Dealership buy-sell post-COVID

With everything going on, buy-sell activity is still very much alive.


he world we live in today is radically different than 180 days ago. Global health and safety mandates focused around enhanced personal hygiene and physical and social distancing have changed the way many Canadians are living their day-to-day lives.

Working from home has become the new norm, and may very well continue well into the future as employers redesign their organizations. Logging on to video conferences replaces the daily commute for many employees. Some believe these changes are temporary and are waiting for the world to return to “normal.”

At the same time, others believe there has been a permanent shift in our business and social environment. The real answer will take time to evolve and will likely end up with a combination somewhere in the middle of both extremes.

After a spring of non-existent economic activity, the summer months have seen a limited recovery. Stock markets seem out of sync as staged re-openings are delivering varied results.

Some privately held companies have rebounded quite nicely, while many others are just hoping to come out of the economic fog into brighter days. Many have their fingers crossed that once the nice weather gives way to fall colours, cool evenings, and eventually winter and living indoors — all-important economic activity will continue its recovery and the path to future profitability. A time when survival will become clearer for many.

The coming weeks will also see the end to (or at least diminished) availability of government subsidies. It will soon become clearer how large the unemployment ranks will truly be. Many businesses have taken these past six months to change their business processes and have figured a better way to operate profitably and successfully with fewer employees.

Having said all that, automobile dealerships are currently proving that the dealership business model is extremely resilient and flexible.

Dealerships all over the country have seen rebounding new and used vehicles sales activity and a steady stream of fixed operations customers. Most are operating with fewer employees. Comprehensive pandemic protocols have been successfully adopted by all dealerships in Canada and customers are responding positively.

Although verall dealership revenues and gross margins are still behind normal, aggressive expense reduction combined with healthy wage subsidy support provided by the federal government has allowed most dealerships to successfully balance the books and provide much needed employment and economic activity to communities right across Canada.

The full slate of auto retail industry suppliers has also done their share by providing various forms of expense relief and payment deferrals in support of their dealership customers. Many of those businesses will quickly need to recoup their deferrals to ensure their own short-term viability.

Vehicle supply is inconsistent as vehicle assemblers continue to deal with interrupted supply chains, labour agreements, and shipping issues. The used vehicle market always goes to the beat of its own drummer. Needless to say, the global automotive industry has been significantly impacted by the pandemic.

On top of trade wars, tariffs, and a newly enacted USMCA, we are in an environment of change and uncertainty. The move to electrification of vehicle fleets may be stalled somewhat by the pandemic, however the longer-term initiative is still a go. Vehicle electrification is still on track to change the face of the automobile in the short-term and long-term future.

Many dealerships of all shapes and sizes are doing business differently. Having taken advantage of pandemic downtime to reassess how they had been operating in previous years, dealerships have been making necessary changes within their businesses to improve operating efficiency; they are planning to come out the other side leaner and meaner.

Dealership transactions require the meeting of minds between sellers and buyers in an unrestricted, free, and open environment with no obligation of either party to proceed. Buyers are taking a gamble on future business levels, and although they base their offer prices on adjusted historical performance — it’s really future earnings that they are after.

Currently, I believe that the future is quite fuzzy, which makes buyers (although eager) a little nervous, and sellers (equally eager) a little anxious.

Buyers are affected by brand, location, growth prospects, and financing availability. Buyers need a crystal ball into where brands are headed with their shorter-term product availability, new product development strategies, product cadence, and facility programs.

The composition of the current competitive market and future growth potential both in terms of market share and unit volume are critical to understand. The sourcing of acceptable financing is a serious consideration, as financing sources tighten their lending policies. In short, investment capital is harder to obtain than in the months and years leading up to the pandemic.

At present, strategic acquisitions are still being contemplated and some deals are getting done. The gap in seller expectation and buyer comfort is quite wide in many current opportunities.

I believe there are more sellers coming to market and there are more buyers looking to capitalize on depressed prices. There are likely to be fewer transactions in the shorter-term, unless either the seller or the buyer blinks — and likely at reduced prices from those of a year ago.

Dealership consolidation is still a strong, meaningful, and strategic element within many dealer group business plans. Some dealers, largely those with significant debt, will likely sit on their hands for a while as they retool their dealer portfolios and try to build retained earnings.

The time-tested fact that lenders will lend when requests are supported by tangible assets still holds true. Borrowing to purchase intangible assets, on the other hand, depends on many variables and is totally dependent on lender desire.

First time buyers, current dealers who own a few dealerships in their portfolios and dealer groups with many dealerships in their portfolios are all potential candidates. The fact that certain brands and markets are in higher demand is a normal part of buy-sell activity. Sellers will also be big and small and normally sell for their own reasons.

Many are aging, some with no obvious succession and others are tired of dealing with yet another economic event. Many are not prepared to reinvent themselves to deal with the new consumer and their online appetite, and others are not comfortable with their brand’s pressure to increase sales and investment. For these reasons and many more, dealership buy-sell activity is still alive post-COVID.

About Chuck Seguin

Charles (Chuck) Seguin is a chartered accountant and president of Seguin Advisory Services ( He can be contacted at

Related Articles
Share via
Copy link