Written By: Alysha Webb
In our two most recent webinars, we explored preparing to buy and sell a dealership. Our December session focused on the key steps immediately before and after an acquisition that help ensure a successful transition to new ownership for both the buyer and the dealership’s employees.
In “You Bought the Store, Now What? A Roadmap for Post-Acquisition Success,” our panelists offered advice from both the dealership and legal perspectives. Brett Morgan, CEO of Morgan Automotive Group, shared his group’s detailed process for integrating a new dealership. Bert Rasmussen, shareholder at the Los Angeles-based Scali Rasmussen law firm, discussed important legal considerations, including real examples of how things can go awry.
Scaling Through Acquisition
“It took us 10 years in business to reach the threshold of 10 dealerships, and then in the next 10, we've gone on to certainly accelerate our acquisitional pace.”
Morgan Automotive Group certainly has the experience to discuss integrating new acquisitions. The group, which now encompasses 77 dealerships across 28 brands, has been involved in 42 buy-sell transactions, including 16 multi-rooftop deals, since its founding in 2005.
“It took us 10 years in business to reach the threshold of 10 dealerships, and then in the next 10, we’ve gone on to certainly accelerate our acquisitional pace,” Brett Morgan remarked.
Morgan Auto Group is highly decentralized and gives its operators, which it calls general leaders, a lot of “control and leeway,” Morgan noted. That operational flexibility only comes after Morgan has completed its detailed acquisition checklist.
Day-One Integration: Moving Fast, Staying Flexible
There’s no easing into the new process. On day one of ownership, the Morgan Auto Group is “more inclined to kind of rip the Band-Aid off,” he added. The DMS is immediately switched to Reynolds and Reynolds if the acquired store isn’t already using R&R. The Morgan Group also installs its warranty company, CRM system, and inventory management system.
Morgan Auto Group applies this process at the group level, which also includes using the Group’s retail and internal markups, labor rates, and more. “So, we do give our managers some leeway, but they do kind of have mins and maxes, if you will,” Morgan commented.
General leaders have more flexibility in choosing peripheral vendors and specific elements, such as the desking process, the lane process, the service operation, and the BDC operation. Acquired stores may also keep their original name; the Group’s dealerships, with very few exceptions, do not carry the Morgan name.
Morgan Auto Group recognizes that expecting a new acquisition to meet its pro forma run rate too quickly can be stressful for new employees and may lead to rapid turnover. In some cases, they have set expectations too high from the outset, with negative results, Morgan noted. “I think I would allow for 60 to 90 days to materially get on to that pro forma run rate.”
Laying the Groundwork Pre-Closing
“There's several places where I just would say that we've learned to be very proactive.”
Morgan Auto Group’s checklist includes pre-closing processes. Weekly meetings with the acquisition and executive teams begin months before the actual acquisition, if possible, moving to bi-weekly as the closing date approaches. The Group tries to “feel out” the right time to bring in the new store management, whether that is part of the existing team Morgan plans to retain or an operator it will install.
The Group also recommends involving the dealership’s IT team and even major partners, such as the DMS provider, in pre-closing meetings at the appropriate time. “There’s several places where I just would say that we’ve learned to be very proactive,” Morgan explained.
That, of course, requires requesting pre-close access to the seller’s key leadership team members. If Morgan Auto Group already has a relationship with that team, it allows the dealership to get off the ground more quickly under new ownership.
“But we’ve had sellers that said, hey, look, you know I’m not telling my people until we’re a week out, and you won’t meet (the new team members) until the day of the close. So again, you are kind of sworn to the pace and the cadence that the seller wants to move at,” Morgan recalled.
Due Diligence and Early Employee Communication
If possible, once the LOI is executed, but definitely after the APA has been signed, a buyer should be very detailed in their due diligence requests, Morgan advised. Go far beyond the “boilerplate OEM reports” and obtain as much data as possible on Google Analytics, detailed ad spins, traffic management reports from the current CRM, current labor rates, and more, he suggested. “Get all copies of pay plans if you can,” Morgan added. There can be differences between what a seller believes a person’s pay plan is and what it actually is.
Once high-level vendors are involved, there is always a chance of a confidentiality breach, so if employees don’t already know the store will change ownership, “we’re going to push for a store meeting,” Morgan explained. Once employees learn of a sale, it can create a “fear-based environment,” he warned. “Nine times out of ten, we’re going to ask that seller for an early meeting and with their full employee base.”
Morgan’s executive team even shares their personal cell phone numbers and email addresses with the employees of the store to be acquired so any questions an employee may have been hesitant to ask in front of the group can be addressed privately.
The First 100 Days After Closing
Within the first three months, it’s crucial to inspect accounting and data flows to ensure the new processes are running smoothly, Morgan emphasized. This includes confirming that new and used vehicle inventory is accurate in the DMS, ensuring all pay plans are approved and properly uploaded, reviewing repair orders delivered through the DMS to confirm the setup is working correctly, and completing other detailed checks.
At each month-end, all customer engagement paths should be tested to ensure data is integrated and functioning properly. This includes form lead submissions, third-party and OEM websites, and the dealership’s new website. Email, social media, and phone contact information should also be verified to confirm they have been updated and are working as intended.
