Q&A: Aaron Zeigler, President of Zeigler Automotive Group
As the leader of a family-owned business, Aaron Zeigler can relate to the owners of car dealerships acquired by his Kalamazoo-based Zeigler Automotive Group. The $1 billion (revenues) mega-dealer has grown by acquiring other family-owned dealerships in recent years, earning it a national ranking of 64th in new car sales last year, according to Automotive News. Zeigler, a second-generation owner, spoke with MiBiz about the intricacies of buying other family-owned dealerships in an era when the automakers often control whether a transaction can move forward.
In growing Zeigler Auto Group, you’re typically buying other family businesses, correct?
From a broad perspective, almost every business that I buy is family owned. Every single one has some family in it. When I go in and start looking at a deal, I always try to figure out what the seller is trying to accomplish, and how I can best accomplish their goals. If I can accomplish what they want to accomplish and also accomplish our goals, then it can work very well from that standpoint.
As a family business owner yourself, what are some of the special considerations you need to have when buying another family-owned business?
A lot of times in a family-owned business, it becomes your (business and) personal life all wrapped into one. You can’t really separate the two. A lot of people do struggle from an emotional standpoint with selling family businesses. Most of the people I’m buying from are retiring ... and sometimes they struggle with what is the right age to retire. They’ve been running these businesses, and all of a sudden sell it, and then they don’t have anything going forward, or they’re not nearly as busy as they were when they were running a business. And for a lot of them, their employees kind of become like an extended family as well. So you’ve got to make sure our culture fits in with their culture and whatnot, so (the employees) can continue on with us.
Has it always been the case where these people who are seeking to retire don’t have sons or daughters who are willing to take over the dealership?
Our business is a little unique in that when they sell it, the manufacturer has to approve the new buyer. So quite often, the manufacturer will not approve the son or daughter. That’s why they have to look outside. They want to sell it to (their children), but the manufacturer says no, and that’s where we’ve been able to come in and buy some dealerships.
It seems like that could be a source of contention if the children wanted to buy the business from their parents, the manufacturer said no, and now here comes Aaron Zeigler into the picture. How do you work through that?
You’re absolutely right. So what happens is, whoever’s going to buy the dealership has to have proven themselves to the manufacturer. They have a pretty extensive application process, and you have to have a proven track record. And if the son or daughter doesn’t do that, it does sometimes create some animosity between the seller and the manufacturer — not so much with us, because we’re not the ones telling them no. It’s the manufacturer, so then it puts them in a different position.
Has it always been the case that the OEMs have wielded this much power over these transactions?
That’s really changed in the last five or 10 years, where the auto manufacturers have gotten much more aggressive at not approving people. And that sometimes is not just sons or daughters. In our business, all of the manufacturers have first right of refusal on the contracts. So if person A is selling to person B, and the manufacturer doesn’t think person B is strong enough, they can reassign it to person C. That’s a fairly common practice in our industry, and we’ve bought a handful of stores that way as well.
After you ink the deal, and it’s confirmed that you’re going to be running the company, how do you approach the cultural integration process?
The single most important thing for the success of the business is to get the culture right going forward. Culture is kind of an overused buzzword in the industry today. A lot of people talk about it, and very few people really get it. In the retail business, the value that we add is really a customer experience. (Employees) have to be passionate about the customer experience. We have to teach them to be really passionate about that.
How do you do that?
Literally, the day (we) buy the business, (our training) team will go in and they start with new-hire orientations and talk about how we do things and what we are all about. And most of the time, most of the people will fit into our culture and then they’re able to move on with us. Obviously, if they don’t fit into that culture, then it doesn’t work, and they’ve got to go find a culture that works for them.
What about for the senior management?
We always bring in somebody internally from our business to run it, and I usually have the person before I buy the business. We’re developing future leaders in our company all the time. I will bring somebody out of my company and they will go run the new family business because they know and are ingrained in our culture. And culture starts from the leadership of that business.
How long does this process typically take?
It takes a little bit of time, but over a six-month period or so, their culture really (starts) to mirror the rest of the business.
As the owner of a family business yourself, do you have a different sales pitch than what private equity or publicly traded companies might offer to the seller of a family business?
Yeah, I think a lot of people in our business fear private equity because it’s fear of the unknown. Private equity has struggled in our business, because they struggle to get approved. I think private equity isn’t so much focused on the people as they are numbers, and we focus a lot more on the people. And I think that’s where (the pitch from) one family-owned business to another family-owned business is a much easier sell, so to speak. You have a similar type of backgrounds going on.
How do you handle family members who want to work in the business after the sale?
Every deal is so unique. … We’ve had some instances where somebody’s (relative is) in the business and they may flourish at our new company and stay with us for the long term. Other times, you have it where whoever’s in the family leaves (when the transaction is complete.) But those things are understood either way, before you close on the deal. Everybody’s on the same page with us of what’s going to happen, and it really comes down to what the seller wants or their interests are.