Valuation Is An Opinion
Most business broker in the U.S. that specializes in auto retailers have their version of predicting how the buy/sell market is going to look like ahead in 2025 and beyond.
Some of them use published investment banker’s data by simply subscribing to their publications and then offering it to their potential clients under their own marketing means such as newsletters, “Buy/Sell” reports or on their websites. The trouble is almost without exception, the information has motive, and it is misleading in order to drum up business. Almost all of the automotive brokerage firms operate with the same strategy of going after listings, then announce the opportunity to the entire market, start rumors and upheaval, disrupt business and just knock on doors until they find a potential buyer. Once a letter of intent is executed, they sit back and hope for an escrow close to collect in most cases as high as 5% of the purchase price. But the most troubling part is that they have opinions on the valuation of these dealerships and the multiplier for each of the franchises across the United States. Hardly anyone of them has automotive retail experience not to mention any finance or accounting experience.
No two transactions are the same, they have unique circumstances that need to be taken into consideration After being in the industry as an automotive retail operator for almost 30 years, and assisting retailers as an advisor for the past 18 years, through my Company Convergent Alliance, we offer a specific expertise that combines operational forensics with diverse accounting expertise. We are not a brokerage firm and rather an advisory company for the buyers or the sellers first to assess the opportunity with proven methodology, then through our very in conspicuous connections, seek out potential opportunities whether you are the buyer or the seller. Hold hands with our clients throughout the very complex transition of the process and assist in every aspect from documentation, factory, bank and regulatory approvals, business plans and ultimately the escrow process.
In order to determine a realistic multiplier and or a purchase price for a dealership, there are many variables that need to be considered, other than just the brand, the location and the profits that are reflected in the financial statement. Operational forensics is the expertise needed to analyze an auto dealership beyond surfacy documentation and operational specifics. In most cases, what you would pay for an underperforming opportunity store is a lot different than you would pay a reputable franchise with healthy looking bottom line which has to be put through extreme scrutiny to verify. In fact, in most cases, opportunity stores, even those not profitable, present a more attractive picture for the future and therefore maybe worth more than just a multiplier of the net profits. Of course, the reason being that once improved offers a much higher multiplier for a resale value. Business is changing rapidly, for most retailers, there are exciting opportunities looking ahead that require willingness and proactive approach. For those who are reluctant, next few years are critical to make decisions to maximize value.
I offer free consultations for those who want to explore. Please visit our website, and or reach out by email or phone. Look forward to hearing from you, See you next month.
Yours truly,
Arlan Tarhan