Automotive Advisors of America, Inc. now offers published articles on their site to help investors interested in buying new car dealerships. For more information, please visit us at http://www.automotiveadvisors.com
(PRWEB) August 13, 2005 -- Automotive Advisors of America, Inc. now offers published articles on their site to help investors interested in buying new car dealerships. For more information, please visit us at http://www.automotiveadvisors.com
Interviewing Factories and Financial Institutions
Lenders and factories have an affirmative duty not to promiscuously disclose the financial condition of their dealers. We tell you what questions you can and should ask.
The Buyer's Responsibilities
Courts have held that a buyer may not abandon all caution and responsibility for his own protection and unilaterally impose a fiduciary relationship on another. Even the seller's accountants upon discovery that its client's financial statements were misleading at the time they were given out, has no duty to correct them. We tell you what you need to do.
The Physical Inspection of the Dealership
Due diligence requires more from a physical inspection of the dealership then searching for defects in the facility, or potential EPA or OSHA problems. We tell you what else to discover.
Public Information
Data can be obtained from public information to determine not only the financial strength of the dealership, but it can also suggest how to structure an offer more attractable to a seller. Sometimes a seller will accept less money because of the manner in which the offer was structured. Determine what a seller needs, then find a way to enable him or her to get it. We tell you where to look.
The Fallibility of Dealership Financial Statements
Although manufacturers require dealers to file financial statements each month, they should not be materially relied upon.
Financial statements do not provide answers about a dealership; they present a method to formulate intelligent questions in order to pursue answers. Furthermore, industry financial guidelines make good servants, but bad masters. We give the reasons and the questions.
Keys to Analyzing Dealership Financial Statements
Consistency should exist from month to month in each individual account. All inventory and expense accounts should be compared. Note and receive an explanation with respect to major fluctuations. See our website (http://www.automotiveadvisors.com) for a checklist of basic flags" to watch for when analyzing dealership financial statements.
Buying Without Relying
One buys a dealership without relying solely upon a seller's financial statements in almost the same manner in which a manufacturer opens a new point. Major differences in these approaches generally inure to the buyer's benefit. We tell you why.
Officer, Director and Shareholder Approval
Dealers sometimes have silent partners, or sell an interest in the business without informing the factory. In either instance, a potential purchaser could be misled into negotiating with the wrong party. In the case of Michael Gage, president of Michael Gage Chevrolet, the investor negotiated and signed a "Memorandum of Agreement" to buy the store. Gage had no approval from either the Board of Directors, or the shareholders of the corporation. Subsequently, the Board and the shareholders rejected Gage's agreement and entered into and approved a Buy-Sell Agreement, with another party that was consummated. Gage sued the Board and the shareholders in both state and federal court, and lost.
The investors not only lost their time and travel expenses, but also all of the attorney and accounting fees they spent negotiating the contract. We tell you how to avoid the problem.
Questions to Ask about the Business
Why did the Dealership fail or succeed? Why is it important to know both the actual sales and the manufacturer's planning volume? What questions should be asked regarding the dealership's geographical area of sales and service responsibility. We provide a list of questions to ask and answers that should alert an investor to potential problems.
About John Pico
John Pico holds a Doctorate of Jurisprudence, is a vice president of Automotive Advisors of America, Inc. and in the last 33 years has completed over 1,000 dealership transactions. In addition to lecturing about buying and selling automobile dealerships, Mr. Pico has published two books and numerous articles on the subject. For more tips, sources and a list of references and experience, go to http//:www.automotiveadvisors.com.
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The one place to go for advice when investing in an automobile dealership is Automotive Advisors of America, Inc.
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