Poll Results: The real impact of Covid on M&A Transactions

According to the recent poll conducted by DSMA on LinkedIn, 33% of participants responded that the average buy/sell transaction takes 4 to 6 months to complete and 16% responded that it takes 1 to 3 months!  That’s almost 50% of participants who think it takes between 1 to 6 months from initial listing to close; including marketing, LOI negotiation, financing, due diligence, OEM approval, etc. That would have been tight without COVID, when the average time to complete a transaction was, in fact, 8 months, across all brands and all markets.

Pie Chart Poll Results

Now think about the complexities Coronavirus has layered onto the normal buy/sell process and let’s consider just one part of the process, OEM approval.

OEM approval has always been known to throw up a curve ball or two, but when you add in the fact that most OEM employees have been working from home since March 2020, the time to complete OEM aprovl has stretched dramatically.  In a lot of cases, OEMs still require physical signatures from multiple employees to approve a dealer. This means the paperwork starts a long snail mail process at the first employee’s home, is reviewed and signed by them, then is re-sealed in an envelope, put in the mail, delivered to the post office, and sent off to employee number 2’s home for their signature, and so on. What once was achieved in 1 or 2 days, now takes as long as 1 to 2 months. 

Other factors are also contributing to the lengthening process, it’s not just OEM approval, but that is an easy example to understand. Combined, the effect of COVID is that the average time to complete a transaction (from listing to close, the whole transaction) is now up to approx. 12 months. So, if you want to sell your store in April 2022, you should be reaching out to DSMA now to start the process!

Time is only one factor you will consider when deciding when and if to sell your business, and although I paint a less than rosy picture of the current transaction time frame, now is actually the best time to sell your business for probably a long time to come. Why? Because the market is seeing a halt in the recent years declining goodwill values as dealer profits are high, demand for acquisitions is high, investment capital is very affordable, and business inventory is low as owners continue to make hay while the sun is shining. But (and it’s a big but), we are already starting to see new inventory come into the market as owners realize that change is coming to the M&A market. The higher than usual profitability won’t last forever and dealers that were thinking of selling right when COVID hit in 2020, are now starting to come back to the idea of selling. As business valuations are based on a normalized value over the past 5 years anyway, sitting on the fence any longer will only hurt your chances of achieving top dollar for your prized asset and attracting a well-financed, well qualified buyer. 

If you have a mind to sell your business, don’t wait any longer, start the process today. 

Carpe Diem!


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