Acquisitions _ Disposals

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					                                                         Issue 16 Winter 2007




              Dealer profitability is tracking at 0.9%
              for the 9 months to September 2007,
              indicating another tough year for the
              average dealer.

FSA REGULATION – THREE YEARS ON
   Is your glass half empty or half full?

                  CAPITAL GAINS TAX
          What exactly are the changes?

             BUSINESS ACQUISITIONS
                Minimising your VAT hit

    OCTOBER CONFERENCE REVIEW
A key event in the motor retail calendar




      ™
           Acquisitions
           & Disposals
IN THIS ISSUE
  IN THIS ISSUE                                        BUSINESS ACQUISITIONS MINIMISING YOUR VAT HIT | P2


                                BUSINESS
 BUSINESS ACQUISITIONS                                                                                   context of the overall tax plan-
 Minimising your VAT hit                                                                                 ning performed for the company
                                                                                                         and took account of their wider


                                ACQUISITIONS
                                                                                                         business objectives.
 TRANSACTIONS SPOTLIGHT
 David Beswick                                                                                           Our advice would be that as
                                                                                                         soon as you start to consider the


                                MINIMISING
 OCTOBER CONFERENCE                                                                                      acquisition of a new business
 Sensory selling techniques                                                                              you should make sure that your
                                                                                                         professional advisers are fully


                                YOUR VAT HIT
 KEY YARDSTICK REVIEW
 Results for 9 months to                                                                                   By careful structuring of
 September 2007                                                                                           the deal, we ensured that
                                                                                                            no VAT was payable on
 CAPITAL GAINS TAX              Careful planning can often                                                 the transaction thereby
                                                                                                            avoiding the £1 million
 What exactly are the
 changes?
                                mitigate the amount of VAT and                                                   cash flow hit

 COMPOSITES
                                other associated taxes that may                                          briefed as to the nature of the
                                                                                                         proposed deal and your inten-
 Realising the value            be payable.                                                              tions for the future development
                                                                                                         of your organisation. This will
 FSA REGULATIONS                Many people believe that            VAT return, which would obvi-        enable them to formulate the op-
 Three years on                 payment of VAT is something         ously put an immense strain          timum tax planning solution for
                                that cannot be avoided, but         on working capital and would         you ensuring that shareholder
 PLANNING TO SELL?              the reality is that careful         attract large amounts of interest    value is maximised.
 Achieving the best price       planning can often mitigate
                                the amount of this and other        It is vitally important that         Finally, although it can be easy
                                associated taxes that may be             VAT is not ignored,             to concentrate on the direct tax
                                                                    as minimising this liability         effect of any deal, do not forget
                                payable. This is even more
PUBLISHER
 PUBLISHER                                                          can relieve potential cash           indirect taxes such as VAT.
                                essential when undertaking                                               The lead time before, for exam-
                                a large scale transaction                  flow pressures
                                                                                                         ple, the corporation tax conse-
                                such as the purchase of a           as a consequence of the ad-          quences of a decision are felt
                                new business.                       ditional borrowings required to      can sometimes run into years,
                                                                    fund it. In addition, this would     but as VAT is a transactional
 Trevor Jones                   It is almost second nature to       have increased the stamp duty        tax, the time before settling
 Sutton House,                  ensure a deal is structured in      land tax (SDLT) payable on the       any liability can be a matter of
 Acorn Business Park,           an efficient manner from an         transaction by £40,000, repre-       months. Taking on a new busi-
 Heaton Lane,                   income tax and corporation          senting a real cost to our client,   ness is complicated and costly
 Stockport,                     tax perspective but it is vitally   as this cannot be reclaimed and      enough without incurring an un-
 SK4 1AS                        important that VAT is not           tax relief is only obtained at the   necessary tax charge in the first
                                ignored, as minimising this         time a property is sold.             few weeks.
 Website                        liability can relieve potential
 www.trevorjones.uk.com         cash flow pressures and provide     By careful structuring of the        For further information
                                real savings. This fact was         deal, we ensured that no VAT         contact our specialist motor
 Email                          clearly demonstrated in the         was payable on the transaction       trade VAT advisor Michelle
 enquiries@trevorjones.uk.com   case of a recent transaction        thereby avoiding a £1 million        Malone on: 0161 475 4700
                                undertaken by one of our clients.   cash flow hit and £40,000 SDLT
 Telephone                                                          charge. We liaised with the
 +44 (0)161 475 4700            Our client bought the share         seller’s accountants and solici-
                                capital of another motor trade      tors to ensure that the transac-
 Fax                            company. At the same time,          tion qualified for what is known
 +44 (0)161 475 4705            it bought the freeholds of the      as “transfer of a going concern”
                                company’s trading premises          treatment, which meant that it
 Contact                        from its parent company and         was taken outside the scope of
 David Kendrick and Deb Fox     associated pension scheme for       VAT altogether. This involved
                                £5.5 million. The intention was     persuading the seller to com-
 Design and Print               to hive up the new company’s        pletely restructure their VAT
 Bourn Design                   trade and assets into its exist-    registration prior to sale and
                                ing company immediately after       advising our client to delay
                                purchase.                           considering a hive up until a few
                                                                    months after purchase.
                                All of the property purchases       The key to the success of our
                                would have been subject to VAT      VAT planning was our early
                                amounting to a cash outflow of      involvement in the deal. This
                                £1 million. Even with careful       allowed us to influence the deci-
                                timing, our client would have       sions taken by the vendor to the
                                needed to fund this amount for      advantage of our client. Most
                                at least two months before it       importantly, we ensured that the
                                could be recovered on their next    VAT advice was given in the
 WWW.TREVORJONES.UK.COM                                                      TRANSACTIONS SPOTLIGHT DAVID BESWICK | P3

