COUNSELOR’S CORNER This will not be your typical issue of “Counselor’s Corner.” I will not be writing about distinct legal issues or updating you about burdensome laws and regulations. Instead, I wish to deliver a slightly different message and provide some constructive guidance about buying or selling a motor vehicle dealership. I have been doing buy-sell transactions for over 15 years and have been involved in 40 to 50 dealerships being bought and sold across the eastern United States. In the past five years, we have seen a significant increase in the buy-sell market. The particulars of any Letter of Intent, Definitive Purchase Agreement, Real Estate Purchase Agreement and ancillary documents are all subject to negotiation to fit each transaction’s unique situation. That said, the goal of this article is to provide you with a general understanding of the process and to highlight issues for you to consider along the way. Obviously, depending on whether you are a buyer or seller, certain aspects and positions are going to be more important than others. Regardless of which role you occupy, I hope this “Counselor’s Corner” will make the journey a little less stressful by showing you what lies ahead. To begin, be careful about relying on the national publications for multiples to determine a Blue-Sky number for your dealership. While they admittedly are a guide, they do have limitations. If you read the fine print, those published multiples are for dealerships that would sell at levels not commonly seen in West Virginia. Usually, but not always, the initial transaction document is a Letter of Intent. It should state that it is non-binding. It should also have provisions related to confidentiality and bind the seller to no further negotiations for a specified period of time as the definitive purchase agreement is negotiated. One common discussion is how detailed a Letter of Intent should be. It is important to always negotiate the price of assets for inclusion in the Letter of Intent. Articulating terms of how the parties determine the price of new cars, fixed assets and Blue-Sky numbers are key. If amounts can be agreed upon, it will prevent disagreements or other losses of momentum during the purchase agreement negotiations. Having these terms decided early also helps to prevent misunderstandings during the initial period when the parties are attempting to build trust. The Adventure of BUY-SELL By Johnnie Brown, Esq. Pullin, Fowler, Flanagan, Brown & Poe PLLC WVADA NEWS 10
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