Selling a auto dealership with a planned buyer relocation can complicate obtaining the automaker’s consent to the transaction.
M&A Stories
December 9, 2024
Selling a car dealership requires automaker consent, and state laws generally require automakers to act with “good cause” when granting or withholding that consent. This requirement becomes particularly significant when a dealership sale involves a planned relocation.
This issue arose in the sale of a GM dealership in Ohio. The buyer intended to relocate the dealership as part of the transaction. GM approved the transfer of ownership but refused to consent to the new location.
The buyer and seller contested GM’s decision before the Ohio Motor Vehicle Dealers Board, claiming that GM lacked good cause to withhold its consent. GM argued that the Board had no jurisdiction to review its decision regarding the relocation, contending that only its approval or denial of the sale itself was subject to oversight.
The Board found otherwise. It determined that GM’s refusal to approve the relocation was inseparable from its decision on the sale and concluded that GM did not have good cause to withhold its consent. Both a trial court and an appellate court upheld the Board’s ruling, affirming that the relocation was integral to the transaction. By denying consent to the relocation, GM effectively rejected the deal as a whole.
The courts ultimately permitted the sale to proceed without GM’s consent to the relocation.
This case underscores an important distinction: while automakers may have more leeway to reject standalone relocation requests, transactions involving dealership sales often fall under the jurisdiction of state dealer boards. Buyers and sellers should be prepared for potential pushback from automakers when relocations are part of the deal, and they should carefully evaluate whether the automaker has “good cause” for its decisions.
See: General Motors, LLC v. Autosmart Chevrolet, Inc., No. 24AP-239, Court of Appeals of Ohio, Tenth District, Franklin County, (November 26, 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 recenegal problems of buyers and sellers of small businesses.
Email: jmccauley@mk-law.com
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