Setting Expectations and Measuring Performance
“The faster you can install and optimize your effective tech stack, especially your customer facing tech stack, the faster you're going to be able to gauge the true talent of your existing team members.”
It’s also important to help your new employees by clearly defining expectations for their role, how success is measured within their specific department, where they can access that data, and which benchmarks matter most, Morgan advised.
Having the right technology in place and fully integrated is critical to measuring employee performance, Morgan noted. “The faster you can install and optimize your effective tech stack, especially your customer facing tech stack, the faster you’re going to be able to gauge the true talent of your existing team members.”
Closing Day and Immediate Legal Actions
“Most asset purchase agreements will include provisions that provide essentially that the buyer and seller will work cooperatively post-closing to deal with any contracts in transit, things of that kind with regard to the seller's final days of business.”
Bert Rasmussen, who has represented dealers for more than 30 years, discussed the legal steps he advises dealers to take in the immediate, short, and long term after acquiring a dealership.
On closing day, the buyer should verify all documentation, including bills of sale, titles, and related paperwork. They should also confirm the physical delivery of all assets, including new and used inventory, parts, supplies, tools, and other fixed assets. “There’s going to be loose ends,” Rasmussen noted.
Scali Rasmussen is currently working on a case in which a client’s mobile service van was excluded from the purchase. The buyer convinced employees that all the special mobile service tools in the van were included in the acquisition, stripped the van internally, and then returned it. “The seller wasn’t very happy about that,” Rasmussen added.
Employee changeover is another immediate issue to address. “The key thing is that there is no longer an employee-employer relationship with the seller,” Rasmussen explained. The seller must terminate all employees at closing and pay any earned compensation, and the buyer needs verification that those terminations have occurred. Different states have different rules regarding payment for leftover vacation or sick days, so it is important to understand the rules that apply, Rasmussen advised.
The buyer then decides whom to hire under the new ownership. Upon closing, the buyer must also have immediate physical control, including keys, alarm codes, passwords, and “everything else that was supposed to be provided.”
Within the first 30 to 60 days, buyers should confirm that they actually received what they believed they purchased, including legal documents and fixed assets. They should also ensure there are no remaining liabilities, confirm the dealer license and any other required permits or licenses, and verify that the dealership is in good standing with the state.
“Most asset purchase agreements will include provisions that provide essentially that the buyer and seller will work cooperatively post-closing to deal with any contracts in transit, things of that kind with regard to the seller’s final days of business,” Rasmussen explained.
That provision can be crucial. A Scali Rasmussen client purchased a dealership in Virginia, and a post-closing inspection identified a non-compliant fire control panel that had to be fixed in order to receive a certificate of occupancy. The APA included a provision allowing the buyer to operate for 15 days using the seller’s license, but replacing the fire control panel was likely to take longer.
“I’m sweating bullets because not only do we need to go to the seller and negotiate an additional period of time, but we need to be worried about what is the implication of operating for a longer” under the seller’s license, Rasmussen said.
That situation is frowned upon by the DMV and manufacturers, he noted. Fortunately, “we were able to make everybody realize it was definitely not anyone’s fault” that the fire control panel was broken, and the situation ultimately worked out.
Short-Term Legal and Financial Reviews
“Your best bet is to have a calm and harmonious relationship with the seller at all times, but you did pay for an APA to be negotiated on certain terms.”
In the first two to four months, a buyer should conduct financial and contract audits while it is still early enough to identify any seller-period issues and take action, Rasmussen advised. Contracts and leases should also be reviewed to identify any that may have been in default prior to closing, among other concerns.
Within six months, vendor contracts should be reviewed to identify any auto-renew dates, among other tasks. In the first six to nine months, buyers should revisit the transaction documents with audit findings in hand and identify any issues that conflict with the seller’s representations. “Your best bet is to have a calm and harmonious relationship with the seller at all times,” Rasmussen said, but “you did pay for an APA to be negotiated on certain terms.”
Generally, APAs include an expiration date, so Rasmussen recommended that buyers keep a log of issues that may be worth raising with the seller before that date. These could include historical performance that “doesn’t seem to be even close,” missing CRM or customer list data, and similar issues.
Managing Long-Term Risk and Obligations
In the first three years, a buyer should focus on managing legacy risks, such as environmental issues, product claims arising from pre-closing sales or repairs, and employee claims tied to pre-closing employment practices, among others. Beyond three years, there are ongoing obligations to maintain certain seller records for additional years.
After five years, buyers should confirm that all escrow releases have been processed, adjust retention of seller records, document legacy issues and their resolution, and note which post-closing steps worked well for future practice. Any surprises should also be noted to update pre- and post-closing checklists, Rasmussen advised.
Taken together, Morgan’s and Rasmussen’s insights underscore a critical reality of dealership transactions: closing the deal is only the beginning. From day-one integration decisions and employee communication to ongoing legal, financial, and operational reviews, a disciplined post-acquisition process can help buyers avoid costly missteps and set the foundation for long-term success. Their presentations offered far more granular guidance on navigating each phase of the transition, from pre-closing preparation through long-term risk management. A link to the presentation materials, along with the full webinar recording, is available below.
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Catch the full recording of “You Bought the Store, Now What? A Roadmap for Post-Acquisition Success” and download the slide deck below.
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