In each “Meet the Team” segment, we highlight a different professional on our Auto Dealer Industry team. This week we highlight Scott Womack, Senior Vice President of Mercer Capital and the leader of the Auto Dealer industry team.

While Scott has provided valuation services for clients in a wide variety of industries, he has significant experience in the auto dealership industry. He provides clients in the industry with valuation and financial advisory services for purposes including gift and estate tax valuation, litigation support, corporate valuation, ESOPs, and financial reporting.

The experience and expertise of our professionals allow us to bring a full suite of valuation, transaction advisory, and litigation support services to our clients. We hope you enjoy getting to know us a bit better.

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What attracted you to a career in valuation?

Scott Womack:  Initially, I knew I wanted to be in a career involving numbers and problem solving.  My introduction to the valuation profession came from my college roommate’s father, who is a pioneer in the industry.  Ironically, that college roommate and his father are now two of my colleagues at Mercer Capital, Bryce and Don Erickson.  After 20+ years in the industry, I still enjoy the challenge of determining the qualitative and quantitative factors that impact the value of businesses.

What attracted you to a career in litigation support?

Scott Womack: I started doing divorce work about 13 years ago. Personally, I find this work to be very rewarding. Divorce clients are very appreciative and I believe I am making a difference as their Trusted Advisor throughout the process, but especially in mediation or during the trial. Often the non-business (or “out-spouse)” is not directly involved in the couple’s business and doesn’t know the value of the business or understand the process of valuation. These clients look to us to educate them and guide them through the process. Business owners (or the “in-spouse”) also see us as a value-add to the process, as they may have not gone through the business valuation process during their ownership of their company.

What type of cases gives rise to your involvement in litigation matters?

Scott Womack: More often than not, I am involved in family law/divorce cases. The cases generally involve high-wealth individuals and those who own businesses or business interests. In addition to the valuation and forensic work, I also participate in mediation to assist the client in an attempted settlement. If mediation is not successful, I generally submit a formal report to the Court and do testimony work at trial. Other litigation projects include breach of contract or shareholder disputes.

How has the valuation industry evolved since you started?

Scott Womack: Early in my career, the industry was comprised mostly of valuation generalists. In the early 2000s, financial statement reporting and valuations took on a whole new life of their own with purchase price allocations and stock-based compensation. At this point, the valuation profession kind of exploded to become more specialized. We have people that now specialize in a specific service – be it, say, divorce or financial statement reporting – or a particular industry. So, the movement from generalization to specialization within the industry is the most pronounced change I have witnessed. Especially for growth in your career, specialization is a great avenue for advancement because you are able to become an industry or service line expert.

What influenced your concentration in the Auto Dealership Industry?

Scott Womack: I had a partner at a prior firm who had several auto clients and I often got to work on those engagements. Some of those engagements were related to divorce so I was able to see what litigation-related valuation is all about. The Auto Dealership industry has some unique characteristics in its financial statements and operations. After being exposed to these differences I saw an opportunity to make an impact in this industry. I am able specialize in this area in order to provide the best valuation services possible.

What are a few unique characteristics of the Auto Dealership Industry?

Scott Womack: The financial statements are pretty unique in the Auto Dealership industry. Dealers have to submit monthly financials to manufacturers, and each manufacturer statement looks a little different, almost like trying to solve a puzzle. Due to the specialization and profit centers of the various departments, these statements have a lot of detail. They are very informative pertaining to not only the major categories like assets, liabilities, and revenues, but you can also determine the size of the service department or how many used vehicles they sold, what they’re selling them for, or how much inventory they have on the lot.

Not only do auto dealerships have to submit monthly statements, but some also report a thirteenth month statement. The thirteenth month takes the twelfth month with added year-end tax adjustments, normalization adjustments, etc. Furthermore, there is unique terminology in this industry. An example would be “Blue-Sky,” which is the goodwill value of the dealership. It can encompass a number of factors and the Blue Sky value is often very meaningful to a dealer requesting a valuation.

There are also nuances in ownership and management that are important to know, as well as different valuation techniques and methodologies that are preferred. Someone specializing in this industry is better equipped to know what a client is looking for. My experience valuing auto dealerships has given me an advantage in knowing what to look for and what questions to ask.

What types of Auto Dealership engagements do you work on?

Scott Womack: Most privately owned auto dealerships are owned in a similar fashion – the operating dealership held in one entity, and the real estate utilized for the dealership location in another entity.  I perform valuations of both types of entities for a variety of purposes including estate planning and litigation.  We have performed valuations of auto dealerships in numerous states around the country and have been involved in litigation engagements in multiple jurisdictions.

What is one thing about your job that gets you excited to go to work every day?

Scott Womack: I have always enjoyed that the valuation and consulting business is project-based. On a project basis, you are able to work with different owners and different industries all across the board. One of my favorite parts of a project is conducting the management interviews and site visits. While the financial statements paint a picture and supply the quantitative results of operations, the management interviews provide much of the qualitative factors and allow you to gain an understanding of the company, the industry, and the risk factors that they face. I enjoy meeting different business owners and learning about their successful companies and history.