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Liquidity vs. control:

5 exit options for selling an auto dealership


Is it time to sell or otherwise transition your auto dealership business? Consolidation, new technologies, and changing consumer habits are disrupting the automotive retail industry. For dealership owners nearing retirement, it's more important than ever to have an exit strategy in place.

When developing a plan to sell your dealership, ask yourself a key question: are you prepared to give up control and receive the full value of the business in the short term, or do you want to retain control and get some value later or over time?

To get started, consider these five key exit strategies for auto dealership owners.

Strategic sale

Selling the dealership to a strategic buyer, such as a competitor or consolidator.

  • Receiving value from the dealership more quickly compared to other options.
  • Potential for wealth diversification. Retaining real estate could provide ongoing income.
  • External buyers may bring opportunities for growth, new ideas and expertise, scalability, and vertical/horizontal integration and synergies.

  • With continued consolidation, buyers are more particular on brand, location, etc.
  • Potential for conflict between the buyer and employees, the OEM, or customers.
  • Business and culture changes for employees, the OEM, and customers.
  • No further involvement or control over the dealership.

Private equity

Selling the dealership to a financial buyer.

  • Potential for wealth diversification.
  • Receiving value from the dealership more quickly, as compared to other options.
  • Vendor financing is likely not required.

  • Potential for conflict between the buyer and employees, the OEM, or customers.
  • Less business continuity in terms of the management team.
  • Risk to the dealership’s brand and goodwill.
  • Little or no further involvement or control over the dealership.

Management/ employee buyout

Selling all or part of the dealership to internal stakeholders.

  • Potential for a more seamless ownership and management transition.
  • Business continuity for employees, the OEM, and customers.
  • Opportunity for continued participation in dealership growth and leadership.

  • Loss of control over business decisions.
  • Prolonged exit process and timeline.
  • Buyers often need vendor financing loans. Owner may assume risk.

Debt/equity recapitalization

Leveraging the dealership balance sheet or real estate to extract value in the short term.

  • Potential for wealth diversification.
  • Risk mitigation and management.
  • Unlocks your dealership’s value and utilizes business assets.

  • Prepayment of taxes may be required.
  • Fluctuating interest rates could affect the cost of borrowing.
  • Increased oversight.

Family succession

Transitioning the dealership business to the next generation.

  • Maintaining a legacy for future generations.
  • Trust in your successors.
  • Business and culture continuity for employees, the OEM, and customers.

  • Limited liquidity; limited wealth diversification.
  • Successors may not be available, suitable, or prepared.
  • Lack of external knowledge gained through a strategic sale.
  • The business may need to support multiple families.

How BDO can support your dealership

BDO's team of experienced auto retail advisors can provide guidance and support at every step of the exit process, from strategy development to post-transaction. Along with our in-depth knowledge of the automotive sector, we conduct financial, operational, and market analyses to assess your unique business, personal, and family needs, as well as your market position and assets.

Automotive Outlook

For more information on key business issues for your dealership, BDO's Automotive Outlook report offers insights on today's auto retail market, including actionable strategies for owners and principals.

Download now

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