When it comes to either buying or selling a dealership, when the deal is done, the parties on the different sides of the table say they all face the same set of challenges. How the issues are prioritized may differ if you’re the buyer or seller, but the concerns remain the same.
“When our family sold Foley Implement Co. in 2013, we had three main concerns,” says Larry Blackmon. In order of importance, he listed them as:
- Welfare of our employees
- Customer challenges
- Integrating the new processes
Nearly every dealer who responded to Farm Equipment’s survey on best practices and most critical issues listed these three factors as those that must be addressed immediately after an acquisition is announced. Responses from the “buying” dealers generally rated customer challenges as most important, while “selling” dealers put their employees at the top of the list.
Implicit in the third point, “integrating the new processes,” is the often frustrating task of assimilating new employees into the “culture” of their new employer. If there was any consensus among dealers participating in the survey, it is changing ingrained habits is a daunting assignment. Dealers also admit that this challenge is where they’ve made their most significant missteps and, in many cases, their most meaningful success.
But trying to accomplish these can require walking a fine line, says LeRoy Thompson of Thompson Equipment. The biggest challenge, he believes, is “Maintaining the integrity of all those involved, and not losing the ‘good’ things about both companies.”
As an acquiring dealer, Gaetan Cournoyer of Groupe Symac, adds, “We have to realize we are a newcomer in the community.”
Change is Hard
“The biggest challenge for acquisition dealers is keeping good employees as you try to change the culture and implement process changes,” says Howard Wickham of Wickham Tractor. “People generally don’t want change and many long-time employees figure it’s a good time to quit or change careers. Generally, the acquiring dealer has to initiate cost reforms (cuts) to get a store more profitable and in alignment with their new cost structure. Employees hate to lose anything that they feel they are entitled to.”
This was the sentiment most often expressed by dealers who have been through the acquisition process. “The main challenge we faced on our last one was integrating the personnel and our practices into the new location. It is human nature to think the way they were doing things was the best way. The most important thing you can do is put your people into the management positions and start the process of integrating the location into your culture [immediately],” says Mike Hansen, Arthur Farm Power/DBA Farm Pride.
Lance Carlson of Quincy Tractor couldn’t agree more and adds, “Some people jump on board and some people don’t make it. Some think that with you not being there everyday they can continue to do things their way and work against you in the end. It starts with the right manager to enforce your changes, then you have to support the manager and weed out the people who are not operating to the new companies policies.”
Tom Rosztoczy of Stotz Equipment, also advises that the “one culture” acquiring dealers want to install must be clearly defined. “Only then can it become common across all stores.” And he concurs with Carlson on what it takes to truly imbed a new culture.
“If the ‘one’ culture is really the culture of the acquiring business, then the only way it really takes root in the new stores is if someone from the acquiring company takes on the key leadership role in the new stores. The leader of the new stores has to believe in the ‘one’ culture 100% and to have lived it prior to the acquisition.”
Speed of Change
One area where there are two distinct schools of thought is in how fast changes should be initiated. While most dealers believe that it’s best to move quickly when they feel changes are necessary, others believe acting too quickly is a serious mistake. As Tim Brannon, B&G Equipment, cautions, “A new broom sweeps clean, but the old one knows where the dirt was. Even if the new owner has to make changes, it must be done gradually.”
No ‘Big Bangs’ for New Employees
For Clint Schnoor, president of Agri-Service, the major issue transitioning a dealership to new owners centers on the employees of the store being acquired. “The employees of the company we are acquiring expecting a ‘Big Bang’ change has been our biggest challenge. We typically spend a lot of time becoming familiar with an organization prior to us making the decision to buy. Our decision is predicated on what we feel the fit will be between the cultures of both companies,” he says.
“We may not make an acquisition if we cannot see a clear way to have the cultures fit. For this reason, we do not have major changes to make to get the integration to take place.”
Because assimilating the new staff into the new organization is so critical, Schnoor says open and honest communication is a must for a successful transition.
“The next challenge is having a reasonable amount of time to be in front of the employees of the company you are buying. For many reasons, the timeline from going public on a potential acquisition and the actual closing is very short. This means that change is fast for the employees and that can be a hard adjustment. I am not sure this can be changed, but lots of honest, open communication helps. Having leaders in front of them on multiple occasions helps but having some of your non-leadership employees spend time at the new dealership is critical,” Schnoor says. “We feel like these interactions really help the employees know what the company who just bought them really is like.”
