Buy the Broker, Not the Deal
By Phil Villegas
I am a collector of vintage watches. For anyone who doesn’t know too much about vintage watch collecting, this might seem like a nice, innocent and stress-free pastime. For anyone who does know about vintage watch collecting, they will know that it is anything but stress-free and innocent. Vintage watch collecting is ripe with fraud, deceit, and embellishment to name just a few factors. Original, unpolished, unaltered and as true to the condition of how that watch was first produced means everything in the watch collector’s world. For vintage watch buyers who don’t have the level of expertise or resources to evaluate a watch, there is one golden rule when considering the purchase of a vintage watch: “You buy the dealer, not the watch.” In other words, you invest in an individual with the knowledge, experience and reputation necessary to qualify them to properly represent and sell that watch.
This concept of buying the broker is no different than when buying dealership. Some buyers have the necessary financial and operational knowledge to conduct their own evaluation and diligence of a dealership purchase, but many simply do not. Just like the vintage watch world, the dealership sales market is ripe with fraud, deceit and plenty of embellishment, and an inexperienced buyer could easily overpay by millions. In the dealership buy/sell market it’s not simply about the multiple of earnings being paid, but rather what the multiple is being applied to, and more importantly, the sustainability of those earnings. A good dealership broker with a solid reputation is just like a respected vintage watch dealer. A good broker is not going to risk their reputation and credibility in the market by grossly mispresenting the underlying realities and fundamentals of the transaction. Over the last 20 years I’ve seen a lot of brokers come and go, I’ve seen a lot of dealers get burned on the deals unnecessarily simply because the fell in love with deal and didn’t do their homework on the deal or who was selling it to them.
On any buy/sell transaction we get involved in, the first thing we consider is the reputation of the selling dealer and/or the broker before even moving forward. Just remember, no matter how good a deal might look, even a broken watch is still right twice a day.