Ego is the Single Greatest Cause of Unsuccessful Dealership Acquisitions
By Phil Villegas
During my career I have been fortunate enough to experience a multitude of dealership buy/sell transactions, from being an employee at a dealership, to working for a dealership group acquiring stores, to my current role of advising dealers on the merits of deals they are considering. I’ve seen transactions of all sizes and franchises, from coast-to-coast. In this, I have been exposed to many different types of operators and their respective personalities.
Dealers will expand their businesses for numerous reasons. From opportunity knocking on the door regarding an available store in the neighborhood, to investing excess funds in a known industry, to creating a growth opportunity for existing loyal employees; there are plenty of valid reasons to acquire a dealership. Where we have seen the pitfalls of dealership acquisitions is when the potential buyer’s ego is the primary motivator for expansion. We typically witness this when a dealer has been successful running a few stores and based on that success they believe this same degree of success can be easily replicated everywhere else.
The ego flaw comes to light when the prospective target store’s historic performance is not seriously weighed. Where the operational, geographic and personnel factors of the store have not been fully considered. The simple belief that a new dealer can run a store better than an established successful operator is where many acquisitions fail.
Always focus on the fundamentals of the acquisition and don’t allow ego or prior successes be the leading profitability driver in the new acquisition projection model.