Tim Young, Young’s Equipment, says, “It is important to take time to become familiar with the existing culture and really understand the business processes that are in place. The biggest mistake is to implement too many changes too quickly. Another one is to not recognize a few of the best practices that the acquisition currently uses.”
Concurring, another dealer adds, “New owners, most of the time, want to impose their way of doing things and do not listen to the original staff. It takes time to have all involved people on the same page and sometimes it never [happens] and new owners begin to replace people and lose precious time and people. They don’t know that will impact the customers.”
At the same time Rosztoczy believes the biggest mistake a dealer can make is “Not making changes fast enough and not moving a leader into the acquired stores from the existing stores right away.”
Along these same lines, Herman Wilson, Pioneer Equipment, admits this was a problem area for him. “The biggest mistakes that I have made are not recognizing the weaknesses of certain employees of the acquired dealership. An even more significant problem is not recognizing weaknesses in the manufacturer’s people whose help is vital in achieving market success.”
Stay or Go?
Maybe the stickiest issue the acquiring dealer confronts is whether or not to retain the services of the previous owner or top managers. Asked to name the biggest mistake he’s seen in these situations, James Sommer of Service Motor Co. says it is retaining existing management. “It is difficult to change a culture unless you change the leadership.”
Hansen of Farm Power is in total agreement on this point. “It just never works,” he says. “If they want to continue to be involved the best way is to move them to another location, but do not leave them in power in the store they managed or owned.”
Blackmon, who today is the Foley, Ala., store manager for SunSouth, the same location his family sold to the dealership group, couldn’t disagree more. He says the biggest mistakes he’s seen acquiring dealers make are “leadership changes that weren’t necessary, as well as radical process and policy changes.”
He believes that the approach taken by the acquiring dealer can make all the difference in the world, and offers his own experience. He says, “I can tell you today that everyone in this location took to the processes pretty quick and some would tell you that it made life a little simpler with all the support that larger dealerships are able to manage from a support center type of organization that SunSouth LLC has built.”
Joshua Anderson, Anderson Sales and Service, also feels strongly that working with the old owners is critical for a successful transition. “The ability to evaluate and work side by side with the previous owner for a timeframe that works best for both parties will ensure success. Any transition will result in a temporary loss of performance, but the amount of time for recovery and eventual growth will be determined by the attitude of the new owner.”
Making Everyone Happy
When it comes to the staff of the newly acquired dealership, most dealers agree that it may require some time for them to acclimate to the new ownership. One dealer says he doesn’t have a problem giving employees at a newly acquired dealership some time to adjust, but adjust they must. He says the biggest mistake the new ownership can make is “trying to make everyone happy.”
He explains, “All of our acquisitions have been contiguous acquisitions, which means we have been ‘doing battle’ with them for many years. It’s very difficult to come in and expect these new employees to be totally receptive.”
At the same time, he’s come to know that “Some employees of the newly acquired locations will never be on your team. They will do everything to disrupt the culture change because, [they say] ‘that’s not the way we do it.’ ‘Well, it is now!’ You have to be welcoming, but at the same time, you have to set the direction going forward. This is our process and we expect everyone to do it this way. You can have compassion initially but after a short time, you have to intervene and find out if they want to be on your team. If not, no hard feelings, ‘Best of luck to you!’”
He adds that too often dealers try too hard to do the “right thing.” He says, “We worry too much about trying to keep all employees and spend far too much time working with some on change. When I look back on our acquisitions, we could have saved a lot of time and frustration if we would have followed our gut and cut people that we knew deep down would never be on our team. Invariably, when we do get to the point where we part company, other employees tell us, ‘It’s about time.’”
Over the years, Wickham of Wickham Tractor, has observed other dealers make several fundamental mistakes based on faulty beliefs going into the deal. These, he says, include, “Thinking they can keep all of the good employees. Thinking they can change the culture without losing a lot of business. Thinking that acquiring another location means they will make more money. Thinking that adding another location will make them happier. All mistakes!”