One aspect of selling a dealership that few people discuss is the emotional impact the decision can have on dealer principals, their employees and families. Because of confidentiality reasons, many dealers don’t have anyone to talk to about the emotions they are experiencing.
At DSMA, we understand ALL aspects of the sale: business, financial and emotional. We created this case study so that dealers will know what to expect, when to expect it, and how to deal with the very real emotions they will experience throughout the road to the sale.
BEFORE THE SALE
Eric Levitt and Katie Naughton are partners in both business and life. Until recently the married couple were co-owners and operators of Mike Naughton Ford in Aurora, Colorado and 401 Dixie Kia in Mississagua, Ontario. They frequently commuted between the two dealerships.
The arrangement worked until the pandemic hit, when travel restrictions were implemented between the U.S. and Canada. Travel between the two stores became difficult, and Eric endured five separate two-week quarantines before the Naughton family decided to sell Mike Naughton Ford in Colorado. That left the couple with 401 Dixie Kia, which they had owned and successfully ran for nine years.
The seed to the sale was planted during a Canadian Auto Dealers Association (CADA) presentation in 2021. “We heard a lot of talk about the agency model and how that could lead to the destruction of dealerships’ brand identity,” said Katie. “As dealers we worked hard to set ourselves apart from other Kia dealerships. We also heard about data sharing agreements that might give OEMs the ability to target dealerships’ customers directly.”
Katie and Eric attended the presentation from different locations. Afterwards, Katie texted Eric: Is it time to sell?
At this point, the emotions that Katie and Eric felt were fear and uncertainty. “It was a negative presentation,” said Katie. “We felt dejected, deflated, devalued and helpless.”
They also felt lost, and had no idea what to do next. What was wrong? What was right? They didn’t want to make a mistake they would regret. Seeking advice, the couple reached out to mentors they knew in the industry. One of Eric’s long-time friends and mentors happened to be Farid Ahmad, CEO of Dealer Solutions Mergers & Acquisitions (DSMA). Farid invited them to dinner.
GETTING READY TO LIST
“Our biggest takeaway from that dinner with Farid was that if you are going to sell, you want to do so in a market that is favorable to you,” said Eric. “At the time, the market was hot, and multiples and profits were at all-time highs. After that meeting we were ready to list.”
Still, even after making the decision, Katie and Eric felt nervous, confused and cautious. They were still afraid that they were making the wrong decision, and uncertain of what the future might hold. Farid recommended that they start the process by getting a valuation of their dealership.
During the valuation process, DSMA combed through four years of historical data and financial statements. “The valuation process brought a whole new set of emotions to the table,” said Katie. “There was so much information to provide, and we immediately felt overwhelmed.”
Katie and Eric wanted to keep their decision to sell confidential. However, they quickly realized they would need to bring in their controller to pull the data they needed from the dealership management system (DMS). This made them feel uneasy and anxious that their confidentiality would be breached, which might lead to an exodus of employees.
The valuation process also made Katie and Eric realize that this was real; that they were taking actions that would result in a sale. “It seemed unreal to me that we were selling our baby. This dealership was our baby,” said Katie.
PRESENTATION OF NUMBERS
Less than two weeks after DSMA received the data they needed for the valuation, Katie and Eric were called in for the presentation of numbers.
“I remember Farid handed me the booklet, face down, and instructed me not to turn it over and not to look at the last page,” said Eric. “So, of course I immediately opened it and turned to the last page. He just looked at me, like really?”
The numbers looked good. At this point, Katie and Eric began to feel excited, eager and optimistic. “The emotions shifted quickly,” said Katie. “This is where we boarded the DSMA express. At this point everything started to turn. We were having fun, it was a great time.”
After listing their dealership, Katie and Eric were presented with a list of potential buyers for vetting. They could choose to take away buyers they didn’t want to talk with, and had the opportunity to add a few groups that were not on the list.
Almost immediately, offers poured in. “The process was incredible. We received six Letters-of-Intent (LOIs) within three days,” said Katie. “At this point, things were great. We felt euphoric.”
