Pub. 5 2016-2017 Issue 1

18 San Diego Dealer IN DEALERSHIP SALES, ANTICIPATE THE UNEXPECTED By Dan Cheyney, National Practice Leader, Automotive & Dealer Services Practice; Sid Tobiason, CPA & Partner; Amy Stillwell, CPA & Senior Manager, Moss Adams LLP B uying or selling a dealership business is unlike any other business transaction—and that isn’t just rhetoric. When you combine the different ways in which a dealership’s departments operate, its relationships withmanufacturers, dealer-specific tax provisions, the types of assets dealerships hold, and how dealership values are determined, the result is a complex process that can surprise buyers and sellers alike—and not always pleasantly. Transactions among auto dealers are picking up pace across the nation, a product of the industry’s perceived strength among traditional buyers, Wall Street, and private equity investors alike. During the recession, when consumers put new vehicle purchases on hold, auto dealers demonstrated sustainability by puttingmore emphasis on used vehicles, parts, and service. The investor community took note of the elasticity of the franchised dealer. Now that the economy has recovered, the auto industry is picking up steam (and profit) quickly. With this as the backdrop, many dealers are poised to take advantage of their strength and attractiveness to investors. But before diving in, let’s look at a few of the most common pain points you’ll want to be aware of and prepared to tackle. Value Determinations A number of factors impact a dealership’s value. In addition to a franchise’s historic performance, potential buyers, brokers, and valuations experts examine the dealership’s geographic market (metropolitan versus rural), competition, and stability as well as whether the brand is desirable and how it treats its dealers. To accurately determine value, each of a dealership’s departments needs to be examined. A parts department sells high-volume, low-cost items; the new and used vehicle sales departments sell lower-volume, higher-cost units. Then there’s the service department and body shop, which sell labor, and the financing department, which brokers loans and other products.