Legal Insights for 2025 Buy-Sell Landscape and How Dealerships Can Ready Themselves

With the start of 2025, industry analysts and experts alike have espoused the view, backed by policy assessments and data analysis, that with the incoming Trump administration, dealers can expect “policy changes [that] could create a boom in buy-sell action.”[1] Profitably forecasts along with dealership valuations, depending on the OEM brand, are predicted to rise in 2025 above post-pandemic levels with dealers looking to acquire the “most trusted brands” and “to divest of those [brands] they find more challenging.[2]

So, what does an uptick in buy-sell activity mean for dealers considering the sale of their businesses? It means that now is the time to prepare to achieve your goals, whether those include ensuring the highest purchase offer, or preserving the dealership’s good will legacy in the community and with customers, or locking in job security and benefits for employees, or a combination of all of these. In fact, the following guidance incorporates certain best practices for long-term planning regardless of the sale date of the dealership.

First, evaluate and manage the dealership’s expenses with an eye towards streamlining revenue sources and maximizing dealership profitability. Dealership financial statements, among other financial documents, will be reviewed by prospective buyers and it is fundamentally imperative that all financial information be current, truthful, accurate and transparent. Second, maintain and enhance the positive nature of the dealership’s goodwill and reputation within the community, with customers and employees, as well as with its OEM(s). Such preparation contributes to the overall market value of the business. These goals should be prioritized and ongoing.

And before starting the buy-sell process, gather and organize all pertinent information and required documents. This includes (i) dealership financial operating statements, accounting reports and statements prepared by the dealership’s accountant, and any income adjustments; (ii) current OEM performance reports and requirements and sales and service agreements, including market area addenda; (iii) lists of dealership inventories, including fixed assets or depreciation schedule for fixed assets; (iv) copies of vendor contracts and leases, along with long-term or executory obligations, including the dealership’s dealer management systems (DMS) contracts, and any obligations to dealership customers, such as, “we-owes”, service contracts, etc.; (v) list of any claims, pending litigation and other pertinent documentation; (vi) list of dealership employees, including job descriptions, pay plans and benefits, as well as and any union agreements; (vii) if the dealership real estate is also proposed for sale, existing environmental reports, property appraisals, surveys and other reports relating to the real estate.

This information should be accessible in the early stages of negotiations, ideally before negotiations occur. Relegating this important aspect to sometime afterwards could cause undue delay and misunderstanding between the parties or jeopardize a successful closing.   

Before definitive purchase agreements are prepared and signed, negotiations with prospective buyers might be documented in some form in writing such as through a letter of intent. While a letter of intent is not a substitute for the formal definitive purchase agreements required by the parties and the OEMs to start the approval process, it serves to provide a general outline of the parties’ understanding and proposed terms and conditions of the forthcoming definitive agreements. The parties should consult with experienced buy-sell counsel well before signing the letter of intent, as the LOI itself might give rise to an argument that it is a binding contract, creating legal obligations of the parties.

Throughout the process of the dealership’s preparation for a prospective dealership sale or acquisition, the dealer should work with legal, financial and accounting professionals and consult with them as the buy-sell transaction proceeds from inception to OEM approval and successful closing. The buy-sell attorney should be experienced in buy-sell transactions in the automotive space, along with automotive franchise law, OEM franchise agreements and interactions, and state licensure and regulatory laws impacting the transactions. Similarly, the accountants should be experienced in dealership operations and automotive industry transactions and be postured to maximize sale proceeds and minimize tax consequences in the transactions. A financial advisor or planner can also assist the dealership with managing post-sale proceeds to achieve expressed financial goals. Dealership brokerage firms can provide valuations and relevant market conditions information, as well as manage the transactional process along to a successful closing. Each member of the selling or acquiring dealerships’ teams plays an important role in assisting their dealer clients to mutually achieve their goals.

In 2025, the automotive industry will be rapidly evolving, with technological advancements, changing customer preferences and a new regulatory framework reshaping the market horizon. For automotive dealers looking to sell or buy dealerships, a strategic approach to planning and preparation ensures that they navigate these complexities effectively, mitigate risks, and seize opportunities for growth or divesture consistent with their goals.

[1] Automotive News, December 2, 2024.

[2] The Kerrigan Dealer Survey, 2024.