Digital Dealer - November 2017 - 10

Continued from pg. 9

O WN E R S H I P

2016
1H	2017
CHART 2

Real	Estate	Value
Blue	Sky	Value
$10.3
$6.6
$16.9
$10.5
$6.5
$17.0

Real Estate Blue Sky Value
Full Year 2016 versus First Half 2017

$16.9

$17.0

$6.6

$6.5

quickly than dealers are
accustomed. If you are
considering an outside
investor, you may want
to assess your internal
controls and management style to determine
if you are ready for a
metrics-based management system.
WILLINGNESS TO
SHARE CONTROL,
AND POSSIBLY ANSWER TO OUTSIDE
INVESTORS. Constitu-

$10.5

$10.3

2016

1H 2017
Real Estate Value

Blue Sky Value

Source: NADA and Kerrigan Advisors Analysis

source, whether that be
debt or equity.
In addition to blue sky
and real estate, dealership acquisitions also require significant working
capital and the purchase
of fixed assets. When all
of these elements are
added together, the average transaction, for a single dealership, approaches $20 million. And, that
is just an average. Many
attractive dealerships, by
virtue of size or location,
are worth considerably
more. For a dealer who
seeks to acquire a group,
transactions can easily
enter the "nine-figures"
zone. (See chart 2)
Although our industry has plenty of well
capitalized dealership
groups, not all are able
or - equally importantly -willing to take on acquisitions of this magnitude.
10

NOVEMBER 2017

As one dealer explained
to me some time ago,
"We have bet the family
farm multiple times in this
industry. And, while we
still want to grow, we're
just not willing to continue
doing that."
CONSIDERATIONS

As you consider your
own growth plans for
your business, a strategic capital partner may
be a compelling option.
However, it is important to
assess whether you are
a good candidate for this
approach. Below, I have
listed six key criteria to
consider when determining if a capital partner is
an appropriate strategic
choice for you and your
business.
PROFESSIONAL,
METRICS-ORIENTED
MANAGEMENT. Sophis-

ticated financial partners
are very metrics driven,

D I G I TA L D E A L E R . C O M

and they generally hold
managers at all levels to
predetermined budgets
and rigorous levels of
performance. In certain
regards, auto retail is a
natural fit as our industry
also has its share of key
metrics, which are religiously tracked, starting
with units sold on a daily
basis. The plethora of
reports provided by the
OEMs can be very helpful
in tracking the success of
a dealership and identifying areas for improvement. That said, we find
auto dealers are generally more comfortable
with significant monthly
swings in performance
than are seasoned
investors. And, given
fluctuations or lagging
performance, financial
investors may push for
staffing and organizational changes much more

tionally, some business
owners are simply more
willing than others to
collaborate and make
decisions in a joint manner. Dealers need to be
honest with themselves
if they are open to
being challenged on a
regular basis about the
business that they are
operating day-to-day,
particularly from voices
that are not trained in
auto retail. It is important to also recognize
that many investment
funds have a mandate
for "control investments." No matter how
they dress up this language, control investors
negotiate their documents in a manner that
allows them to make
unilateral decisions.
While they may state
their position to "back
the management team,"
they retain the right to
change out management as they see fit,
albeit subject to some
limitations set forth by
OEMs. It is critical to
understand investors'
mandates and style.
Control investors vs.
non-control investors
Continued on pg. 12


