In this blog post, we delve into the intricate world of M&A in the automotive industry, focusing on a Cleveland Honda dealer’s challenging journey to expand its footprint. We explore the legal complexities that arise when an automaker denies consent for a dealership acquisition and the subsequent legal battles faced by the buyer. From filing protests to navigating appellate courts, this post provides a detailed narrative of the legal hurdles and strategic maneuvers involved. Perfect for readers interested in the legalities of M&A, franchising disputes, and the automotive sector.
June 11, 2024
Acquiring a car dealership is a complex process involving the buyer, the seller, and the automaker. The initial agreement is between the buyer and the seller, but final approval rests with the automaker. What happens if the automaker denies consent for the acquisition? What recourse does the buyer have?
This dilemma faced a Cleveland Honda dealer attempting to buy another Honda dealership 20 miles away within the same metro area. Despite the buyer’s own dealership being profitable, it had the lowest sales among the seven Cleveland Honda dealerships, raising concerns about its performance.
Honda refused to consent to the sale, citing the buyer’s declining sales and poor performance. These issues posed a risk of franchise termination if not promptly addressed.
Determined, the buyer filed a protest with the Ohio Motor Vehicle Dealers Board, arguing that Honda’s refusal was unreasonable. The board ruled against the buyer, leading to an unsuccessful appeal in a Columbus state trial court.
Persisting, the buyer took the case to the Ohio appellate court. However, the appellate court dismissed the buyer’s arguments, siding with Honda.
It’s unclear why the buyer believed it could overturn Honda’s decision.
Case Reference: Frye v. Am. Honda Motor Co., Inc. No. 23AP-490, Court of Appeals of Ohio, Tenth District, (Rendered on April 23, 2024).
Thank you for reading this blog. If you have any questions, insights, or if you’d like to engage in a more detailed discussion on this matter, I invite you to reach out directly.
Feel free to send me an email. I value thoughtful discussions and am always open to connecting with business owners management, as well as professionals who share an interest in the complexities of M&A law.
By John McCauley: I write about recent legal problems of buyers and sellers of small businesses.
Email: jmccauley@mk-law.com
Profile: http://www.martindale.com/John-B-McCauley/176725-lawyer.htm
Telephone: 714 273-6291
Podcasts https://www.buzzsprout.com/2142689/12339043
Check out my books: Buying Assets of a Small Business: Problems Taken From Recent Legal Battles and Selling Assets of a Small Business: Problems Taken From Recent Legal Battles
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