Dealer Group Plans Lemco Purchase
March 15, 2005
Filed under Uncategorized
Lemco is the nation's largest motorcycle training group with about 300 members. Ride Now is its largest customer, spending more than $100,000 annually for training with Lemco.
Negotiations have been going on for several months, and the sale is expected to close on or about April 1, 2005, Lemco told Powersports Business. An offer from an unidentified non-powersports training group was rejected, he said. Financial details of the Ride Now offer were not disclosed.
The cash sale is part of his planned retirement process, said Lemco. Initially, he said, he planned to sell the company to employees, but such a move would have weakened the company's cash position and would have prevented it from making planned upgrades to its operations.
Plans call for Lemco to continue with the company for two years after the close of the sale in a variety of promotional and training roles.
Lemco Management is the oldest and largest dealer-training group in the country. Lemco, a former dealer and a former district manager for Suzuki, launched Lemco in 1980 and started its first 20 Group in 1981. A 20 Group is made up of approximately 20 non-competing dealers who share monthly financial information and who attempt to help other Club members improve their profitability.
Lemco has been successful in recruiting the top dealers in the country since it started, and growth has been significant recently. Membership has nearly doubled from about 150 dealers five years ago, said Laura Lemco, vice president of sales and marketing.
Two keys to the program's success are that financial information is not released outside the group and that members do not solicit employees from other Lemco dealers.
Dealership financial information is provided monthly and compiled in a 20 Group spreadsheet analysis that compares individual dealership performance over time and with other dealers in the group. Individual dealerships can compare the performance of their operations with benchmarks for the group.
Lemco also provides a variety of other specialized training programs for dealership department managers and general managers.
Lemco, who makes his home in St. Croix, the Virgin Islands, is involved in several other businesses worldwide. “I won't really retire until I die,” he said.
With Lemco's departure from full-time involvement, the company will be headed by Sam Dantzler, who will become president and CEO. He joined Lemco about five years ago as a trainer and began moderating 20 Groups in 2002.
Ride Now Powersports Management Group, based in Chandler, Ariz., was launched with one store in 1989 as Arizona Motorsports. Today, it operates as Ride Now and owns and manages 25 stores in Arizona, Florida, Nevada, New Mexico and Texas. The company is in a growth mode, and plans call for the acquisition of another five or six stores this year, which would bring 2005 revenues to more than $400 million, according to Chief Executive Officer Mark Tkach. The company has all major franchises, including Harley-Davidson, Honda, Kawasaki, Ducati, Aprilia, Polaris, Suzuki, Yamaha, Triumph, BMW, and Bombardier Recreational Products (BRP).
Lemco and Tkach have close ties, and Tkach makes extensive use of Lemco training for his employees. “The whole 'best practices' concept has been a great learning lesson for me,” Tkach said during an interview with Powersports Business. “Frankly, Ed has been extra special to us; he's almost trained us on a piecemeal basis. Ed has been very good to me.”
THE ROLE OF RIDE NOW
Although concern has been voiced by some dealers that Ride Now will use the financial data submitted by dealers to Lemco to identify prospective acquisitions and potential employees, both Lemco and Tkach says this is not the case. “Confidentiality is not an issue,” says Lemco. While there have been reports that some dealers have dropped out of Lemco because of the planned sale, Lemco said no dealers have quit the organization. “I've told (dealers who asked) to wait and see,” he said.
Major dealers contacted by Powersports Business have said they do not plan any action at this time.
“They spend more than $100,000 with us each year,” points out Lemco. “Why not spend it with their own company? They will use their own resources to create their own programs for their own stores. If they had to recreate the system, it would be very expensive for them to do that.”
Tkach said the deal is definitely an “arm's length” purchase. “There's no hidden agenda here,” he said. “Originally, I thought I would be more of a lending institution to pump some money into the company. The real goal was to carry on the Ed Lemco legacy.”
Assuming the sale is closed, he said, Lemco would be run by its current employees. “You won't see me in the (Lemco) office more than once a year,” he said. “I will confer with management, obviously, to protect my investment, but I'll also be looking to grow my training program for my own company.
“What's good for us in the industry will be good for other dealers in the industry. As we grow it, this (training) will become available to other dealers, as well.”
Tkach emphasized that confidentiality of dealer financial data will be maintained. “We are going to do our best to put into place procedures to protect dealer's confidentiality,” he said. “There are several layers we can put into that. I understand the concern, but to me it holds no basis; it's the farthest thing from my mind.”
Actually, says Tkach, he doesn't need dealer information from Lemco to acquire more dealerships because potential sellers always have been willing to share data with him. “I wouldn't have to buy Ed's business to get that information,” he says. “It would be kind of silly for me to spend the kind of money that I am just to get those numbers.”
One industry source, who asked not to be identified, suggested that 20 Group financials also can be used to analyze regional market data and identify strong department heads who could be recruited for Ride Now stores.
“The Lemco policy of not hiring other Lemco employees will remain in place,” says Tkach. “We also plan on approaching only non-Lemco dealers for our current and future acquisitions. If any current Lemco dealers want to speak to us about selling, they are going to have to contact us.”
Finally, says Tkach, additional security measures will be put in place to ensure dealer confidentiality.
Says Lemco: “I think we'll see bigger and better things (from the sale).” These could include a series of professionally produced training videos and an upgraded computer system.