http://www.DIGITALDEALER.COM

Table of Contents for the Digital Edition of Digital Dealer - November 2017

Digital Dealer - November 2017
Contents
A Letter from the Show Director
Don’t Be a “Management Jerk” and Steps for Handling Them!
Attempting a No-Huddle Offense? How’s That Working for You?
Is a Financial Partnership in Your Future?
Fallacy
You Can't Take a Train 500 Miles on 400 Miles of Track
4 Tech Tools That Decrease Employee Turnover
Organize for 2018 – Expect Greater Efficiencies and Profitability, Fewer Surprises
Retail Warranty Reimbursement: Leveling the Playing Field
Cracking the Car Code on Selling to the #1 Buyer: Women
Professional Voice-Over Secrets!
CAMERON JOHNSON Dealer Principal, Magic City Ford Lincoln
When It Comes to Social Media... Don't Step on a Rake
The Online Shopping Experience Has Radically Changed. Your Dealership Can Reap the Benefits.
The New Car Manager's Modern Guide to Merchandising
Top 3 Information Technology (IT) Recommendations for Stability and Increased Productivity at Your Dealership
That’ll Bee $128 Forda Tech Ta Lookatit - Ouchie
Only 5 ½ Cents- Per-Mile to Maintain a $50K Machine! Wow!
Digital Dealer - November 2017 - Digital Dealer - November 2017
Digital Dealer - November 2017 - Cover2
Digital Dealer - November 2017 - Contents
Digital Dealer - November 2017 - A Letter from the Show Director
Digital Dealer - November 2017 - 3
Digital Dealer - November 2017 - Don’t Be a “Management Jerk” and Steps for Handling Them!
Digital Dealer - November 2017 - 5
Digital Dealer - November 2017 - Attempting a No-Huddle Offense? How’s That Working for You?
Digital Dealer - November 2017 - 7
Digital Dealer - November 2017 - 8
Digital Dealer - November 2017 - Is a Financial Partnership in Your Future?
Digital Dealer - November 2017 - 10
Digital Dealer - November 2017 - 11
Digital Dealer - November 2017 - 12
Digital Dealer - November 2017 - Fallacy
Digital Dealer - November 2017 - 14
Digital Dealer - November 2017 - 15
Digital Dealer - November 2017 - You Can't Take a Train 500 Miles on 400 Miles of Track
Digital Dealer - November 2017 - 17
Digital Dealer - November 2017 - 18
Digital Dealer - November 2017 - 19
Digital Dealer - November 2017 - 4 Tech Tools That Decrease Employee Turnover
Digital Dealer - November 2017 - 21
Digital Dealer - November 2017 - Organize for 2018 – Expect Greater Efficiencies and Profitability, Fewer Surprises
Digital Dealer - November 2017 - 23
Digital Dealer - November 2017 - 24
Digital Dealer - November 2017 - Retail Warranty Reimbursement: Leveling the Playing Field
Digital Dealer - November 2017 - Cracking the Car Code on Selling to the #1 Buyer: Women
Digital Dealer - November 2017 - 27
Digital Dealer - November 2017 - Professional Voice-Over Secrets!
Digital Dealer - November 2017 - 29
Digital Dealer - November 2017 - CAMERON JOHNSON Dealer Principal, Magic City Ford Lincoln
Digital Dealer - November 2017 - 31
Digital Dealer - November 2017 - 32
Digital Dealer - November 2017 - 33
Digital Dealer - November 2017 - 34
Digital Dealer - November 2017 - 35
Digital Dealer - November 2017 - When It Comes to Social Media... Don't Step on a Rake
Digital Dealer - November 2017 - 37
Digital Dealer - November 2017 - The Online Shopping Experience Has Radically Changed. Your Dealership Can Reap the Benefits.
Digital Dealer - November 2017 - 39
Digital Dealer - November 2017 - The New Car Manager's Modern Guide to Merchandising
Digital Dealer - November 2017 - 41
Digital Dealer - November 2017 - Top 3 Information Technology (IT) Recommendations for Stability and Increased Productivity at Your Dealership
Digital Dealer - November 2017 - 43
Digital Dealer - November 2017 - That’ll Bee $128 Forda Tech Ta Lookatit - Ouchie
Digital Dealer - November 2017 - 45
Digital Dealer - November 2017 - Only 5 ½ Cents- Per-Mile to Maintain a $50K Machine! Wow!
Digital Dealer - November 2017 - 47
Digital Dealer - November 2017 - 48
Digital Dealer - November 2017 - Cover3
Digital Dealer - November 2017 - Cover4
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