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Avoiding Closing Table Surprises

By Marilou Vroman, CPA, CFE

Buying and selling dealership’s is no small task, nor is it something to be taken lightly.  With transactions that can take months to complete and involve tens to hundreds of millions of dollars, both the financial risk and reward can be overwhelming.  Here are some items buyers and sellers should keep in mind as negotiations heat up.

Employee Matters

  • Employee compensation plans – Have there been any recent increases in pay or management?
  • Payroll considerations – Most closings will not occur conveniently at the end of a pay period.
  • Employee Vacations – How are employee vacations and time off accrued and paid?
  • “Sacred Cows” – The Dealer’s daughter or son, the Service Manager’s nephew, etc. Gain an understanding of employee relationships and their roles in the dealership.
  • Non-disclosed, undocumented employee privileges – Certain employees may enjoy peripheral benefits that are not documented part of their pay plans.
  • Loyalty to the seller – Certain employees will understandably maintain a degree of loyalty to the seller. Watch for potential conflicts of interest.

Customer & Vendor Matters

  • Legal matters and customer relations – There is a risk that certain transactions may have “gone sideways” prior to the closing date – how to settle complaints belong to the seller’s.
  • Verbal promises to customers – treatment of customer obligations such as deposits and “we-owes”.
  • Pricing arrangements with vendors – Consider vendor relationships with Management where pricing may not be competitive.

Purchase Price Matters & Adjustments

  • Fixed assets – A detail fixed asset schedule will typically accompany an APA with a list of all the equipment, furniture and fixtures etc. that will be transferred. Understand the business purpose of each and conduct a physical inventory to verify existence and condition.
  • Miscellaneous inventories and supplies – The dealership will be likely stocked with reams of paper, toner cartridges, brake clean, postage, and various types of office equipment and supplies that have likely been expensed. Consider these items before the closing.
  • Proration of revenues and expenses – Certain bills may come in following closing such as rent, utilities, advertising, data processing, and so forth. Ensure a documented proration and settlement procedure is in place.


In considering the acquisition of a dealership, there are many items that can end up falling between the lines of the APA.  The scenarios listed above are just a sample of the potential items that could surface during the dealership acquisition process and after the transaction is finalized.

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