially. If you decide to sell, you can move forward and get listed right away.

Lev Kowalsky (pictured, above left) is a mergers and acquisitions associate with Dealer Solutions Mergers and Acquisitions, a buy/sell transaction partner serving the Canadian and U.S. markets.