Strategic buyers are usually firms that are already established in the automotive retailing space. They’re likely looking at purchasing your dealership as a way to capture synergies. A strategic buyer believes that adding your dealership to their existing group will create certain benefits that are greater than the sum of their parts. These synergies can be accomplished in a variety of ways, once your operation has been combined with their existing organization:
- Reduced marketing expenses (one more rooftop added to their existing “brand”)
- Geographic expansion (if you’re located in an area that the buyer is yet not established in)
- Lower overhead (reduction of headcount in management, consolidation of marketing and back-office functions)
- Increased sales (through more efficient marketing, more cars sold, and improved F&I/fixed ops revenue)
- Improved margins (your location is no longer a competitor, so it can’t undercut their pricing)
- Enhanced productivity (using the buyer’s “leaner” systems to boost economies of scale)
A strategic buyer has a growth plan that endeavors to make two plus two equal five. Because of this aggressive and optimistic outlook, a strategic buyer is usually willing to pay more for your dealership. This higher price consists of the actual value of your business, plus some consideration for the added value it will bring to the buyer’s bottom line once the synergies are realized. Other items that can add value to the sales price are optimal locations, owned assets, experience of the team, and proprietary processes.