Dealership Valuation: When is the Right Time?

Article

While there are many reasons to have a dealership valued, the two most common reasons are for a potential sale of the dealership and for estate planning purposes. It’s an important part of doing your due diligence in order to be strategic and make more informed decisions.

Potential Sale

While any time is the right time to have a valuation performed, this is definitely a great year to do so for a potential sale. The pandemic gave dealerships another chance to demonstrate they are nearly recession-proof. Dealerships displayed impressive strength and resilience through the pandemic and its economic pressures.

Many dealerships have shown record profits, and the 2021 industry outlook remains bright. At this time, Blue Sky multiples are high and there is a great deal of acquisition activity in the industry. All of this is likely to have a positive impact on your dealership’s value.

Additionally, it might be advantageous to conduct your sale ahead of potential tax law changes brought about by the Biden Administration’s proposal to increase the tax on capital gains.

Whether you choose to have a full valuation prepared for a potential sale or not, an experienced dealership advisor can help in a number of areas, including:

  • Assisting with establishing a sales price
  • Review of the deal structure to maximize tax savings
  • Providing an analysis of the potential sales proceeds after taxes
  • Deal closing services including detailed closing documentation

Planning for mergers and acquisitions in the dealership industry has certain complexities. You’ll want to be sure to structure the deal to maximize on both sides of the equation.

Estate Planning

A valuation is crucial for substantiating the value of your dealership for estate planning purposes. If you are planning to transition your dealership to the next generation, this could be a great year to put that plan into action ahead of the Biden Administration’s proposal to reduce estate and gift tax exemptions. Depending on the size of your estate, executing a transition prior to the proposed changes could be very beneficial to your overall plan.

Are you considering buying or selling a dealership or are you looking to transition your dealership to the next generation? Our dealership advisors have experience in the industry and can help you get a clear picture of your dealership’s value. Let’s get started.

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