As compared with the public markets, the private capital markets are like the wild west. I liken it to a frontier town where there’s no sheriff, plenty of gunslingers and news travels slowly by stagecoach.
In my March MTD column, we reviewed some of the proposed changes to federal taxes on the horizon. Since this is the April edition, let’s continue with the tax theme and investigate how sale transactions are taxed under today’s laws.
Elections have consequences. The Tax Cuts and Jobs Act of 2017 was passed by the slimmest of margins in the Republican-controlled Senate and House through a budget reconciliation process that needed only a majority of votes to pass. We find ourselves now with the situation having flipped.
The wealthiest independent tire dealers I’ve met always owned most of their own real estate. They lived in and around the market areas that their stores were in, so they knew the good locations with the best demographics and highest traffic patterns.
Last month, I wrote about how commercial tire dealer profits can sometimes be lower, on average, than retail tire dealers’ profits. I boiled it down to the fact that whoever owns or controls the customer relationship has the power to call their own shots.
In times like these, we learn the business lessons that stick with us for the rest of our lives. One lesson I think we’ll see is that the tire dealers who kept all of their technicians and best sales people employed during the pandemic will recover faster than those who did not.
I run across a lot of 50-year-old tire dealerships that have a mix of businesses, like the retail tire dealership that opened a warehouse to deliver tires to its stores and then started wholesaling to get more volume, better pricing, and more cash profit.
What is managed care? It's different from “fee for service.” It involves a contractual arrangement with your customer to provide all maintenance and repair needs for a vehicle over a two- to three-year period.
Here’s a little history lesson for the young people. Bridgestone Corp. was not always the largest tire company in the world. The acquisition of Firestone Tire & Rubber Co. in 1988 helped make it the largest.
Sophisticated buyers want to know everything about your business before acquiring it so they can be responsible to their shareholders and investors, as well as plan for an effective integration after the sale closes.
With the combination of private equity-owned Mavis Tire Supply Corp. and Express Oil Change & Tire Engineers (Express Oil Change LLC), it’s a good time for tire dealers to understand how private equity plays the acquisition game differently than strategic acquirers like Monro Inc.