Dealership Buy Sells During these Times
Updated: Mar 20, 2020
As we are in the midst of the Covid-19 pandemic, we first want to wish you, your family and your staff the very best in these challenging times. We have provided some quick information in regards to questions that we have been receiving from our clients.
We Are Mobile and Flexible
Each member of our team is currently working from home and with our experience in over one thousand completed transactions, we can process almost the entire buy/sell transaction remotely.
Who is Buying?
Speaking to our prior experience in the financial crisis in 2007/08, we continued to process buy/sells and even saw a slight uptick in acquisitions. We have an extensive database of very well capitalized clients that have excess funds ready to deploy for the right opportunities. Many of our clients see this as a buy opportunity.
How does Current Market Conditions Affect my Stores Value?
If you have a business that is currently profitable or has significant upside, your store still has value and we do not predict any significant reduction in recent market values/multiples.
As we have heard from most major lenders and manufacturers in the U.S and Canada, there is a tremendous willingness to assist business owners and individuals through this pandemic (floor pan support, mortgage payment deferrals, employment support and various tax credits). As a seller, you are supported and do not have to sell. This is the best position to be in if you were to bring your store to market.
Additionally, our base multiplier calculation is based on past financial performance along with upside opportunities. Even if you had a rough few months recently, averaging out with several past years performances will dramatically reduce the impact on your base multiplier.
Should I Buy Now or Wait?
As with the past 47 recessions in the U.S, they have recovered 47 times and have achieved a new market high. There will be motivated sellers entering in (and on) the market for reasons related to cash flow, a lack of desire to proceed through ramping their store (s) back up, or just uncertainty.
We anticipate incredible opportunities (brands/locations) coming to market that, under normal circumstances would not be available.
Acquisitions, Offers and Conditions During Covid-19
If you are interested in acquiring a dealership(s) but are concerned about potential work stoppages or business interruptions, consider including the following with your offer:
Include terminology speaking of Covid-19 or the business being fully restored and operational as a condition of your Letter of Intent (LOI) prior to your closing date.
Have your lawyer additionally include this as a condition of your Definitive Purchase Agreement (DPA) if your offer is accepted.
If you are concerned about key staff returning in the event of a work stoppage, you again can include terminology stating this as a condition of your LOI/DPA.
If you have any questions regarding buying or selling a franchised dealership, feel free to reach out to us for a complimentary consultation at gordie@timlambgroup.com
Written By Gordie Gerbrandt/Director of Canada/Tim Lamb Group