SELLING A DEALERSHIP · CANADA
How to Sell a Franchised Car Dealership in Canada
Seven steps to guide owners through a confidential, professionally managed Canadian franchised dealership sale.
1. Define the desired outcome
Decide whether your priority is a complete exit, a succession transaction, retaining a role after closing or selecting a particular type of buyer. Agree the timetable with other owners before going to market.
2. Establish a defensible valuation
Review three to five years of financial statements and the latest trailing performance. Document normalized earnings, market-rate owner compensation, unusual income and related-party costs. Assess goodwill separately from vehicle and parts inventory, working capital, equipment and real estate.
3. Qualify potential purchasers confidentially
Before sharing proprietary financial information, assess the buyer group experience, capital availability and OEM qualifications. Use a properly executed confidentiality agreement and a controlled document-sharing process. Avoid public disclosure of an identifiable dealership before the owner approves it.
4. Negotiate the letter of intent beyond headline price
Set principles for parts obsolescence, new and used vehicle valuation, OEM credits, floorplan loans, working capital, employees and real estate. Have experienced legal and tax advisers analyze the asset-sale or share-sale structure before agreeing to binding terms.
5. Plan manufacturer and lender approvals
A franchised dealership sale commonly depends on requirements in the franchise agreement, buyer capitalization and OEM review of the proposed operator and facilities. Lender security releases or replacement financing can also influence closing timing. Build adequate time for these third-party decisions.
6. Control due diligence and staff communications
Buyers will typically review quality of earnings, fixed operations, aged inventories, facility and environmental matters, contracts, OEM obligations and key management. Centralize questions and protect staff and customer confidentiality while maintaining the dealership business.
7. Confirm the actual closing proceeds
Reconcile purchase-price adjustments, inventory counts, tax consequences, lender payouts, holdbacks, property treatment and post-closing obligations. The closing funds flow may differ materially from the advertised goodwill or total enterprise value.
Related resources
Five issues that can reduce seller proceeds
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