Explore the legal intricacies of selling a mixed-make dealership portfolio, with a spotlight on a real-life M&A dispute involving Honda’s right of first refusal. Delve into the complexities of dealership agreements, Oklahoma law, and the challenges that arise when selling multiple brands as a single package. This post provides valuable insights for entrepreneurs, legal professionals, and industry insiders navigating similar M&A scenarios.
M&A Stories
August 08, 2024
Selling a car dealership requires approval from the manufacturer, and when multiple dealerships with different brands are involved, the process can become particularly complex—especially when a manufacturer holds a right of first refusal.
In Stillwater, Oklahoma, a seller owned a Honda dealership at one location and Hyundai and Chrysler dealerships at another. The seller received an unsolicited offer to purchase all three dealerships as a package. They were only interested in selling the entire portfolio, not individual dealerships.
The Honda dealership agreement included a right of first refusal, allowing Honda to purchase the dealership’s assets under the same terms as those offered by the prospective buyer. Oklahoma law supports this right, provided Honda matches the buyer’s offer and meets specific conditions. Upon notification of the offer, Honda requested a separate Asset Purchase Agreement for its dealership.
The seller complied, stipulating that the sale of the Honda dealership would only close concurrently with the sale of the Hyundai and Chrysler dealerships. However, when Honda exercised its right of first refusal, the seller refused to proceed with the Honda sale alone, citing the contractual requirement for all three sales to close simultaneously.
As a result, the seller withdrew the entire portfolio from the market. Honda then sued in an Oklahoma federal court, seeking to compel the sale of the Honda dealership. The seller countered by asking the Oklahoma Motor Vehicle Commission to block Honda from enforcing its right, arguing that Honda’s terms did not align with those offered by the original buyer, specifically the requirement for concurrent closings.
The federal court agreed to stay the proceedings pending the outcome of the Motor Vehicle Commission’s review. This means that the decision on Honda’s right to purchase will ultimately be determined by the Oklahoma agency and, if necessary, by state courts.
This case highlights the complexities and potential pitfalls of selling a portfolio of dealerships involving multiple brands. The process can be significantly longer and more expensive than selling a single dealership.
Case Reference: American Honda Motor Co., Inc. v. M&N Dealerships VI, LLC, Case No. CIV-24-165-D , United States District Court, W.D. Oklahoma, (July 25, 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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