The most important thing about dealer succession plans is to have one, say experts, so you're grandfathered in on a federal estate tax exemption that expires in 2026.
At the start of COVID-19, Fred Salinas was sidelined from his work as dealer principal at Friendly Ford of Crosby in Texas, near Houston, because health experts said the 68-year-old shouldn't be going into the store.
Leadership at the store remained stable, however, because Salinas had a strategy: An eight-year succession plan that started in 2017, designed to place sons Austin and Blake at the store's helm.
"Everything was going smooth and on time, and then COVID hit," Austin Salinas told Automotive News.
Already helping lead, the Salinas sons were elevated to oversee the dealership in Fred Salinas' absence. Weeks became months, and the sons realized they could afford to buy out their father nearly three years early — something the duo did in April 2022.
The Salinas family's preparedness, however, doesn't represent most dealership owners, according to auto retail industry experts.
Erin Kerrigan, managing director of dealership sell-side firm Kerrigan Advisors, of Incline Village, Nev., said her firm estimates more than 50 percent of the auto retail industry is in some transition, from either the second to third, or third to fourth, generation, a process that has become more challenging as businesses get bigger, more complex and more valuable.
"Not every next generation has the skill set to, or the desire to, manage this multifaceted, ever-evolving business," Kerrigan said.
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Kerrigan Advisors is the leading sell-side advisor and thought partner to auto dealers nationwide. Since its founding in 2014, the firm has led the industry with the sale of over 280 dealerships representing $9 billion in client proceeds, including the third largest transaction in auto retail history – the sale of Jim Koons Automotive Companies to Asbury Automotive Group. The firm advises the industry’s leading dealership groups, enhancing value through the lifecycle of growing, operating and, when the time is right, selling their businesses. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, accounting, finance and real estate, Kerrigan Advisors does not take listings, rather they develop a customized sales approach for each client to achieve their personal and financial goals. In addition to the firm’s sell-side advisory services, Kerrigan Advisors also provides a suite of consulting and investor services including growth strategy, market valuation assessments, capital allocation, transactional due diligence, open point proposals, operational improvement and real estate due diligence.
Kerrigan Advisors monitors conditions in the buy/sell market and publishes an in-depth analysis each quarter in The Blue Sky Report®, which includes Kerrigan Advisors’ signature blue sky charts, multiples, and analysis for each franchise in the luxury and non-luxury segments. To download a preview of the report, click here. The firm also releases monthly The Kerrigan Index™ composed of the seven publicly traded auto retail companies with operations focused on the US market. The Kerrigan Auto Retail Index is designed to track dealership valuation trends, while also providing key insights into factors influencing auto retail. To access The Kerrigan Index™, click here. To read the 2023 Kerrigan Dealer Survey, click here. To read the 2024 Kerrigan OEM Survey, click here. Kerrigan Advisors also is the co-author of NADA’s Guide to Buying and Selling a Dealership.
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