The Hardest Part of Completing an M&A Transaction Begins After You’ve Found the Buyer
When dealer principals contemplate selling a dealership, the conversation naturally centers on valuation, blue sky multiples, taxes, transaction structure, and buyer demand. These are all critical elements of a successful transaction, and they largely determine the economics of the deal.
What many dealer principals underestimate, however, is that agreeing on price is only one milestone. In today’s automotive retail M&A environment, the greatest challenges, and often the greatest frustrations, emerge after a purchase agreement has been signed.
The market has changed significantly over the past decade. In many regions, qualified buyers outnumber dealerships available for acquisition. As a result, the challenge is rarely finding a qualified buyer willing to pay market value. It is successfully navigating the increasingly complex path from signed agreement to successful closing.
For many dealer principals, that distinction comes as a surprise. A signed purchase agreement may feel like the finish line. In reality, it often marks the beginning of the most demanding phase of the transaction, where financial due diligence, securing financing, legal documentation, and countless other moving parts are prerequisites. In fact they are foundational requirements to secure an OEM approval before a deal can close.
OEM approval remains a large obstacle, without it, there is no deal!
Without question, manufacturer approval has become the single greatest source of uncertainty in dealership transactions.
In my most recent article, I discussed how OEM approval has evolved from an administrative requirement into a strategic evaluation of both the buyer and the future of the franchise in a specific market. Manufacturers are no longer simply approving ownership transfers; they are actively shaping their dealer networks.
Today’s OEMs evaluate far more than a buyer’s financial capacity. They assess the buyer’s operating history, financial strength, market performance, customer satisfaction metrics, commitment to required facility investments, management depth, existing portfolio of dealerships, and long-term strategic fit within their network.
Even exceptionally qualified buyers can spend months working through multiple levels of manufacturer review. During this period, dealer principals have little visibility into the approval process and virtually no control over the timeline. The dealership must continue to operate as usual while both buyer and seller wait for a decision that ultimately rests with the manufacturer.
The most common question becomes: “We’ve agreed on the deal. Why haven’t we closed?” That uncertainty can be one of the most stressful aspects of the entire transaction.
Confidentiality is far more difficult than most owners expect
Selling a dealership is unlike selling most other businesses.
Maintaining confidentiality is one of the greatest challenges throughout the transaction process. Employees notice unfamiliar visitors. Lenders and vendors begin asking questions. Competitors start connecting the dots. Before long, speculation can spread throughout the dealership, creating uncertainty among employees, customers, and business partners.
As the transaction progresses, preserving confidentiality becomes increasingly difficult. One of the clearest indicators that changes are afoot is the formation of new legal entities, public filings that can inadvertently signal a pending ownership change.
Dealer principals must carefully balance two competing priorities: providing enough information to keep the transaction moving while protecting the confidentiality necessary to maintain business continuity. Maintaining that balance over a process that may span six months, or considerably longer, can be one of the most demanding aspects of selling a dealership.
Due diligence can change the economics of the deal
One of the more frustrating moments for sellers occurs after they believe the financial terms have already been settled. Following execution of the Letter of Intent, buyers begin an extensive review of the business.
Working capital adjustments, normalized owner compensation, used vehicle inventory, parts inventories, environmental reports, pending litigation, F&I performance, facility requirements, OEM image program compliance, and historical financial reporting all come under detailed review and are often over scrutinized.
It is during this phase that buyers may seek adjustments to the original purchase price or transaction structure. From the seller’s perspective, this often feels like renegotiating a deal that has already been negotiated. From the buyer’s perspective, it is simply validating assumptions before committing substantial capital.
Neither perspective is necessarily wrong, but it underscores the importance of preparing well before going to market. Accurate financial reporting, organized records, and disciplined operations reduce surprises during due diligence, strengthen buyer confidence, and help preserve transaction momentum.
Transactions rarely move as quickly as sellers hope
Time is another source of frustration, and one of the greatest risks to any transaction. The longer a deal remains in process, the greater the opportunity for circumstances to change, whether operationally, financially, or strategically.
Many dealer principals assume a transaction can be completed within ninety days. In today’s environment, that expectation is rarely realistic.
