THE NETWORK STILL MATTERS BUT A BUY SELL PROFESSIONAL IS NOW SO MUCH MORE

• The “broker’s” role in a buy sell has expanded exponentially
• Firms provide services from long before the sale to after the closing
• Relationships are still of primary importance, however

Once upon a time the main role of a broker facilitating dealership buy sells was to flip through a (hopefully) well-stocked Rolodex that included a well-heeled network of potential buyers and make an introduction that would (hopefully) result in a deal being struck. The broker collected a healthy commission and moved on to the next deal.

While a good network is still vital, the role of firms facilitating dealership buy sells has changed dramatically. From developing a go-to-market plan and assessing the best buyers to assisting post-closing, many buy sell firms today bring immensely more value to the table.

Financial and strategic advisors

Willie Beck, co-managing partner at Bel Air Partners, describes the Florida-based buy sell firm as “financial advisors and strategic advisors. We think we have acumen and core competencies mere brokers don’t have,” he says.

When Bel Air is working with a client to sell a franchise or franchises, it doesn’t run an advertisement or list the dealership somewhere. “The paramount thing is confidentiality,” Beck tells Getting to Go!, “so our process is very defined.”

That process can begin months or even years in advance, he says. If a dealer is thinking of selling, Bel Air Partners works with the dealer to ensure all the information, financial and otherwise, is up to date and correct and that Bel Air has access to all the relevant financial information. That includes factory statements, tax returns, most recent appraisal, condition of property from an environmental perspective and more.

“You want to lay all that stuff out upfront so there are no surprises later on,” Beck says.

It then develops a list of potential buyers that Bel Air is sure will be approved by the manufacturer. “We never want to spend time and energy going through a process where it isn’t going to be consummated in the end,” he says.

Once Bel Air and the seller agree on a list of say, the top ten, buyers, it shows those buyers a teaser document with brand, revenue and sales about the franchise. If the potential buyer is interested, an NDA is signed and discussions continue.

Bel Air’s network is important as it speaks to the breadth and depth of the firm’s relationships, Beck says.

“It’s not only important that we know people. It’s important that we’ve done transactions with people, so they know when we represent something … it is based on our prior experience with them. They understand that what we’re telling them is true,” he says.

That speaks to credibility, he says, which moves deals along more quickly. Bel Air has sold three different deals to the same buyer over the past 15 years, Beck adds.

A changing industry

Deals used to be simpler. Beck worked at Ford Motor Credit Co. from 1988 to 2003 and exclusively handled Sonic Automotive’s buy sell transactions. All the public retailers had internal M&A teams then, he says, so a broker’s main qualification was presenting many options for Sonic to consider.

“It was really a volume deal,” Beck says. “They needed introductions to potential sellers (so) the broker’s rolodex and their ability to have sellers made them very important.”

There were also private groups acquiring, and regional or local dealers doing their first acquisition. “So, the need for help just varied,” Beck says.

Now, what used to be a mainly local or regional search has become national, Beck says. Dealer groups acquire franchises far from their base.

As dealership valuations have increased, deals have become more complex. Real estate values are rising, and facility image upgrades are a growing part of the picture. That has pushed up the total valuation. “The check size just kept getting higher and higher,” Beck says.

Bel Air finds itself doing “a ton of valuation work” now, as well as expert witness work. It also does debt and equity and real estate financing when working with family office and private equity buyers, he says

On a recent deal in which Bel Air advised the family office buyer, Beck led their due diligence, property appraisals, introduction to bankers, attorneys and environmental assessment.

“It was an in-depth role,” Beck says. “This situation is unique in that this person runs a family office, but they don’t have that auto-specific expertise.”

An investment bank

The Presidio Group is another example of how the traditional broker’s role has expanded to encompass many more aspects of retail automotive M&A. Founded in 2016, Presidio has executed major buy sell transactions including advising Lithia Motors on its acquisition of The Suburban Collection’s 56 franchises as well as many smaller deals such recently advising the Patriot Automotive Group on the sale of a New Hampshire Nissan store. But it doesn’t call itself a broker. Rather, Presidio bills itself as an investment bank.

“Presidio was one of the first investment banks servicing automotive M&A,” Presidio president George Karolis tells Getting to Go!

By virtue of having a Financial Industry Regulatory Authority (FINRA) license, Presidio offers a full suite of services, including capital raises. For dealerships, it does market assessment, financial analysis, valuations, helps prepare the offering materials, structures the transaction, and more.

Presidio also advises on optimizing a dealership’s value including in-depth research and analysis and preparing the deal to go to market. It has been a full-service buy sell firm from the beginning, Karolis says.

“We can do the deal soup to nuts,” he says.

Once a buyer is selected and the deal is moving forward, Presidio works with its client on the purchase agreement, legal documents, manufacturer correspondence, due diligence, how to integrate the new franchise into the existing business, and closing the deal.

The firm’s network makes a difference. “We have a robust database (that) we continually update,” Karolis says. “We are all about matching (the right buyer with the seller) and a bespoke approach to business.”

Presidio’s database and relationships allow it to find buyers with the right qualifications to obtain manufacturer approval,” he says. “That is a big part of the pre-qualification process. Not just who has money. That is easy. It is all about quality versus quantity with the right buyer.”

They won’t take on a client with whom there is a disagreement regarding the dealership’s valuation, Karolis says. “We always tell dealers to be careful who you are talking to and be sure you aren’t being told what you want to hear.”