Every day, dealers enter into buy-sell agreements and have no idea what the words mean.
I recently worked with a longtime “auto” attorney who told me that he used the same purchase-sale agreement for every deal, whether he represented the buyer or the seller.
He said the parties would eventually reach the agreement he proposed, so he saved everyone time and money simply by changing the names and addresses on his template and no one has ever complained. An incredible story, but true.
Dealer sales and purchases are technical documents. A preposition and a verb could change the price by a quarter of a million dollars or more. I have seen it! A comma here or there, or an adjective inserted in the right place could change the entire meaning of the document.
The dealer said the factory will pay for it. The dealer, the factory said, will pay for it. Identical words; opposite meanings. In one case, the country of the factory, in the other, the country of the distributor. A simple example, without a doubt, but it is still illustrative.
There are dozens of buy-sell instances where traders left millions of dollars on the table, or paid millions of thousands that they didn’t have to pay. And when they left the closing table, neither the parties nor their advisers ever knew what they did.
Definitions
OEM = original equipment manufacturer. OEM refers to parts used in the original assembly of a vehicle – vis-à-vis, the aftermarket parts that can be installed after the car leaves the factory.
The following example does not apply to all transactions, but there are dozens of other technicalities, and various situations will undoubtedly arise in each dirty.
The typical phrase in a purchase-sale, with respect to the parties, goes more or less like this:
“BUYER will purchase all of SELLER’s inventory of current (listed in Manufacturer’s current parts books and/or computer tapes), unused, undamaged, new and factory-rebuilt parts and accessories for General Motors vehicles that sold available at Closing, excluding parts and accessories that are not returnable to the Manufacturer.”*
Suppose, for example, that one is buying or selling a General Motors dealership, how does the aforementioned premium apply to AC Delco parts?
To understand the distinction, one must understand the history of the distribution of aftermarket parts from the various manufacturers.
AC Delco Spares
Delco is an acronym for Dayton Engineering Lab Co. and AC stands for Albert Champion, the man who started Delco.
Just as vitamin manufacturers wanted to take advantage of bargain hunters by allowing grocery stores to sell their vitamins under a different label and at a lower price, General Motors wanted to take advantage of aftermarket bargain hunters by selling parts. from GM at a lower price.
The powers-to-be at GM thought that using the Delco brand would be a way to distinguish parts and accessories from General Motors OEM parts and accessories, and thus limit complaints from their dealers that the factory was going to be in direct competition. with them.
AC Delco was and still is owned by General Motors. Delco parts from General Motors manufacturers and some used in GM vehicles (ball joints, struts, etc.) come with lifetime warranties, if installed by an AC Delco garage.
Some GM dealers use Delco parts because they are cheaper and the factory allows them to be considered “genuine” as far as the customer is concerned. **
But the fact is that Delco parts are “No returnable to General Motors” under the General Motors Dealer Sales and Service Agreement.
Please note that although AC Delco parts are produced by General Motors, they have different part numbers and a different distributor.
Consequently, any GM dealer who stocks AC Delco parts must address the problem and reach an agreement between the buyer and the seller. Before Sign the asset purchase agreement.
Getting to the closing table and then protesting that the AC Delco parts should be counted as “returnable” creates problems. A buyer is entitled to assume that the seller knows what the words in the contract mean at the time the deal is made and if a seller did not include aftermarket parts from the manufacturer *** then that is the problem of the seller.
Brokers, Lawyers, Accountants, Consultants
Which brings us to the topic at hand. Just because someone has run a dealership for 20 years, or handled dealership buying and selling for the factory for 20 years, doesn’t make them a student of the industry when it comes to buying and selling. And, in the case of the lawyer who used the same buy-sell on every deal – buy or sell, neither is being an “automotive” lawyer for 20 years.
As mentioned above, there are dozens of technicalities that come up in every dealership sale.
Furniture, Accessories and Equipment
There are, for example, five ways to value tangible assets. Do you know which definitions benefit the buyer and which benefit the seller? In the sale of a Chevrolet-Cadillac store, the addition of a prepositional phrase added $480,000 to the amount the buyer paid for tangible assets. Neither the buyer nor his advisers ever understood why the price was so high.
Representing both parties
If an adviser (broker, attorney, accountant, etc.) says they will represent both parties in a transaction, what definition do they choose? Is it the one that favors the buyer or the one that favors the seller? If they represent a party, the choice is easy. If they represent both, even explaining the differences would hurt one party. The same is true with respect to other technical definitions and exceptions.
Addition
As I said at the beginning of this article, “regular dealers enter into buy-sell agreements and have no idea what the words mean,” but they all walk away, happy with the results, proving the old adage. “Ignorance is nice.”
*Manufacturers differ in their definition of returnable parts.
** The Magnuson-Moss Warranty Act of 1975 provides, in part, that replacement parts do not void a manufacturer’s warranty, unless the warranty clearly states that they will, or if it can be proven that the replacement device is the direct cause of the failure. failure. Various state laws also protect consumers using aftermarket parts.
*** Most factories have aftermarket parts. Ford has Motorcraft®, Chrysler has MOPAR, an acronym for “MOtor PARTs.”
**** Note: Sometimes an aftermarket part can be both OEM and aftermarket. For example, if Ford uses Bosch fuel injectors when building a vehicle, then the Bosch injectors could be considered OEM on one model car and aftermarket on a different model.
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