In June 2007, the                     By early March, Heads of Terms          they do listen to what the deal-           circumstances. I would have no
                                      were agreed and the sale was sub-       ers have to say.”                          hesitation in recommending the
shares of Grantham                    sequently completed on 30 June                                                     teams at Trevor Jones and DWF
Motor Company                         2007. All objectives were com-          Advice to TO OTHERS
                                                                              ADVICE Others                              Solicitors – by spending a little
                                      pleted – price, timetable, accept-                                                 up front, we saved a whole lot
Limited were sold to                  able buyer and, most importantly,       Having been through the disposal           more in the end.”
Vertu Motors plc for                  confidentiality was maintained          process first hand, David has a
                                      throughout. This was achieved by        number of recommendations to               The FUTURE
                                                                                                                         THEFuture
the sum of £4.6m.                     ensuring that all of the potential      make to fellow dealers.
                                      acquirers were qualified fully be-                                                 David has now evaluated a
                                      fore any information was released                                                  number of other business op-
                                      to them.                                                                           portunities which will keep him

David Beswick, who was then
Managing Director of Grantham,
together with the other sharehold-
ers, Verity Bryant and Chris Tay-
lor, decided that it was the right
time to sell should the right buyer
be identified.

“A number of objectives had
to be met in order for us to go
ahead with the deal”, says David.
                                                                               David Beswick (right) and Chris Taylor (left) receiving the
                                                                               MotorTrader Used Car Dealer of the Year Award, 2006.
“The deal had to be made on a
full share basis at no less than
the minimum price we agreed.
The purchaser had to be ap-           REFLECTIONS                             “Selltime –
                                                                              right
                                                                                    at the                               occupied in the future. But by
                                                                                                                         selling up at the right time, David
proved by Honda, and they would                                                                                          is now in the fortunate financial
have to commit to retaining
our staff. Finally, the two most
                                      David admits to missing the
                                      industry and the day-to-day
                                                                              don’t wait for                             position of being able to take his
                                                                                                                         time in choosing his future path.
important factors to us were that     involvement with the team he had        your business to                           Without doubt, he has the skills
the deal should be completed by
30 June 2007, and confidentiality
                                      at Grantham, but says he is now
                                      coming to terms with the change.
                                                                              go into decline                            and experience to take any future
                                                                                                                         venture to success – Grantham
must be maintained throughout                                                 before consid-                             was one of the top ten Honda
the transaction.”                     Reflecting on his time in the
                                      industry he comments, “If there
                                                                              ering your op-                             groups in the country for vehicle
                                                                                                                         sales, market penetration, retail
Based on the criteria stipulated,     is one thing I would like to see        tions….after all,                          hours, profitability, return on
Trevor Jones recommended that                                                                                            sales and return on investment.
Grantham went through a process
                                      change in the industry, it would
                                      be for manufacturers to treat
                                                                              would you want                             Whatever David moves on to
of Vendor Due Diligence. De-          dealers as customers rather             to buy a busi-                             next will no doubt be a very suc-
tailed financial and legal reports    than as dealers.” He goes on to                                                    cessful venture, which focuses
were prepared highlighting any        say, “There are too many people         ness that was                              on staff and customers alike.
anomalies before information was      working at a senior level in the        making losses
released to potential purchasers;
this meant that when the purchaser
                                      motor industry who show little
                                      or no appreciation for the dealer       year on year?”                             THE BUYER
came to the table with their offer,   as a customer. Over the years I
opportunities for them to negotiate   have worked with many differ-           He also says “Get yourself pro-            Robert Forrester, CEO of Vertu
the price were limited. The pro-      ent manufacturers, but without          fessional advice. The old maxim            Motors plc said “Grantham
duction of a detailed Information     a doubt, Honda were the best.           “you get what you pay for” cer-            Motor Company was of
Memorandum was also crucial in        They are very approachable and          tainly proved to be true in our            significant interest to us
maximising the transaction value                                                                                         when it was brought to our
as it clearly stated the norma-                                                                                          attention through Trevor
lised profit level of the business,                                                                                      Jones’ Dealermatch service.
property details, employee chart                                                                                         Not only was the business a
and a number of other key areas                                                                                          great opportunity for us to
a potential acquirer would want                                                                                          start our relationship with
to understand before submitting                                                                                          Honda, but it was also a very
an offer.                                                                                                                well run regional group and
                                                                                                                         had a proven track record with
David says, “Yes there was a cost                                                                                        delivering strong profits. Since
to us for this, but the problems                                                                                         the transaction completed the
that came to light were rectified                                                                                        business has integrated well
by our team and therefore never                                                                                          into our group structure and
became issues for us later on                                                                                            we look forward to improving
in the transaction. It kept the                                                                                          the efficiencies further to drive
negotiations on an even keel and                                                                                         profitability.”
avoided potential conflict areas
and unforeseen diminution of                       David Beswick (right) and Verity Bryant (left) receiving the
the price.”                                        MotorTrader Aftersales Dealer of the Year Award, 2006.
WWW.TREVORJONES.UK.COM                                                       OCTOBER CONFERENCE TREVOR JONES | P 4/5




 OCTOBER
 CONFERENCE
October 2007 saw the
annual Conference held
by specialist accoun-
tancy firm Trevor Jones
and MotorTrader, spon-
sored by NatWest Bank,
held at venues in the
north and south of the
country. The Confer-
ence, which has become
a key event in the mo-                 aimed at “Extracting Real Profit”.
tor retail calendar once
                                       Webb, one of the main speakers                               Visual People
                                       at the annual NADA convention
again concentrated                     in the US, was making his UK          These people can be recognised by use of such words as “saw”,
                                       debut. Having nearly 20 years’        “look”, “show”, “see” and “picture”. They want to be shown what
on specific issues of                  experience in motor retailing in      the vehicle can do, they want to look at the car inside and out, they
concern to dealers and                 the States, Webb now advises and      want to picture themselves in the vehicle.
                                       trains both publicly and privately
manufacturers alike in                 owned dealerships. His sales and
the current market.                    management training programmes
                                       have been proven to raise profit-
                                                                                                 Auditory People
                                       ability by as much as 142 percent.
                                                                             Auditory people need to hear the information directly. They will
                                                                             used words like “hear”, “tell”, “listen”, “sounds” and “explain”.
                                       An advocate of continuous train-
                                                                             For these people to be made to feel in their comfort zone, they
                                       ing and self-improvement, Webb
                                                                             need someone to tell them about the benefits and explain how it
                                       himself went back to selling cars
                                                                             will affect them.
                                       last year in order to keep his own
                                       skills up-to-date with the industry
                                       and the quirks of customers in
                                       an ever-increasingly informed
                                                                                              Kinesthetic People
                                       market.
Michael Jones of Trevor Jones,                                               This group of people need physical contact with what they are
opened the October Conference      There are a number of areas where         considering. They need to be able to “feel” the benefits to them-
with a review of market perfor-    motor dealers can make a differ-          selves; they want to “touch” and become “emotional” with their
mance to date. Jones said that     ence to their bottom line profits,        proposed purchase.
profitability up to August was run-according to Webb. The differenc-
ning at 0.6 percent, although the  es in extracting that profit however,     of person they are dealing with         would not necessarily feel com-
top 10 percent of dealers were still
                                   stems from how customers are              early in the process, then they can     fortable working in a call centre.
achieving levels of 4.2 percent.   treated by staff. Webb points out         change their own sales techniques
Results in used car sales appeared that people usually take in informa-      to offer the customer the proposal in   Extracting real profit from the vari-
to be one of the key differences   tion and process it in one of three       the way the customer responds to.       ous business streams in a dealership
between the top and bottom per-    different ways, and that sales staff      Webb also says that dealers should      is an achievable target. Webb went
formers.                           need to be able to recognise the          look at their own staff –               on to stress that delegates need to
                                   type of customer they are dealing         if any staff members are under-         give sales training to their aftersales
In excess of 250 dealers, manufac- with in order maximise the selling        performing, it may be that they         people “These are the best people
turers and industry contacts then  opportunities available to them.          are in the wrong role within the        to sell oil changes, air conditioning
went on to hear guest speaker,                                               business. For instance, somebody        service and tyres, so give them the
Paul Webb, in the conference       If sales staff can identify the type      who is naturally a “visual” person,     tools to do this” says Webb.
  WWW.TREVORJONES.UK.COM                                                               OCTOBER CONFERENCE TREVOR JONES | P5




                                                                              you increase new sales, and at the   sales, strong aftersales, and a
             ideas – can’t wait
      “Great to digest.                                                       same time you increase your used     firm control on costs. If you get

                       “
                                                                              car stock to give variety to used    those three right, success tends to
                                                                              car customers. More used cars        follow.”
             Stephen Scott, Bristol Street Motors                             sold = more profit.”

Last year 7.5 million used cars
were sold in the UK, but dealers
still look at this business stream as
                                        site and make themselves familiar
                                        with them”, says Webb. “Then
                                        when your customers come to
                                                                               “always too closepastthe woods –
                                                                                Made me review
                                                                                                      to
                                                                                                           knowledge…
a “cheaper option”. “How many
times have you noticed that a
                                        look around, the sales staff are
                                        able to tell them everything they
                                                                                   you can’t see the trees.“
carpet is getting a bit tatty in your   need to know in order for them to          Grant Long, Norfolk Motor Company
showroom? What do you usually           make an informed decision.”
do with it? You send it down to                                               Steve Branney, head of the mo-
                                                                              tor retail team at NatWest Bank,

  “Veryideas and trainer. Brilliant
        effective
                      methods.“
                                                                              concluded the conference by
                                                                              summing up that “the three key
                                                                              elements behind a successful
     Wayne Bradley, Lythgoe Motor Group                                       dealership are strong used car

the offices of your used car facil-     Webb goes on to note dealers’
ity don’t you….after all – used car     behaviour when it comes to valu-
= used carpets”, says Webb.             ing trade-in vehicles. He says
“We all know there is potentially       “Although it is natural to want
more money in the bonnet of a           to give the best possible price to
used car than a new one, yet we         benefit the dealership, if you give
still insist on treating used cars as   higher trade-in values, people are
second best. Sales staff should sit     more likely to purchase a new car
in every vehicle on your used car       from you. If they purchase new,

At popular request, Paul Webb will be coming back to the UK in April 2008 with
a session aimed at sales managers and sales staff.
Watch our website for more details. www.trevorjones.uk.com



                                                                        Trevor Jones would like to encourage readers
                                                                        of Driving Force to keep themselves up-to-date
                                                                        with issues that affect them throughout the year
                                                                        by visiting www.trevorjones.uk.com

    As well as getting up to the minute news regarding industry matters, visitors can:

       Look up the latest profitability figures                    Book places at forthcoming events
       Check current year tax rates                                Search for other services at the touch of a button
       Register for acquisitions and disposals                     Download newsletters & publications
                                   We can also keep you informed of issues affecting the motor industry via email.
                                 If you would like to receive these alerts please email updates@trevorjones.uk.com.
  WWW.TREVORJONES.UK.COM                                                                                 CAPITAL GAINS TAX ACT NOW | P8
Every motor dealer is
familiar with the need to
exploit opportunities when
they arise within their
business, whether we are
talking about sourcing
vehicles or making a sale.

The proposed amendments to the
Capital Gains tax rules, announced
in the recent pre budget report, are
no exception. Acting before April
next year may minimise the amount
of tax you pay on the disposal of
your assets by up to 8%. This can
equate to a significant amount if
you are considering withdrawing
from the motor trade by selling
your company or disposing of your
personally owned property.
In addition, if you wish to purchase
                                        It reduces the amount of chargeable        The abolition of the minimum            will pay far more Capital Gains Tax
an asset, the changes may provide
                                        gain subject to tax based on the           ownership period also means that        on disposals after 5 April 2008 than
a bargaining tool to ensure a
                                        complete number of years, up to            you will no longer be disadvantaged     under the existing regime.
favourable price is agreed, as the
                                        a maximum of 10, that the asset has        if you need to buy and sell assets
seller may be keen to finalise the
                                        been owned since this date. There are      within a short time scale. The 18%  It is difficult to give general advice
transaction prior to the new rules
                                        two types of taper relief, with more                                           concerning what action should be
                                                                                   will apply to all disposals irrespec-
taking affect.
                                        favourable rates being given to business   tive of ownership period.           taken as a result of the amendments
                                        assets than non-business assets. After a                                       to the legislation, as each case must
So what are the changes, and                                                   In response to the wide criticism the be looked at individually and there
what do they mean for you?                  Acting before April next           proposals have provoked from both is still uncertainty surrounding what
                                             year may minimise the             the tax and business communities,       the final legislation will contain.
 Currently, when an asset subject to     amount of tax you pay on the the government has now announced It is important however, that if you
 Capital Gains tax is disposed of by       disposal of your assets by that a form of capital gains tax relief are considering disposing of any
 an individual, it may qualify for two                up to 8%                 will be available for those business assets, you must seek advice imme-
 allowances or reliefs – indexation                                            owners who are selling their assets     diately to ascertain whether it may
 allowance and taper relief. If the     two year ownership period, assets held                                         be more favourable for the transac-
 proposals in the pre budget report     personally and used by a business               The abolition of the           tion to take place prior to April next
 become law, both these allowances or shares held in a trading non-plc           minimum ownership period year or after.
 will be abolished from April 2008      could qualify for a minimum tax          also means that you will no
 and will be replaced by a flat rate of rate of 10%. This will almost              longer be disadvantaged             As a final point, it should be noted
 tax for capital gains of 18%.          double to 18% for disposals after         if you need to buy and sell that some capital gains tax reliefs
                                        April 2008.                               assets within a short time are unaffected by the changes.
 Indexation allowance takes into                                                                  scale                The most important of these are
 account the effect of inflation on     Owners of non-business assets                                                  principal private residence relief,
 the original cost of an asset when     should benefit from the changes        because they are retiring. Although business asset rollover and business
 calculating the profit on its sale and however. Many of you, for              details are sketchy, it is thought that asset gift hold over relief.
 is based on any ownership period       example, hold investment proper-       £100,000 of any gain realised will
 between March 1982 and April           ties on your company balance sheet be exempted from CGT, and there
 1998. In practice, it tends to double as well as trading assets. Under the are rumours that further reliefs for
 the allowable cost that can be         old rules, this tainted the business   other individuals may also be under For further information
 deducted from the sales proceeds,      asset status of the shares, meaning    consideration. Although any miti-       contact our specialist
 if the asset has been held for the     that the effective rate of tax on any  gation of tax payable is welcomed, motor trade tax advisor Liz
 whole of this period. Disposing of     disposal was a minimum of 24%.         it is still likely that many owners     Gallagher on: 0161 475 4700
 your assets after 5 April 2008 will    From April you will see this drop
 therefore result in a large increase   considerably to 18%.




                                           ITAL
 in your tax charge, even taking into




                                        CAP S TAX
 account the lower rate of tax that
 will be applied to any profit made.

The situation is somewhat more




                                        GAIN
complicated for Taper Relief as you
may be a winner or loser depend-
ing on the type of asset you hold.
Taper Relief is given for ownership
periods after 6 April 1998.
                                                                                                                                                          !
                                                                                                                                                   OW
                                                                                                                                                N
                                                                                                                                        T
                                                                                                                                      AC
 WWW.ASEONLINE.COM                                                                   ASE THE VALUE OF COMPOSITES | P9



