Pub. 5 2015 Issue 2

11 interests and to the transaction itself, as manufacturer approval of the sale transaction is required. A third consideration about the ROFR relates to whether and how it may be applied in a proposed multi-franchise sale transaction; that is, one where the selling dealer has multiple franchises and different franchisors, either under the same roof- top or at the same physical location, or even at multiple loca- tions. The ROFR may impact the dealer’s ability to sell all of the franchises in a single or packaged transaction. Generally, sellers want to maximize the best deal possible, including the monetary consideration buyer is paying for the whole package. Where the package includes multiple franchises, however, and one of the manufacturers exercises its ROFR, the seller may not receive all agreed upon consideration or the deal might end up being scrapped altogether. The manufacturer might also try to elicit from the selling dealer an allocation of the total purchase price or blue sky amount allocated to each franchise to isolate that amount for payment by the manufacturer or its assignee in the event of the exercise of the ROFR. As a result, the parties’ carefully crafted transaction becomes subject to division, delay and possible unraveling. An additional consideration relates to a few recent judicial de- cisions. At least one court has held that the manufacturer’s ROFR may not be circumvented by the offer to purchase the subject as- sets/franchises as part of a packaged or bundled transaction. The proposed seller and buyer in a multi-franchise transaction must evaluate the likelihood of a manufacturer’s attempt to slice its franchise from the whole transaction pie. Similar analysis is useful where the sale of assets or transfer of ownership also involves the sale or lease of dealership real estate. Also, claims have beenmade by proposed buyers of dealerships that the seller should disclose to the buyer at the start of negotiations the existence of an ROFR provision in the seller’s franchise agreement. At a minimum, as part of buyer’s due diligence, the buyer should request and review a current copy of the seller’s franchise agreement. The exercise of the ROFR can complicate and frustrate the buy/sell process between buyers and sellers. Manufacturers seem more willing to use the ROFR to fulfill their franchise representa- tion agendas in certain markets. Dealers thinking about the sale or purchase of dealership assets or transfer of ownership must carefully review and consider the manufacturer’s ROFR and its potential impact to their sale transaction.  Julie A. Cardosi is Principal of the private firm, Law Office of Julie A. Cardosi, P.C., of Springfield, Illinois, and has exclusively represented the unique business interests of automobile dealers state-wide for nearly 25 years. Formerly in-house staff legal counsel for the Illinois Automobile Dealers Association, she concentrates her practice in the areas of dealership ownership transfers (asset purchases and stock acquisitions), mergers and acquisitions, franchise law and franchise issues, factory relations, corporate law, add points, commercial real estate transfers, advertising, and other issues impacting day-to-day dealership operations.