March 3, 2016
MBAF's Ira Silver discusses M&A in the automotive industry in Automotive Buy Sell Report.
Have you ever imagined taking a trip down the Amazon River, or maybe going on an African Safari? You wouldn’t dream of taking on such an adventure without the proper guides. Navigating the waters of a major M&A deal, regardless of the side of the transaction, could be almost as treacherous!
Just as you would not rely on a single guide for such a jungle trek, you also need to assemble a team with various skill sets and expertise to ensure the success of your merger deal. Certainly, you need your attorney, and your CPA, but they are only the foundation of building your M&A “dream team.”
The circumstances of your particular merger or acquisition may dictate your ideal team. At the bare minimum, however, you need an accountant, an attorney who specializes in M&A, an automotive dealership valuation specialist, and a banker. Other possible members could be wealth managers and certified financial planners.
You should start assembling your team as early as possible. This will give them enough time to learn how to work together, and strategize for what will likely be a very complex transaction.
Where do I find My Dream Team?
When putting together your M&A team, start with the familiar. Reach out to your existing relationships. You have a trusted relationship with your current attorney or CPA. That would make either one of them ideal for heading up your team. Usually your attorney will be the team leader.
An attorney is critical to executing your M&A transaction effectively. He or she will provide you with qualified legal advice on how the deal should be structured and things such as securities law issues. Most importantly, a law firm that you already have a trusted relationship with will likely have the resources necessary to round out the team in your best interest.
The Qualities to Look For
Even if you are dealing with team members or a team leader that is a known entity, there are a few fundamental qualities that you want to be sure your team possesses. As clichéd as it may sound, the most important quality is experience. M&A transactions are exceedingly complex. Who would you rather have on your team, someone who has done hundreds, or just a few?
Beyond significant experience, the other talents you want in your M&A dream team are:
- Knowledge of the Auto Industry – Any M&A transaction is complex. Those involving auto dealers are even more so. Be sure you team members not only have experience, but experience in our industry. You need a knowledgeable team that can identify credits due on new cars, understand the valuations for fixed assets, and discover unknown liabilities. Such knowledge can save you tens of thousands of dollars, or help make you tens of thousands of dollars!
- Accessibility – You want people on your team that you can get to. You also have a right to know how busy he or she is, and how many other deals they are currently working on, so you can be sure that he or she has the time and resources to devote to your transaction.
- Team Players – It should go without saying that in building a “dream team,” you need people who are team players. Each member of your team needs to be able to work with others, and put his or her egos aside. They must work diligently and with the full knowledge that they are working for you and your best interests, and not their own.
The Role of Your Accountant
Next to your attorney, your CPA is probably the most critical member of your M&A team. If your attorney is your leadoff batter, it is your CPA that is at clean-up!
The main responsibility of the accountants on your M&A team are to prepare and/or review your dealership’s financial statements and to give expert tax advice. This is a very crucial role, and requires significant due diligence on your part, or the part of your team leader. The importance of the accuracy and reliability of a dealership’s financial information in an M&A transaction cannot be understated.
The CPAs on your team are responsible to get all of your financials in order, and most importantly, to make sure they are all 100% in compliance with the generally accepted accounting principles (GAAP) prior to the letter of intent.
It is the accounting team that will be able to help you understand all of the tax implications of a given sale or acquisition, and can help you and your attorneys structure the deal accordingly. Your accounting team is also critical in identifying any possible Section 1031 or other tax planning ideas, such as estate planning, which will undoubtedly arise during any M&A transaction.
On the sales side, by helping the dealer and the broker with good financial information, your accounting team can be extremely important in maximizing your sales price, and in expediting the transaction. The same can be said for the buying side, as supplying the broker with accurate and easy to digest financials can speed up due-diligence and get you to closing that much quicker.
Your CPA or accounting team will also work very closely with your broker, and/or investment banker. On either the selling or buying end, these financial players will help with the valuation of the transaction and will be involved in helping to secure funding. They should know the market, and have strong relationships with strategic buyers and private equity firms. The contacts and experience of these team members can dictate the cost effectiveness of your deal.
Just as in a jungle guide, or a heart surgeon for that matter, you want to be sure you do not shirk when it comes to the members of your M&A team. You want to be sure to hire the very best you can! Even though your life may not depend on it, your financial well-being and your livelihood just might.
Even a simple mistake in an M&A transaction involving your dealership could be painful and costly. Missing some details in a contract, having financial records that are inaccurate, or not doing all the proper due diligence as it relates to your particular dealership, could mean money left on the table on the sell side, or you could wind up with more risk than you thought, if you are buying.
Ira Silver, CPA, CGMA, is a principal in the Tax and Accounting Department at MBAF and is the principal-in-charge of the firm’s Orlando office. Ira has been in the public accounting profession since 1982. He can be reached at (407) 781-0150 or firstname.lastname@example.org
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