Much has changed since last January when Cars.com closed its acquisition of DealerClub, a reputation-based dealer-to-dealer digital wholesale auction, for approximately $25 million in cash and potential performance-based consideration of up to $88 million.

In the following 18 months, Cars.com announced cuts of approximately 11% of its full-time positions. Now it’s facing a lawsuit brought by Joe Neiman as the seller representative for the former stockholders of DealerClub.

According to a post from the law firm, Bass, Berry & Sims represents the digital wholesale vehicle auction platform in litigation arising from the $88 million post-closing earnout dispute following DealerClub’s acquisition by Cars.com.

“The complaint alleges that after closing the transaction, Cars.com breached the parties’ stock purchase agreement by failing to provide the sales, marketing, and operational support promised during negotiations and by taking actions designed to prevent DealerClub from achieving the revenue targets tied to the earnout,” Bass, Berry & Sims said in its post.

“The complaint also asserts claims for fraudulent inducement, alleging that Cars.com made pre-closing representations regarding its plans to invest in and grow the business to induce the sellers to accept a transaction in which the majority of the purchase price was contingent on future performance,” the firm continued.

“The lawsuit seeks compensatory damages, specific performance and other equitable relief,” Bass, Berry & Sims went on to say, adding that its team handling the case is led by Margaret Dodson and includes Shayne Clinton and Grace Platt.

Cherokee Media Group contacted Cars.com public relations representatives for comment but did not yet receive a reply on Tuesday.

However, Cars.com touched on DealerClub through its latest 10-Q filing with the Securities and Exchange Commission.

The company said the total purchase consideration for DealerClub was $25.3 million. Cars.com said it expensed incurred total acquisition costs of $0.2 million during the second quarter of last year, indicating these costs were recorded in general and administrative expenses in its consolidated statements of income.

“As part of the DealerClub acquisition, the company may be required to pay additional performance-based consideration of up to $88.0 million, which may be paid in cash, or stock if mutually agreed upon,” Cars.com said in the filing. “This potential performance-based consideration is not included in the total purchase consideration and will be deemed compensation expense.

“The amount to be paid will be determined by DealerClub’s future achievement of certain revenue-related financial targets through Dec. 31, 2028, and will be expensed over the relevant performance periods. Based on current performance trends, no such consideration was expensed during the three and six months ended June 30, 2026,” Cars.com continued.

Cars.com also elaborated about the purchase price allocation in the filing.

“The fair values assigned to the tangible and intangible assets acquired and liabilities assumed were determined based on management’s final estimates and assumptions, as well as other information compiled by management, including third-party valuations that utilize customary valuation procedures and techniques, such as the replacement cost method,” the company said.

Cars.com added details about one more component of the move involving DealerClub.

“In connection with the DealerClub acquisition, the company recorded goodwill in the amount of $22.0 million, which is primarily attributable to expected sales growth from existing and future customers, product offerings, technology and the value of the acquired assembled workforce,” Cars.com said. “All of the goodwill is considered non-deductible for income tax purposes.”

Bright outlook at time of the acquisition

When the acquisition came together, company leadership at the time spoke glowingly about what DealerClub would add to Cars Commerce, which includes Cars.com.

The company said in January 2025 that acquiring DealerClub would help Cars Commerce move its trade and appraisal strategy forward while giving it an entry point into the $10 billion-plus wholesale car market,

Additionally, leadership saw the move bringing in another revenue stream for Cars Commerce’s subscription business.

Cars Commerce acquired the Accu-Trade group in 2022, a deal that included Accu-Trade, Galves Market Data and MADE Logistics and allowed the company to “enter into the rapidly growing multi-billion-dollar digital vehicle acquisition and remarketing category with Accu-Trade’s best-in-class valuation and appraisal technology,” then-Cars Commerce CEO Alex Vetter said when that deal was announced four years ago.

In a January 2025 news release, Cars Commerce said the Dealer Club purchase, can “create long-term cross-selling opportunities and acceleration of AccuTrade adoption with an attractive full lifecycle platform that seamlessly integrates retail and wholesale operations.”

The company added that the acquisition, “Brings the transparency of reviews to the wholesale market for the first time and builds on the company’s legacy as the largest provider of consumer and dealership reviews in auto.”

When acquired, DealerClub had more than 650 dealer customers and its primary revenue stream was through transaction fees.

In a LinkedIn post made when the acquisition closed, Neiman said: “I could not be more excited to share that DealerClub has entered into an acquisition agreement with Cars Commerce, the parent company of industry-leading brands such as Cars.com, Dealer Inspire and AccuTrade. DealerClub is the first reputation-based dealer-to-dealer auction and is bringing power back to dealers, making it clear of the opportunity that exists in wholesale. I know that by joining Alex Vetter and the Cars Commerce team, we will be able accelerate our growth even faster and offer tremendous value for our dealer customers as we continue to leverage technology to simplify automotive.”

Big changes after the acquisition

Cars.com isn’t the same company it was when it made the move for DealerClub, beginning at the top.

Just before the holiday season of last year, the company announced that Vetter would step down as CEO and from the board on Jan. 15, and that the new CEO would be Tobias Hartmann, who would also join the board.

Vetter was to serve as an advisor to the company from Jan. 15 through March 31 to facilitate a smooth transition.

Before joining Cars.com, Hartmann was CEO and chairman of the management board at Scout24 SE Group, parent company to the ImmoScout24 digital real estate company in Europe.

His previous executive experience also includes roles at HelloFresh and eBay.

“Tobi brings strong sector experience and a proven track record of growing businesses to deliver meaningful customer, consumer and shareholder value,” board chairman Scott Forbes said in a news release announcing the executive changes. “The board has executed a comprehensive CEO succession process, and we are confident that Tobi is the right leader to accelerate growth and guide the company into the future.”

Changes came swiftly as Cars.com confirmed in April that initiated a cost-reduction program, which included workforce trimming of approximately 11% of its full-time positions, along with process changes and vendor cost optimization.

The company said in another news release that the moves are expected to generate $25 million to $30 million in recurring annualized operating cost savings in 2027, while supporting 2026 profitability targets.

Cars.com said this cost initiative was expected to be completed during the early part of the second quarter and incur aggregate related one-time charges of approximately $8.5 million to $9 million, substantially all of which will be recognized in its Q1 financial statement.

Then last week, Cars.com reported its financial statement for the second quarter of this year, which included highest Marketplace revenue growth in five years. The top-line numbers included:

—Revenue grew to $179.9 million, up 1% year-over-year and in line with guidance

—Net income increased to $14.3 million, up 103% year-over-year

—Adjusted EBITDA grew to $53.0 million, up 4% year-over-year; while adjusted EBITDA margin came in at 29.4%, outperforming the guidance range of 28% to 29% margin

—Share repurchases totaled 3.7 million shares for $37 million. Year-to-date share repurchases totaled 6.2 million shares for $57 million and are on pace to 2026 target of $90 million

“We delivered revenue and profitability growth in the second quarter while making steady progress on our Marketplace-focused strategy. Deliberate prioritization of Marketplace product, processes, and organizational improvements drove Marketplace revenue growth to its highest level since 2021, more than offsetting the expected decline in OEM revenue,” Hartmann said in another news release.

“New product launches, such as Dealer Verified Listings, as well as stronger customer value delivery through more precise audience targeting, are encouraging signals. Looking ahead, we will deploy these learnings and operational drivers across our ecosystem to deliver sustainable long-term growth and value creation,” he went on to say.