Auto Notes -- March 2012



Excerpt from SALES OF DEALERSHIPS: 2012

Good News and Bad News

The good news is that there are now buyers for vehicle dealerships. Transactions have, after a prolonged period of limited activity, increased significantly over the last year. Buyers have come back into the market, and there are dealers who want to sell. The bad news is that deals have become more difficult to negotiate. Buyers are being more cautious. Recent past history has tempered dealers’ risk tolerance.

What Happened To The Buy-Sell Market In 2008?

As dealers are painfully aware, the retail automotive market declined precipitously during 2008 and 2009, and the malaise continued through 2010. The combination of an economic downturn, bankruptcies by Chrysler and General Motors, and the lack of retail automotive financing were all factors. Employee lay-offs were common, and some dealerships were forced to close. To survive, dealers focused on cutting expenses and trying to keep or find floor plan lenders. Dealerships for sale were generally in financial distress. This resulted in fewer sales of dealerships. Sales that did occur were difficult and complicated transactions. Many sales were completed with the approval of the Bankruptcy Court. Not unexpectedly, sale prices were depressed.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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