Thinking About Selling? Five Issues That Can Reduce Your Proceeds

An agreed price is not always the closing proceeds

The original article identifies five negotiation items that may erode seller proceeds after a letter of intent. Preparing them before due diligence helps avoid surprises and preserves confidence in the transaction.

1. Parts inventory and obsolescence

Buyers may propose age-based or OEM-only definitions for transferable parts. A rigid 180-day rule can unfairly exclude saleable tires, fluids, wipers and other routine items.

Review inventory aging and negotiate clear terms for unopened parts, aftermarket parts, special-order items and items with continuing demand.

2. Manufacturer credits and reserves

Advertising support, floorplan assistance, dealer reserves and similar credits may be prorated or reversed when ownership transfers. Revenue recognized before closing may not equal the amount retained.

Ask your controller and manufacturer representative to reconcile credits and identify which party receives or repays each amount at closing.

3. Taxation and transaction structure

Asset and share transactions can yield different legal, accounting and tax results for both buyer and seller. The preferred structure is transaction-specific and should be modeled with automotive tax and legal specialists before an LOI fixes the economics.

4. Employees and management

Severance, accrued vacations, employment agreements, retention arrangements and successor obligations require careful planning. These vary with deal structure and provincial employment law.

Identify key managers and develop a confidential retention and communication strategy before buyer diligence.

5. New vehicles, demos and service loaners

Agree in writing how reported or registered vehicles, excess kilometers, demonstrators and loaners will be valued. Avoid discovering at closing that a vehicle classified as new in internal records is priced as used under the sale agreement.

A stronger position starts earlier

A precise inventory schedule, documented OEM reconciliations and a clear definition of purchase-price adjustments can prevent disagreements and support a smoother closing.