Automotive Buying & Selling Checklists
Buying or selling a dealership will be one of the most significant transactions you will undertake in your business career. Make sure you are in total control and your transaction is at a fair market value. How? Use the following BDO checklists to ensure you are in good shape and avoid the pitfalls of buying and selling.
The sale of your dealership should be the ultimate reward for the risks you have taken and the effort you have invested over the years. The more time you have to plan the sale, invariably the better the quality of the results.
Are the following documents current and up-to-date:
| Profit and loss statements for last three years |
| Tax returns for the last three years |
| Current lease or property valuation (including proof of ownership) |
| Dealership franchise agreement(s) |
| Management accounts |
| Computer system and other equipment leases |
| Off-site storage leases |
| Current employment contracts for key staff, eg department and general managers |
| List of fixed assets |
| PMA market data |
| CSI Reports |
| Positive sales penetration reports |
| Organisational chart |
The selling process
The following steps should be arranged to achieve the maximum sale price while ensuring that the sale is concluded without disrupting the ongoing operations.
| Obtain an indicative valuation of the dealership |
| Prepare confidentiality agreements and information memorandum |
| Identify target buyers |
| Make confidential approaches to target buyers |
| Consider the terms of a Heads of Agreement |
| Communicate with the franchisor |
| Arrange the management of settlement day |
| Communicate with the buyer on a regular basis |
To download the selling checklist, click here.
Buying a dealership can be just as challenging as selling one. Barriers to entry are high and purchasers need to consider and understand the shape of the business, cash flow, revenue, and profitability. Obtaining this information is about asking yourself and others the right questions.
Asking the right questions
| Do franchise requirements complicate the picture? |
| What are the facility development requirements of the franchisor? |
| Is the lease term too long or short for your future plans? |
| What does the future hold for the brand(s) involved? (A weak brand today may be much stronger tomorrow or vice versa) |
| Is the potential gross profit of the dealership adequate for the size and cost of the facility? |
| What is the value of the customer database, staff, dealership name, website, phone numbers? |
| Is the dealership’s prime market area economically diversified with a wide ranging customer base? |
| Are there other franchise opportunities within the prime market area? |
| How strong are your banking and financing relationships? |
| Do you have access to the required capital? |
| Is your current business in good shape in terms of cash flow, revenue, and profitability to support the acquisition? |
| Are the franchises complimentary to your current brands and what are the economies of scale opportunities? |
The buying process
Have you:
| Arranged a valuation to determine a realistic purchase price |
| Undertaken thorough due diligence assessing the reliability of information |
| Thoroughly examined the financial records |
| Considered the people working at the dealership |
| Considered a transition plan to avoid disruption to the business |
| Prepared a business plan and financial projections |
| Identified any matters which may impact on the ongoing financial operating aspects |
| Sought taxation advice on the structure of the transaction |
| Sought franchise approval |
To download the buying checklist, click here.
Getting help
Buying or Selling a dealership should not be a ‘do it yourself’ project. Experienced advisers can have a significant impact on the success of your sale or purchase. Here are some useful questions to ask:
- How many dealerships have you personally helped to sell in the past three years?
- Do you have any conflicts due to your current clients?
- How many dealerships do you currently represent?
Ultimately, your adviser should be able to help you maximise the value while limiting your taxes. For sellers, they should be able to screen buyer prospects and prepare a professional marketing package and a specific marketing strategy customised for your dealership, and for buyers they should be able to assist with targeted acquisition searches, as well as providing the traditional accounting and advisory services.
If you would like to discuss any aspect of a potential sale or purchase, please contact one of BDO’s Automotive specialists.
