On the latest episode of our Smart Compliance Podcast, Mark Johnson stopped by to talk about what creates value in dealership M&A.
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Sales is a fundamental aspect of any kind of business, but it’s uniquely important to automobile dealerships. No other company lives and dies through sales quite like a dealership.
But a dealership’s sales acumen doesn’t necessarily translate to business transactions. When it comes time to sell off the dealership through a merger or acquisition, says M&A pro Mark Johnson, owners can’t rely on the same strategies they’ve used to move vehicles off the lot:
What buyers hate are surprises, so our job is to take all of the surprises out of a deal. We just tell everybody everything right up front. We tell our clients, ‘This isn’t a car deal.’ That’s not to denigrate car deals, but it’s not like we’re going to have a 2 or 3 hour conversation and you’re going to sell me a car and you’re going to tell me what you want to tell me. This is a months-long transition with a statute of limitations on an agreement, and everything’s going to come out eventually—especially once we’ve taken over and the employees start telling us everything we didn’t learn during the deal.
Mark was our guest on the latest episode of our Smart Compliance Podcast. Drawing on his firm’s 17-year history in the industry—a period of time in which MD Johnson has managed over $5 billion dollars in hundreds of transactions—Mark spoke with podcast host Kynzie Sims about how compliance outcomes impact the value of a business, the long-term costs of training versus not training personnel, pay plan changes, what dealerships get wrong about the M&A process, and more.
One major takeaway? People almost always represent the greatest value during a transaction.
When we’re buying stores or we’re helping people understand the value of a store, we’re always looking at human capital [as] number 1. Who’s running the store? What’s their tenure here? What’s their expertise? What are the issues? And we consistently find the same thing: … Those [that] are typically considered the highest performing stores consistently have very, very good general managers who are really good at executing process, who understand human capital and all the things that come around complying with factory training programs and complying with the various laws they have to live with.
Buy-Sell Checklist for Vehicle Dealerships
The buy-sell process is often long and complicated. You need to collect information on: