Author: Tony Karabon, Partner & Executive Vice President, Dave Cantin Group
Almost all dealership transactions involve attorneys, both for the seller and for the buyer. My experience includes serving for 25 years as the general counsel for two large dealership groups, which exposed me to dozens of dealership purchase and sale transactions. I have been “across the table” from more attorneys than I can count during these transactions, and there is one imperative to success that cannot be overlooked: You must find the right attorney, whether you are on the selling or buying side.
While there is no shortage of attorneys in the world, no one attorney is competent in all areas of the law. Yes, the sale of a dealership is a commercial transaction that is comparable to the sale of other businesses. That said, there are industry-specific issues in a dealership purchase or sale that require specialized knowledge and experience.
If you are considering an automotive dealership transaction and need to find the right attorney, contemplate the following best practices based on my dealership buy-sell experience to ensure the deal closes quickly and favorably.
1. Seek the Ideal Qualifications
The No. 1 priority is finding an attorney that has dealership buy-sell experience. The last thing you want is to pay for an inexperienced attorney’s education.
Dealership sales follow a certain formula or pattern, no matter where you are located. Choosing an attorney who is experienced in dealership sale transactions will save you both time and money. Your attorney should be knowledgeable about the retail automotive industry’s unique assets, including vehicles, special tools, and single-use real estate. He or she should also speak the language of a dealership transaction, understanding the industry’s vernacular like holdback, RDR (Retail Delivery Report), CSI (Customer Satisfaction Index), Area of Responsibility, etc. Dealerships are subject to state and local licensing requirements to sell, service, and finance vehicles. Environmental and safety issues play a role as do the rules, obligations, and mandates of the manufacturer(s). You may have an attorney that you have used for various dealership issues. Do not equate this experience with the qualifications necessary for the transaction involving the sale or purchase of a dealership. You are specifically looking for an attorney who has successfully closed the sale or purchase of a dealership, and ideally, many such transactions.
2. Ask the Right Questions
Ask your attorney or a prospective attorney how many automotive buy-sell transactions have they successfully closed? You should also request the names of other dealer clients who are willing to serve as references. Any attorney who has successfully closed the purchase or sale of a dealership should have past clients who should be willing to speak with you.
The National Association of Dealer Counsel (NADA) is an industry group with about 600 members who practice in the dealership space. I am a member of the NADC myself. If you are looking for further assurance that an attorney can effectively represent you in buy-sell transaction, ask if he or she is a NADC member.
3. Managing Your Attorney Effectively
Start your working relationship by setting clear expectations. These expectations, which can concern virtually anything involved in the transaction, serve as the foundation for driving the transaction toward your objectives. They also provide a framework for discussing any problems that emerge during the transaction with your attorney.
Once you have selected your attorney, focus on managing him or her. You are the client, and you deserve the attorney’s legal expertise, as well as an efficient process and strong communication. If your attorney fails to return calls, never answers emails, or makes excuses for why things are not getting done, that is a sign that the attorney is too busy or views your transaction as less important than other matters in which he or she is working. A candid discussion with your attorney might be necessary or you might need to search elsewhere for another attorney.
Your attorney should take a leadership role in the transaction. That includes:
- Performing the work in the least amount of time. Attorneys bill by the hour, but they should also strive to keep the transaction moving forward.
- Push the other attorney to respond promptly. If the other side’s attorney is slow to reply to matters that arise during the transaction, your attorney should apply pressure.
- Follow communication best practices. Your attorney should keep you timely apprised of all issues, the behavior of the other party, and the overall progress of the transaction.
The Consequences of Choosing the Wrong Attorney
What happens when you choose the wrong attorney? Not all proposed transactions close successfully, and choosing the wrong attorney puts your deal at greater risk of not reaching completion.
For example, a lack of competence on the part of your attorney can frustrate the other side and reflect poorly on your judgment. Also, the longer a deal takes, the greater the chance of it falling apart. This makes it risky to go with an attorney who is slow to respond. Another buyer or seller could come along. The economy or retail vehicle market could shift. Or frustration and anger may even set in. All these dynamics could potentially thwart a deal.
The sale of an automotive dealership always takes considerable time and effort. Do not risk prolonging the transaction or increasing the risk of an unsuccessful transaction by hiring the wrong attorney.
While a buy-sell transaction is about purchasing assets, its success is dependent on many people, including your attorney, collaborating with a successful transaction as the goal.
About Tony Karabon, Partner & Executive Vice President, Dave Cantin Group
With over 25 years of experience in the retail automotive industry, Tony Karabon has served as General Counsel for multiple auto groups, including RFJ Auto Partners, a Top 25 Dealer Group, and The Boucher Group, a top 75 Dealer Group.
In his General Counsel roles, Tony negotiated, documented, and executed numerous buy/sell transactions. He has extensive due diligence and dealership integration experience. Tony also has addressed virtually every manufacturer-dealer issue, as well as every legal issue that dealers may face in a buy/sell transaction.
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