THE
VALUE OF
COMPOSITES
For nearly 20 years ASE has produced          •	 Daily composite functionality               •	 Reports that integrate
manufacturer and dealer composites            •	 Interactive composite output                   management accounts,
which have not only been accepted but                                                           budgets and composite data
                                              •	 Integrated management
embraced by their users. This is because
ASE believes that the aims of a composite        accounts and budgeting                      •	 Reports available when the
programme are to:-                            •	 Automated distribution                         manufacturer wants them
                                              •	 Balanced scorecard generation               •	 Full results interpretation
•	 Improve dealer efficiency                  •	 User friendly analyses                         reports and standard
•	 Improve dealer professionalism                & reporting                                    management reports
•	 Improve dealer profitability                                                                 distributed to key managers
•	 Improve dealer stability                   In addition the ASE solution includes          •	 Interactive reports
                                              physical data validation by experienced
•	 Improve network stability                  motor trade accountants as well as network         a. Opportunity calculator
•	 Increase future investment                 risk prediction software and dealer visits.        b. Output guide
•	 Enhance the Brand                                                                             c. Links to unique knowledge
•	 Improve manufacturer                       For the dealer this means there are signifi-          database
   profitability                              cant benefits, including:-
                                                                                             •	 Automatic annual budgeting
                                              •	 The ability to generate a                      programme
Throughout its history ASE has listened to
the common criticisms of the composites          composite result within 24 hours            •	 User friendly reporting and
by the dealers, namely:-                      •	 Reports at the press of a button               analysis tool
                                              •	 Reports that integrate
•	 Composites are not accurate                   management accounts, budgets
•	 The data is produced too                                                              As a result of these benefits
                                                 and composite data
   historically to be of use                  •	 Reports available when the              ASE has achieved 7 out of the
•	 Composites are for                            dealer wants them
   manufacturers
                                                                                         top 10 franchise composite
                                              •	 Reports distributed to key
•	 Composites do not compare                     managers
                                                                                         systems in the Sewells Deal-
   with budget                                •	 Interactive reports                     er Attitude Survey in 2005,
•	 We only do composites to                   •	 Opportunity calculator
   earn bonuses                                                                          2006 & 2007. ASE’s main fo-
                                              •	 Output guide
•	 We have management accounts                •	 Links to unique knowledge               cus has always been, and will
•	 Composite input takes too long                database                                continue to be, on data qual-
•	 The manufacturers don’t discuss            •	 Automatic annual budgeting
   composites with us                                                                    ity. ASE firmly believe that
                                                 programme
•	 We get too many reports from               •	 User friendly reporting and             only by presenting accurate
   the manufacturer                              analyses tool                           information, on a timely basis
This has enabled ASE to continually tailor
                                              The ASE solution also has significant ben- to the people who can sell
the solution to meet the needs of both the
                                              efits for the manufacturers, including:-   more cars, hours and parts
dealer and the manufacturer to ensure that
it is relevant, timely and accurate.
The ASE composite platform is the most        •	 The ability to generate a               are ASE able to maintain
advanced, flexible and user friendly system      composite result within 24 hours their position as the leading
on the market. Standard functionality         •	 Network database of key
includes:-                                       personnel – driven by dealer            UK business management
                                                 network                                 provider to the retail motor
•	 A completely bespoke system
                                              •	 Flexible composite grouping –           industry.
   for each manufacturer
                                                region, zone, size,
•	 Self validating and automatic
                                                top performers, county,
   auditing system
                                                market area, city, town etc
•	 Fully secure – web based system
•	 Simple step by step mapping and
   input process
  WWW.TREVORJONES.UK.COM                                                                    FSA REGULATION THREE YEARS ON | P10

