Capital Thinking: Family offices accelerate interest in dealership opportunities

By Joe Mowery, Managing Director, Head of Dealerships, and Stan Dimitrov, Senior Vice President, Dealerships at Stephens

Succession planning is rarely straightforward, especially for family-owned businesses with a rich history and deep community ties. That is the reality for many American dealerships, where ownership transitions often involve broader considerations beyond the financials.

Yet as more dealers approach generational crossroads, contemplating the future does not have to be daunting. While a complete sale remains a viable path for some, a different kind of conversation is gaining momentum – one centered on partnership.

Family offices are emerging as an ideal capital source for a partnership, offering a structure that helps dealership owners secure their legacy while gaining a long-term partner for growth.

Mutually beneficial connections

Dealers are attracted to joining forces with a partner who would allow them to remain in control of their destiny. At the same time, family offices increasingly recognize dealerships as attractive long-term investments, thanks to their strong cash flow, recurring service revenue, and longstanding local reputations.

Unlike other institutional investors, family offices are often more passive and flexible in their approach. As patient partners, family offices are willing to back good management teams with capital and expertise as needed, allowing the dealership owner to remain in charge of running the business.

At Stephens, our role is to facilitate the right connections at the right time. A decade ago, family offices were not focused on this space. However, as a full-service investment bank, we have been able to contextualize the dealership opportunity relative to other industries, alongside the assessment of compatibility across factors such as size, growth strategy, geographic footprint, and operating philosophy. Stephens has relationships with more than 400 family offices and dozens of those have interest in dealership opportunities.

Exploring all options

Most of the family-owned dealerships we work with at Stephens are multi-generational businesses. Some have clear plans for the next generation, others do not, and for those the only viable path forward is accessing outside capital, either through a complete sale or a partnership with an investor. But there is no one-size-fits-all solution, thus starting the conversation early can make all the difference.

Every situation is unique, particularly given the nuanced circumstances surrounding family-owned businesses. A thoughtful process with an advisor will consider all options, including the owner’s desired work duration, their potential role in the future, and the possibility of involving family or trusted long-term employees as future leadership. Initiating this process early and with less time pressure also enables an advisor to examine whether there are operational improvements and/or strategic moves that can enhance the business’ value.

It is not always just about generating the highest price. Owners care deeply about what happens after a deal, including how their team will be treated and whether their local reputation will be preserved.

Thriving through cycles

Our goal is to be strategic advisors to our clients, not only through transactional events, but also as they navigate their competitive landscape and make decisions about the direction of their business. Overall, the dealership market is continuing to consolidate, as public and large private dealership groups seek acquisition opportunities in attractive metro locations. While we continue to see strong demand in places such as the metro areas of Texas, Florida, and the Carolinas, there are valuable markets all over the country. Moreover, as seen in countless markets across the country, growth from major urban centers often expands outwards. A market that feels rural today could sit at the heart of a major growth corridor in a few years. Holding or entering these non-metro markets early can provide accretive opportunities to the right operator.

In addition, as the competition to own desirable assets intensifies, it is important to remember that scale is not everything. Community connection and operational reputation still matter deeply, often providing a competitive advantage. Buyers and partners understand that dealerships are local businesses with deep personal connections.

Resilience is a key attribute of the dealership model. Our discussions with owners and investors regularly highlight the strength that comes from the multiple lines of business inside a dealership. Dealerships are also constantly navigating potentially disruptive threats with entrepreneurial spirit and grit. Stephens has navigated cycles and threats as a family-owned financial services firm for more than 90 years, and this long-term vision and approach are at the forefront in our advice to clients.

A trusted relationship

In addition to independent transactional advice, as a full-service investment bank Stephens offers a comprehensive suite of solutions to help address the needs of our clients for growth capital. For clients considering a transformative acquisition that exceeds the support of their current lending relationships, Stephens’ Debt Capital Markets team sources financing options through competitive market processes.

Furthermore, Stephens’ Private Wealth Management group is also available to support clients through each stage of the journey. A dedicated Private Wealth Management team can provide guidance on managing wealth long before a transaction, work collaboratively with you, your tax advisor and attorney on tax planning strategies, and, of course, assist with managing the proceeds after a successful deal.

Succession can be complex, thus having a breadth of options that can be tailored to specific needs is critical. Whether growing via acquisition, a full sale, minority investment, or simply preparing for what is next, trusted guidance matters. Backed by the deep investment bank resources of Stephens, our experienced, relationship-driven approach has a simple goal: be trusted advisors to our clients and help them achieve their family’s goals over the long term.