NBB Insights:

To Retire or Not Retire -- is there a third option?

by
NBB

“Bridge Deals” bring first-time owners and long-time owners together for profitable partnerships

Sometimes the biggest thing standing in the way of a dealership owner selling the business and retiring is...retirement.

Let’s face it. Never-ending rounds of golf or non-stop fishing don’t sound all that interesting to some people. You’ve worked hard and gained a wealth of wisdom and experience. It doesn’t feel right to walk off into the sunset and leave everything behind.

And in the current climate of pandemic restrictions, technology demands, and ever-increasing expenses, “to retire or not to retire” doesn’t sound like the only question anymore. Do you want to ride this out and do what is necessary to come out the other side successfully?

What if you want to stay active and contribute? What if you want to make sure your employees are taken care of? And what if you want to enjoy a slower pace and fewer headaches but still have some involvement in the car business? Is that too much to ask?

It’s not too much to ask, actually. In fact, it can be a great solution for the seller and the buyer under the right circumstances.

Bridge Deals

At NBB, some of our favorite transactions over the years have been what we call “Bridge Deals.” Bridge Deals bring together two generations of auto dealership owners for the benefit of both, and for the long-term success of the dealership.

When someone is trying to break into the world of auto dealership ownership, it can be difficult to win factory approval for the deal. This can be the case even with a general manager who has been running the daily operations of a store for years. The factory wants to be assured of a smooth transition and the protection of their brand under new ownership, and a first-time owner makes them nervous.

One arrangement that helps secure factory approval is for the current owner to stay on as a partial-owner. For instance, the buyer can purchase 80 percent ownership with the seller retaining 20 percent ownership. With the long-time owner still invested in the success of the business, the factory is reassured and is more likely to approve the buyer.

The buyer gets factory approval and the safety net of having the seller’s experience at the ready, and the seller gets to contribute to the smooth transition he wants for his employees and customers, all while still benefiting from the future upside of the business.

Connecting the right buyer and the right seller for an arrangement like this can be the creative win-win solution both are looking for.  We recognize that these types of deals come with certain risks that need to be quantified and evaluated.

Is a Bridge Deal right for you?

Bridge Deals aren’t for everyone. They take the right combination of buyer and seller to hit it off, and to want to work together for the success of the dealership.

Bridge Deal Sellers:

  • A Bridge-Deal seller is typically a long-time owner who wants to slow down, but isn’t interested in golfing seven days a week. They still want to contribute and stay active.
  • These owners have a heart for mentorship and want to invest in a new owner. In some cases they expected to mentor one of their own children into ownership, but they don’t have a child interested in taking over.
  • They have amassed a wealth of knowledge and experience over their careers, and they’re proud of the successful dealerships they’ve built. They’ve shifted from business-building to legacy-building.
  • Being a resource to a new owner who is serious about building a career in the auto industry seems like the perfect way to wind down a successful career.
  • A continued salary and dealer privileges for a part-time role provides a great step-down opportunity as they ease toward full retirement.

Bridge Deal Buyers:

  • A Bridge Deal buyer is typically a first-time dealership owner who needs to secure factory approval and could benefit from the current owner’s continued involvement.
  • These buyers have the humility to recognize the value of consulting with the current owner over the first few years (or however long they’ve negotiated in the contract).
  • They don’t have a team of people to bring on and would rather work with the employees the seller has already trained.
  • They are smart and want to learn from an expert so they can skip the mistakes that are common for new owners.

What it takes to build a Bridge Deal

Brokering a Bridge Deal is almost like “matchmaking” for business owners. It requires a dual-agent broker who knows the buyer and the seller and can recommend a good-fit partnership. It can be a delicate dance, but we can still protect confidentiality even in Bridge Deals -- NBB has hundreds of qualified buyers who have already signed NDAs with us. We know who the good candidates are for a deal like this.

Bridge Deals aren’t “efficient,” “mass market” deals. They require personal, hands-on brokers who are invested in the success of the deal and the dealership. If you think a Bridge Deal might be a good fit for you, give us a call. We would love to be the matchmaker for your next deal.