Preparing for an Automotive Acquisition: Getting into Acquisition Mode

November 10, 2021

If you are planning to expand your automotive empire by acquiring one or more additional dealerships, it’s essential that you’re well prepared for the road that lies ahead. As a buyer, you want to do everything you can to make the acquisition process a success.

The buy-sell market is currently booming, with buyers and sellers of all sizes entering the arena. Dealer profit margins are excellent and consumer buying interest has been high. Let’s take a closer look at what it takes to find, prepare for, and close on your perfect acquisition.

Understand Your Budget and Financial Resources

Just as you will be doing your due diligence on any prospective dealership acquisition as part of the buying process, it is even more important to look at yourself to be sure that you come across as a qualified buyer. Here are a few key questions that you should ask yourself:

  • What is my maximum budget for this acquisition?
  • Will I be borrowing the money to pay for the acquisition?
  • Who is the lender and what are the terms?
  • Will I be making the debt payments from the ongoing operations of my current and/or acquired dealership(s)?
  • Do I have the financial resources to compete with public dealer groups, private equity, venture capital, and other deep-pocketed buyers?

Just as you expect any potential acquisition targets to have clean books, you must also present your own financial capabilities as adequate, transparent, and trustworthy. The seller will expect you to be able to cover the costs of the transaction, whatever the final negotiated price is. Know your financial reach. There is no point in getting into a bidding war that goes beyond your ability to pay.

An important part of this is doing your due buy-side diligence on any dealerships you are considering purchasing. Getting an accurate picture of the business’ strengths and weaknesses can help you to formulate a realistic price that also stays within your budget.

Continuously Build and Expand Your Teams for Future Success

When you acquire a dealership, you will want to manage it according to the principles and procedures that have been successful for you up to this point. Often the best people to execute on this are the managers who have helped you to get to this point, and who are already working for you in your current locations. But how do you avoid the problem of spreading your management talent too thin when there’s an extra rooftop to add to your domain?

A big challenge presented by an acquisition is having enough skilled managers on hand to run your new location, along with your existing points. Yet the opportunity here is that, by expanding your portfolio, you can put efficiencies in place that allow your dealerships to be competitive on pricing or more aggressive on marketing while growing you profit margins.

The best way to manage your talent toward these goals is to have an ongoing process in place to train, retain, and promote your best performers with the right skills into management roles. This process needs to start long before you make an acquisition.

Once that this process is in place, you can develop a “deep bench” of managers who can be “called up to the majors” when an opportunity presents itself. Today’s salesperson can become tomorrow’s operations manager, with some time, attention, and training. Promoting from within tells your motivated employees that there is an established path to better opportunities when they stick with you. It’s not only good for your business, it’s also better for your employees who have the desire to succeed and advance, so this approach can improve the performance of your team.

Hire a firm that will get you the right deal for your goals and vision

Above all, the firm that you hire to assist you with an acquisition must be able to keep all of the necessary balls in the air – and catch them when they come back down. Of course, you want a good deal, structured to your needs. But you also need your acquisition to fit in with your goals and aspirations for your entire automotive business.

DCG Acquisitions is a full-service mergers and acquisitions firm in every sense of the term. DCG Acquisitions is there for you, from the beginning of the process through the final signatures on the agreement. Our decades of established resources and relationships ensure the success of your new acquisition.

DCG Acquisitions has an impeccable reputation and a long track record of proven results, because we’re committed to service beyond the sale. The DCG Acquisitions team has closed billions of dollars in transactions to date. Our experienced team of experts manage efficient, high-return acquisitions consistently and professionally.

Contact DCG Acquisitions to speak directly with an Automotive M&A specialist and learn how our expertise can help you get the most out of your next dealership purchase.