As a race car driver, Tom Hessert Jr. was accustomed to taking risks. As the owner of a successful chain of car dealerships, he hungered for the sense of victory that came with each acquisition.
But after nearly 20 years, Hessert was tired of risking his family's money. So when he had the chance to sell his dealerships to a publicly traded retail group, Hessert did so. In fact, before selling 11 of his 14 New Jersey-based Classic Auto outlets to United-Auto Inc. in July 1997, he had planned to go public on his own.
For Hessert, 47, selling stock was 'a new adventure and a way to acquire dealerships with public money,' he says.
When Hessert founded his empire in Cherry Hill, N.J., in 1978, 'All I wanted to do was earn enough money to go racing,' he says. He runs factory vehicles, including BMWs and Porsches, in road races. His racing-themed dealerships flourished.
Yet, says Hessert, 'As I was growing and borrowing more and more money from financial institutions, my hands were getting tied tighter and tighter and tighter. My family's savings were on the line every time I wanted to buy another dealership.'
In late 1996, Hessert laid the groundwork to take his group public, with an initial public offering slated for spring or summer 1997. He began negotiations with another large dealership group that he planned to purchase with the proceeds from the initial public offering.
But his plans fell victim to bad timing. While he worked on his strategy, he watched while a couple other dealership groups went public. When their price-to-earnings ratios fell after their IPOs, Hessert decided that he could not raise enough money to do what he most wanted to do: purchase more dealerships.
So he began negotiations to sell out to a publicly traded dealership group - not UnitedAuto. It was during that time he that met the principals at UnitedAuto.
With UnitedAuto, he saw an opportunity to be an active participant. Hessert had never considered leaving the car business altogether. 'I believe the grass is not any greener anywhere else,' he says.
The transaction, worth about $30 million, included a majority of cash and some stock. He kept three franchises for himself, one Jaguar and two Nissan.
Hessert kept them for a few reasons: sentimentality (Jaguar was his first new-car franchise), manufacturer conflicts, and Hessert's desire for a nest egg. 'If we (he and UnitedAuto) parted company, I'd have a start,' he says.
For today, though, 'I consider my stores and UnitedAuto's stores as one and the same,' he says. And if UnitedAuto wanted to buy his remaining stores in the future, Hessert would consider selling them.
'There are substantial synergies' within the relationship, he says.
Hessert believes that accord has eased the transition for his 550 employees, along with the fact that they were already prepared to go public. 'They were surprised however, that it was an acquisition,' he says. Still, 'it guaranteed them a living and growth for the future.'
As for the future of Hessert's children - Jessica, now 14, Tom III, 12, and Jamie, 10 - they were young enough so that the sale didn't affect their career plans. And while Hessert feels secure about his family's assets now, 'the money is anti-climactic. My lifestyle has not changed. I have not bought an extra coat, an extra toy.
Hessert plans to buy more dealerships - for UnitedAuto. Overall, 'I would wish the process on my best friend, that's how good it is,' he says. 'When car dealers acquire car dealers, we nickel-and-dime each other to death. With a public company, they're interested in paying and closing.'
In all, Hessert has only one regret. 'I'm sorry I didn't do my own IPO,' he says. 'But being corporate now, I can see that I was far short of what (the) expectations should have been.'
Hessert does not feel that all dealers must go public to survive. 'There is tons of room for both,' he says. 'Although there is the benefit of economies of scale with being large, I would not be afraid to go back and compete one-on-one with a publicly owned company.'
For now, Hessert's racing career is mostly on the back burner.
'I'm in a new phase of my life,' he says. He splits his time between Classic Auto Group's home office in Turnersville, N.J., and UnitedAuto's headquarters in Manhattan, where he enjoys walking to work for the first time in his career.
'I'm working as much as I did before but I am pleased,' he says. 'I was always one that was willing to experiment. I do believe I was one of the lucky ones to be considered.'