Between buyer due diligence, lender approvals, OEM reviews, legal documentation, landlord consents, franchise transfers, licensing requirements, and facility discussions, six months is often a more realistic timeline. Complex, multi-franchise, or multi-state transactions frequently require even longer.
Perhaps the greatest challenge is that nothing inside the dealership slows down during this process. Customers still expect exceptional service. Manufacturers still expect performance. Employees still look to leadership for direction.
Meanwhile, the dealership must continue producing strong financial results. Any deterioration in performance during the transaction can influence buyer confidence, affect valuation, or complicate financing. Successfully selling a dealership while continuing to operate it at a high level requires a degree of discipline that many owners do not fully appreciate until they experience it themselves.
The emotional side of selling is often underestimated
Not every challenge appears on a financial statement.
For many dealer principals, the dealership represents decades of work, family sacrifice, and personal identity. Some are second or third generation operators. Others built their organizations from a single rooftop into substantial dealer groups. Selling that business is far more personal than transferring assets.
Questions naturally emerge: Is this the right time to sell? What happens to my employees? Will my family’s legacy continue? What comes next after closing?
These considerations influence decisions every bit as much as valuation. The most successful transactions recognize that selling a dealership is both a financial event and a personal transition, and prepares for both.
Preparation begins long before the decision to sell
One of the most common mistakes dealer principals make is waiting until they decide to sell before preparing the business for market.
By then, buyers begin evaluating every aspect of the operation through a different lens. They identify inconsistent CRM discipline, declining customer retention, underperforming F&I operations, deferred facility maintenance, over aged inventory, heavy dependence on the dealer principal for key decisions, and incomplete financial reporting. They may also uncover management or cultural issues that raise questions about the dealership’s long-term sustainability.
None of these issues necessarily prevent a sale, but each introduces additional risk, and risk has a cost.
Sophisticated buyers are not simply acquiring current earnings. They are investing in confidence that those earnings can be sustained long after closing. Operational discipline, management depth, accurate financial reporting, and repeatable processes build that confidence. Dealerships that demonstrate these qualities typically attract stronger buyers, maintain greater negotiating leverage, and experience smoother transactions.
The best time to prepare a dealership for sale is years, not months, before going to market.
Successful transactions depend on effective coordination
Generally, what surprises dealer principals is the number of stakeholders involved in bringing a transaction to closing.
A dealership sale involves buyers, sellers, manufacturers, and a host of subject matter experts, i.e., lenders, attorneys, accountants, landlords, environmental consultants, licensing agencies, real estate professionals, and key dealership management. Each has different priorities. Each operates on a different timeline. Any one of them can delay, or even derail, the transaction if expectations are not managed proactively.
Success therefore becomes less about negotiating the highest purchase price and more about coordinating dozens of moving parts while maintaining business performance throughout the process. Throughout the transaction, uncertainty is the constant:
- Uncertainty surrounding OEM approval
- Uncertainty around timing
- Uncertainty during due diligence
- Uncertainty over whether a signed agreement will ultimately become a completed transaction
The objective is to remove as much uncertainty as possible before it has an opportunity to disrupt momentum.
Automotive retail M&A has never been more complex. While valuation remains important, execution has become the defining factor in whether a transaction ultimately succeeds. Dealer principals who prepare early, understand the expectations of OEMs, maintain operational discipline, and surround themselves with experienced advisors place themselves in the strongest possible position, not only to maximize value, but to complete the transaction with confidence and certainty.
Author: George Pero
George Pero is an accomplished leader in the automotive industry. George began his career in the automotive retail sector, where he held various management positions. George’s career achievements include successfully launching, operating, and selling Auctions In Motion (“AIM”), a regional “mobile” auction company that brings the auction to the dealer.
George has extensive knowledge & expertise in mergers & acquisitions in the automotive sector, having overseen more than $1 billion in transactions. His sales and general management experience coupled with his success in M&A activities led George to establish Mach10 Automotive, an Advisory firm offering a 360-degree suite of services for new franchise automotive dealers and wholesale auctions to include performance improvement, succession planning, and M&A.