On 15 January 2005 for all               have reported a fall in income           The FSA require that prior to           The question that needs to be asked
companies, including the                 from insurance activities; and 34%       advising a client to take out an        here is, is the amount of paper you
Motor Trade, the selling of              reported they have now reduced the       insurance product the sales adviser     are issuing to a customer really
insurance products became a              number of products they provide to       asks sufficient questions to ensure
regulated activity.                      customers.                               the product being offered to the             The debate over the
                                                                                  client is suitable. Given that the      relevance of FSA regulation
Over these last 3 years the Motor        However, it is not all bad news.         majority of products sold by dealer-     in the motor trade is likely
Trade has had to contend with the        The NFDA survey also reported that       ships relate directly to the sale of     to continue for many years
added bureaucracy of dealing with        20% of motor traders have seen an        the car and associated finance, it                to come.
the Financial Service Authority          increase in income from insurance        is therefore highly unlikely that
(FSA). Although most Dealerships         activity, and for 63% of dealers the     ascertaining this information will      down to the FSA requirements or is
have not been visited by the FSA                                                  jeopardise the sale. Indeed, as some    it down to a lack of understand-
supervision staff, almost all have        Responsibility for ensuring             in the motor trade have found, by       ing from the people who are
had to commit time and resources           a business is meeting its              asking the right questions this can     advising you?
to submitting the six monthly              regulatory requirements
Retail Mediation Activities                falls firmly on the senior             Dealers are becoming more               The debate over the relevance of
Return (RMAR).                                management of the                      confident with the FSA               FSA regulation in the motor trade is
                                                                                   requirements, as 36% are               likely to continue for many years to
                                                   dealership.
Unfortunately being regulated                                                     reporting that they are now             come. What is less arguable today
by the FSA is much more than         FSA costs are below £2,500 per                 fully compliant with the              is that to ensure your dealership can
submitting a return to them twice a annum. It is also clear that dealers                    FSA rules                     comply with the FSA requirements,
year. The FSA regulation has had a are becoming more confident with                                                       as well as ensuring that selling
much wider impact on the selling     the FSA requirements, as 36% are             often generate additional sales as      insurance products remains profit-
of insurance products such as the    reporting that they are now fully            well as ensuring the adviser is not     able, the FSA requirements must be
costs of maintaining appropriate PII compliant with the FSA rules.                ignoring or missing valuable sales      adhered to.
cover, cost of FSA fees, increased                                                opportunities.
monitoring and training of sales     A New Approach                                                                       Henry Melrose is a senior Com-
staff, additional sales procedures,                                               It is fair to say that many in the      pliance Manager at Threesixty
more forms to complete and having It is fair to say that many in the              motor trade have been critical of       and was formerly employed by
to provide more information to       motor trade have perhaps taken a             the amount of information that must     the FSA’s Small Firms Insur-
individual customers.                negative view of the FSA’s intru-            be provided to the customer at each     ance Department. Threesixty
                                     sion into their business. However,           sale. Whilst it is true the customer    provide user friendly regulatory
The FSA has also made it clear that there are a growing number of                 must receive certain documentation      guidance specifically for motor
the responsibility for ensuring a    companies that have discovered by            during the sales process, it is often   traders. Further details are
business is meeting its regulatory   embracing the FSA commitments,               the case that overzealous compli-       available from www.threesixty-
requirements falls firmly on the     it is possible not only to minimise          ance advisers have taken the view       motor.co.uk
senior management of the dealer-     the time spent on regulation and             that, by providing more information
ship. The FSA appears not to offer   ensure that should the FSA decide            than the minimum FSA require-
any concessions when things go       to knock on the door, this part of their     ments, will in some way make the
wrong. As well as not accepting      business is compliant - they also have       sales process more compliant.
ignorance as a defence, they will    found it can increase profitability.
consider publicly naming both the
dealership and individual senior
management as part of its punish-
                                     When looking at the broader thrust
                                     of the FSA requirements it is dif-
                                                                                  FSA REGULATION
                                                                                  THREE YEARS ON…
ment for non compliance.             ficult to argue against the relevance
                                     of these in a dealership’s day to day
As we have seen over the last        operation. After all it is important
few years, many dealerships have
been reprimanded by the FSA for
not complying with the various
                                     to any business that the individuals
                                     that undertake the day to day sales
                                     activity not only have the neces-
                                                                                  Is your glass half empty
requirements. This can, and often    sary knowledge to do their job,
does, lead to the FSA withdrawing
a dealership’s direct authorisa-
tion which subsequently makes
                                     but are also of good repute. By
                                     simply following their referencing
                                     and recruitment procedures before
                                                                                  or half full?
selling insurance products an        appointing an insurance adviser,
illegal act, not to mention the      the FSA would argue that it is less
effect of the negative publicity     likely that an unsuitable candidate
this may generate.                   is appointed. This is preferential
                                     to appointing an individual and
The Future                           then having to dismiss them a few
                                     months down the road, with the
So, what does the future hold for    obvious costs involved.
the motor trade in regard to selling
insurance products? A recent         The FSA also expects that any indi-
survey completed by the NFDA         vidual who sells insurance products is
(NFDA FSA Insurance Survey,          also suitably trained to do so. It is also
March 2007) found that over          important, through regular meetings
the course of the last three years and monitoring, that the individual
the number of motor dealers with     maintains that knowledge. It is hard
full FSA authorisation has dropped to imagine where this is not also
from 76% to 54%; 37% of dealers      desired by a prudent employer.
  WWW.TREVORJONES.UK.COM                                                    ACHIEVING THE BEST PRICE DWF SOLICITORS | P11




