Since David Wilson became a car dealer in 1975, he never sold a store in his dealership group — until May.
He had to sell Desert Lexus, near Palm Springs, Calif., because his veteran operator and partner, Ren Rooney, wanted to retire.
"I didn't want to sell it. I like the business. I like the product, and I like the market," Wilson, 69, owner of David Wilson Automotive Group, of Orange, Calif., told Automotive News. "But I had a 67-year-old partner, and, I get it, he deserves to take his money and go play golf."
In recent years, the aging of America's dealers fueled the buy-sell market as owners decided to retire. But in a twist, now some buy-sells are driven not by the dealer's retirement plans, but by those of the store's operator because of a shortage of general managers qualified to take over the role.
"I know of at least three to four deals that have come to market this way in the first half," said buy-sell adviser Erin Kerrigan, managing director of Kerrigan Advisors in Irvine, Calif. "I didn't hear of any last year."
Kerrigan said the problem of aging, retiring operators forcing sales is "prevalent." When an operator wants to cash in "their 10 percent, the dealer thinks, 'I trust this guy who's been with me 20 or 30 years. I don't want to take the risk to find another operator at this stage in my career,'" she said.
David Wilson Automotive Group, which now has 17 stores, would seem to be big enough to have a bench of experienced operators to avoid such a problem. The group ranks No. 12 on Automotive News' list of the top 150 dealership groups based in the U.S., with retail sales of 46,910 new vehicles in 2016.
Wilson had owned Desert Lexus since 1991, he said. Rooney, a former marketing manager for Toyota, came on to run the store in 1997, buying a 25 percent stake. Desert Lexus sold about 1,500 new and used vehicles a year, constituting a fraction of the group's annual sales and profits, Wilson said.
Having the store's general manager step up to the role of operator wasn't an option. "My general manager there is the same age as Ren," Wilson said. "He wasn't interested in writing him a check to buy him out."
Likewise, many of the other managers at the store were nearly the same age as Rooney, and Wilson feared he'd be faced with making an operator change again if they chose to retire in a few years.
The location was a problem. Nearly a third of Palm Springs' population of about 45,000 is age 62 and older. "We're a big organization, but I didn't have any young guys who wanted to move there to be the operator," said Wilson. "It's a retirement town."
Wilson, out of options, sold the dealership to Greg Shottenkirk, president of Shottenkirk Automotive Inc., which has dealerships in Iowa and Illinois.
Wilson's problems did not end there. Soon after, another partner, Tom Winterling, 62, decided that after 34 years running Toyota of Riverside in Riverside, Calif., he wanted to cash out his 25 percent stake and retire.
Again, Wilson prepared to sell a store, even though he didn't want to.
"I had a broker appraise the store and got a couple of offers on it," he said. But after reconsidering, "I bought Tom out on Aug. 1. We got an offer from a third party, and I matched it."
That store is one of seven U.S. Toyota stores in Wilson's group. It is "very profitable," selling about 6,000 new and used cars a year, he said.
He had young managers eager to run it in part because it sits about 40 miles east of downtown Los Angeles.
"It's metro, there are several hundred thousand people in that town, and it's contiguous with Orange County," where Wilson has other stores, he said.
Wilson promoted the store's general sales manager to become its operator. He is 50, has kids, has worked at the store for 25 years and is "not going anywhere," Wilson said. But he does not have equity in Toyota of Riverside.
Dropping the equity stake may become the way of the future for David Wilson Automotive Group.
"The valuations are so high that the operator can't write a check for it, and I can't afford to give it to him," Wilson said. "So [the newly promoted operator] is on a generous incentive-based pay plan."
Wilson knows the scenario could play out again. His other partners started around the same age and many are now in their 60s.
"They aren't working as hard as they did when they were 30, and I don't expect them to," he said.
When they retire, he plans to buy their equity and fill their jobs with experienced younger operators from his contiguous stores.
"But it's a problem," said Wilson. "The dealers are getting old, and the operators are getting old, too. Toyota is worried about it. They're proactive in reminding you to have a succession plan."
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