ADESA, Manheim Announce Acquisitions, Expansion Plans

By Richard Greene, AR NewsMagazine Editor
September 19, 2007

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CHICAGO - Significant expansion plans and acquisitions by the two biggest auction chains are now hot topics of discussion, with ADESA and Manheim both making major announcements on opening day of the convention of the National Auto Auction Association here in the Windy City.

Jim Hallett, chief executive officer and president of ADESA, announced that the company has acquired the Tri-State Auto Auction in Cicero, N.Y., and it has an agreement to close acquisitions of the Tri-State Auto Auction in West Fargo, N.D., and Sioux Falls Auto Auction in Sioux Falls, S.D., as well as the Transit Auto Auction in Quebec City, Canada. According to Warren Byrd, executive vice president of corporate development, final closings on the Fargo, Sioux Falls and Quebec City facilities should be accomplished by early October.

According to Dean Eisner, Manheim's chief executive officer and president, Manheim is expanding its Canadian operation by acquiring Auction City Moncton in New Brunswick and by building a greenfield operation in the Western suburbs of Montreal, Quebec.

Company officials said the purchase of the Auction City location in Moncton and its financial portfolio was completed within the past several weeks and publicizing its acquisition was timed to the Montreal announcement. It will operate as Manheim Moncton, effectively immediately, and offer customers Manheim's full breadth of services, officials added.

ADESA Plans

According to ADESA, Tri-State AA in Cicero joins two ADESA auctions in the region, ADESA Buffalo and ADESA Long Island. The 125-acre, seven-lane facility will now be named ADESA Syracuse. According to officials, the auction employs more than 300 full- and part-time staff. AFC will maintain an on-site loan production office, the company said.

The sale has served customers in this region since 1977, and has conducted a bi-weekly factory sale for Chrysler exclusively since 1989, ADESA said.

Meeting with media at the convention, Hallett said the auction's management team and staff are being retained.

"I have known owner Elliott Meltzer for 30 years," Hallett observed. "In fact, I did business with him back when I was a dealer in Canada. I have always been impressed with his level of professionalism and his obvious dedication to both his employees and his customers. I have the utmost respect for Elliott and the business he has built, and I look forward to working with his experienced staff to continue this level of service."

Tri-State Auto Auction founder and president Elliott Meltzer said in a prepared release, "It's been an amazing year. First, we are celebrating 30years in business, and now with the sale of our auction to ADESA. I know that ADESA will not only carry on my family's legacy of excellence, but they will also value and care for my employees as much as I do."

Regarding the acquisition of Tri-State Auto Auction in West Fargo, which celebrated its 55th anniversary this past June, Hallett said ADESA was attracted to this strong domestic-car market and the auction's history with General Motors.

Hallett praised the Zabel family which has owned and operated the Tri-State and Sioux Falls facilities. According to Hallett, Dave Zabel, who was president, will remain on at the new ADESA auction and will be resigning from the ServNet auction group. He was to become its incoming president.

At the same time, Hallett pointed out that the two Dakota sites were appealing because both are in middle-sized markets and run salvage and whole-car operations. "Our sister company, Insurance Auto Auctions, has 137 sites, and now they have two more," he observed. "One of our strategies is try to combine our salvage and whole-car operations wherever and whenever we can."

Hallett went on to say that the Quebec City acquisition enables ADESA to enter a new Canadian market about three hours east of Montreal, where the company currently runs a major "successful, well-oiled machine."

"ADESA will continue to be extremely busy, and I'm hopeful that we can announce more acquisitions before the end of the year," Hallett projected.

On a related note, Hallett told the media that because of current growth and expected expanded business, ADESA is in the process of relocating operations to newer and bigger facilities in Kansas City, Phoenix and Dallas.

Manheim's Busy Too

"Acquiring the Auction City Moncton location and its financial portfolio provides our customers with a smooth transition, while continuing to serve their financial needs," said Kathy Decker, Manheim Financial Services' vice president and general manager.

"With this acquisition, MAFS now has a presence in the Atlantic Provinces, where our full spectrum of MAFS products will be available to serve dealers' needs," Decker added.

According to Patrick Brennan, vice president of operations for Manheim Canada, Manheim is building a six-lane, 70,000 square-foot state-of-the-art facility on a 100-acre site. It's scheduled to be fully operational sometime mid-summer in 2008. Brennan said it will employ about 100 staff and the management team will need to be bilingual in French and English.

In the meantime, Brennan said a smaller facility on the same site is being readied to not only house a number of different services, including MAFS, a marshalling yard and inspection services, but it should also run a scaled-down auction operation by the end of 2007.

"We want to be up and running by the end of the 2007 in this smaller facility and then ultimately open the brand-new facility next summer," he pointed out.

According to officials, to support the company's Canadian expansion, Manheim recently established a corporate office in Mississauga, Ontario. It will serve as a hub for all Canadian operating locations and provide services, including human resources, finance, marketing, sales and e-business.

"Our ultimate goal is to create a national footprint in Canada," Brennan said, adding that Manheim also operates in Toronto, Oshawa and Halifax.

"Further activity will be dictated by customer needs," he explained. "But there are other markets we are looking into, and these could be a combination of greenfield start-ups and acquisitions."

Eisner said Manheim conducted a world-wide study about a year ago and the company will make moves when appropriate. He said Manheim is eyeing further opportunities in China and looking into Mexico.

"You'll be seeing over the next six months continued announcements and development in China," Eisner noted. "China is going well, and Manheim is committed there for for the long term. And it's not just going to be auctions. We will be offering the type of services that their market needs right now in order to help develop the used-car industry in China."

At the same time, Manheim is committed to exploring new markets in the U.S., Eisner pointed out, similar to its recent opening of its first-ever auction in Oklahoma (Oklahoma City).

"We definitely still see U.S. opportunities," Eisner said. "We are looking first at our capabilities and seeing how we can expand and serve our customers. I think there are a number of growth opportunities in the U.S. that are definitely fertile."

In other company news, OVE.com announced at the NAAA convention that beginning Oct. 1, the online wholesale marketplace will be implementing a national online buy back policy.

According to officials, the policy will allow all OVE.com buyers who purchase a post sale inspection to return any vehicle purchased on the site to any Manheim operating location within 14 calendar days of purchase, with no questions asked.

Officials further pointed out that under the new policy, if for any reason a customer is not satisfied with a vehicle on OVE.com, and the customer purchased a post sale inspection, then he or she can return the unit to any of Manheim's operating locations in the U.S. and receive a refund for the purchase price of the vehicle.

"We want our customers to feel confident when purchasing vehicles on OVE.com," noted Jim McKnight, Manheim's president of Online Solutions. "That's why we've created the first policy in the industry that allows dealers to buy vehicles 24/7 from the comfort of their computers and still 'kick the tires.'"

Mike Broe, Manheim's senior vice president of operations, added, "Manheim believes this channel is a safe way for dealers to get the vehicles they need and this policy proves that commitment."

Auction/Wholesale