However, the emotions were short-lived. None of the offers met their basement price, and Katie and Eric had agreed they would not sell unless that number was met. “This was around Christmas. We weren’t getting any more offers and we had a conversation with our DSMA rep,” said Katie. “He didn’t think he could convince any of the buyers to come up in price.”
When no new offers came in, Katie and Eric felt deflated and sad. “We felt undervalued, like our baby wasn’t worth what we thought it was,” said Eric. “This was especially hard because at that point we already felt disconnected from our business and were mentally checked out.”
One day Katie said: “That’s it. We are going to put our dealer hats back on and we are going to kill it. We are going to make more money than ever before.”
Eric texted the news to Farid at DSMA. “We shifted our entire mindset and decided to become dealers again,” he said. “At first, we felt reluctant, but then we felt determined. We could do this.”
Farid invited them to a brainstorm meeting to see if there was anything else that the DSMA team could do.
“Before the meeting we felt perturbed, confused, disappointed and yet, still hopeful,” said Katie. During the five-hour meeting, Eric, Katie and the DSMA team came up with at least thirty ideas to help promote the sale of 401 Dixie Kia. The DSMA team got on the phones and began making more calls.
All of a sudden there was a new buyer on the table, with an offer that was better than they had hoped for. “We knew right away,” said Katie. “This was it. This was the buyer.”
After the meeting, Katie and Eric felt shock, disbelief, invigorated, and then very quickly, confident. “We went from no deal to a deal we didn’t even dream of,” said Eric.
Two days later, Katie and Eric received the LOI for more than was expected. They were thrilled.
“The moral of the story is, don’t give up,” said Eric. “That boardroom meeting turned everything around. Make sure the entire team discusses every issue before throwing in the towel.”
Katie and Eric received the LOI in January and closed on March 31st. “It happened so fast,” said Katie. “DSMA has a process in place that really helps to expedite the asset purchase agreement.” When her family’s dealership in Colorado sold the previous year, using another agency, the process took 10 months. “In retrospect there were a lot of things that could have been expedited in that sale,” she said.
When closing day arrived, Katie and Eric announced the sale to their employees. News of the sale had never leaked, and the employees were stunned. “This was by far the most emotional day for us,” said Katie.
Like many dealers, Katie and Eric had treated and viewed their employees like family. It was heart wrenching, and that day they experienced a flood of emotions. “It was like spin a wheel. We felt tired, guilty, angry, sad, scared, confused, excited, silly, happy, you name it,” said Eric.
Katie spent time under her desk, crying. Some of the employees were crying. “We were a mess,” said Katie.
The next day, Katie and Eric returned to the dealership to finish cleaning out their offices. The employees were waiting for them with cake, flowers, and cards. They were happy for Katie and Eric, yet at the same time, sad to see them go.
One employee gave Katie the red ribbon that he had been saving from the ribbon-cutting of the newly upgraded facility, three years ago. “It was really heart-warming. This meant so much to us,” said Katie.
AFTER THE SALE
The Saturday after the sale, Katie and Eric woke up and realized it was the first Saturday in many years that they didn’t have to go into work. They were unsure of what to do with themselves.
“We felt lost, confused, guilty, melancholy and unsettled. It was just surreal,” said Eric. “For so many years we had a purpose, and now we felt like outsiders.”
Fortunately, these feelings didn’t last. Just thirty days later, their emotions had shifted once again. Katie and Eric traveled to Cancun for a vacation and were considering new career options.
“We were excited about the next chapter in our lives,” said Katie. “We felt eager, energized, inspired, refreshed, renewed and most of all, satisfied we had made the right decision.”
Eric Levitt and Katie Naughton have joined DSMA as Directors of Business Development. In their new roles, they look forward to serving as sounding boards for other dealers who are going through the same decision process and emotional journey that they experienced.
“We understand that selling a dealership is so much more than a business transaction,” said Eric. “For dealers, it is more like a death in the family. It’s the exact same mourning process. We are here to help them through it.”