ACHIEVING THE BEST PRICE
FOR YOUR BUSINESS
Owners who are planning to               Identifying potential problems well      missing licences. Unfortunately,         The ever-increasing number and
sell should fine-tune their              in advance allows you to resolve         you can also be pretty sure that your    complexity of regulations which
business in advance if they              them without the time pressure           landlord will not necessarily be in      businesses face on a day-to-day
want to avoid problems and               that always accompanies a sale,          a hurry to accommodate an urgent         basis means that problems can be
achieve the highest price,               and works out cheaper in the long run.   request for a retrospective licence.     uncovered in even the best run
says Sue Parker of DWF                   Negotiating when you are on the                                                   companies.
Solicitors.                              back foot is never fun.                  You will also need to ensure that
                                                                                  you have complete, signed copies         It may appear strange to have
You are a successful entrepreneur        You may wonder what could                of all contracts that are material       to consider ‘putting your house
with a profitable dealership which       possibly be wrong with the               to the business. Are any of them         in order’ when the business is
you are now looking to sell. The         company. Well, it is likely that         more onerous than current practice
business is in good shape - sales are    no-one has looked at the statutory       would anticipate? Are any of them          If the issues cannot be
growing and margins improving –          registers lately. The starting point     nearing expiry or do they terminate        dealt with quickly and
and it appears to be a very attractive   for any sale is that the sellers have    on a change of control? Are you          economically, the sale may
proposition. You may wonder what                                                  sure that the terms have not been            even be lost entirely
more a buyer could want.                     They will scrutinise the             breached, whether by you or other
                                         business and, where problems             contracting parties?                     running smoothly. But fine-tuning
Unfortunately no company is ever            are discovered, these will                                                     a business is similar to maintaining
in perfect condition. During the          inevitably be factored into the         The buyer will want to see that          a car - by-pass a service or two it
sale process the buyer will engage               purchase price                   employees all have written con-          may well break down at a critical
lawyers to make sure they do not                                                  tracts of employment which comply        time and end up costing more in the
take on any unknown or unquanti-         clear and absolute title to the shares   with current legislation, and that       long run.
fied risks, while the bank or other      so you need to make sure that your       handbooks and your grievance and
institution providing the acquisi-       registers accurately reflect the         disciplinary procedures are up-to-date   The best course of action for
tion funding is likely to do the         up-to-date position and all stamped      and consistent.                          owners who are planning to sell,
same. During this ‘due diligence’        transfer forms are available.                                                     is to address one aspect of the
process they will scrutinise the                                                  Pensions are one of the factors          business at a time, well in advance
business and, where problems are         In this world of ever-increasing         which often create problems in           of putting it on the market. That
discovered, these will inevitably be     regulatory compliance, you also          a sale. You need to be absolutely        way, the cost will be spread, there
factored into the purchase price.        need to be sure that you have up-        sure about the extent of pension         will be minimal disruption and
                                         to-date copies of every health and       liabilities carried by the business.     ultimately you will achieve the
Not only will you receive a lower        safety assessment, test certificate      If you have purchased another            best price.
value but you will also be faced         and record that is required for your     business in the past, it may be that
with additional cost and delay,          business.                                some employees transferred with          Sue Parker is head of the
along with the stress and anxiety                                                 the business that was acquired and       Automotive Group at law
that comes with it. If the issues    What about your property title               you may have inherited liabilities       firm DWF. Contact her on:
cannot be dealt with quickly and     deeds? Have you read your lease              for benefits provided via an oc-         0161 603 5000 or email:
economically, the sale may even be   lately? Although a landlord may not          cupational pension scheme which
                                                                                                                           sue.parker@dwf.co.uk
lost entirely.                       yet have noticed if any alterations          do not relate to old age retirement
                                     you have made or signage you are             benefits. This is a complex area and
So what can sellers do to avoid such displaying are not permitted by the          only specialist advice will be able
problems and ensure they receive the lease, you can be assured that the           to determine whether this may be
highest value? Preparation is key.   buyer’s lawyers will identify any            the case or not.
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