XLerate Group has purchased Liquid Motors, the auction group said Monday.
It’s a move that can help bulk up XLerate’s digital sales, which the company says have seen significant growth in the last five years.
In a news release, XLerate chief executive officer Cam Hitchcock said Liquid Motors management will continue to operate the company.
“We have come to know and trust Liquid Motors and the Liquid Motors team as a critical enabler of our multi-platform digital offering, which has grown explosively at XLerate and many other independent auctions,” Hitchcock said.
“Michael Daseke and his core team are go-to resources for the auction community, and this team will continue to operate Liquid Motors as a highly independent service provider to auctions, dealers, and other consignors,” Hitchcock continued.
Daseke added in the release: “Becoming part of XLerate met several of our family’s personal and professional objectives. XLerate is a well-respected and innovative group that will invest in Liquid Motors’ technological capabilities and, at the same time, provide Liquid Motors with the independence and confidentiality it needs to be a trusted industry service provider. This is a great outcome for both Liquid Motors, its many customers, and the remarketing industry.”
Liquid Motors was founded in 2006 and is headquartered in Richardson, Texas.
XLerate executive vice president and chief revenue officer Chuck Tapp shed some light on the digital benefits to bringing Liquid Motors into the fold.
“XLerate will benefit from the deep insight into various digital strategies that Liquid Motors is familiar with given its market visibility. Digital transactions have grown tremendously at XLerate over the last five years, and digital is a key component of XLerate’s omnichannel, go-to-market strategy,” Tapp said.
“The Liquid Motors acquisition will bolster our digital sales capabilities and transform our go-to-market strategy for other business segments,” he said. “Liquid Motors provides us the opportunity to enhance and increase the unique value and capabilities to service our existing dealer, commercial, and institutional customers as well as potential prospects for whom we have previously been unable to provide solutions. The Liquid Motors platform allows us to integrate any auction functionality seamlessly.”
McConkey Auction Group has purchased ABS Auto Auctions, a Southern California group launched in 1992 by Tom Harmon.
The purchase was announced in a news release included in an email announcement from ABS that was sent to Auto Remarketing on Friday.
This move continues MAG’s expansion in the Southwest and West, as the group recently purchased DAA Las Vegas.
ABS has 10 auctions throughout the West, including locations in California, Nevada, Oregon and Arizona.
“Tom has built a great business that I’ve watched and admired for many years. ABS is a clear leader in the digital auction business,” MAG president and chief executive officer Bob McConkey said in that news release.
He added: “In getting to know ABS better, we found a great synergy in both our family-run auto auction businesses. Tom and his team share a culture and work ethic that will combine well with our operations.”
Harmon and his daughter Danielle and their team will continue with ABS; the ABS Finance dealer floor plan company will still be owned by the Harmon family. Harmon’s son Sean will stay on with ABS Finance, which will work closely with the McConkey group and ABS.
“Bob is a respected industry veteran,” Tom Harmon said in a news release.
“As a past NAAA president and long-time industry advocate, he has the resources and relationships to help take ABS Auto Auctions to the next level, while ensuring that both sellers and buyers continue to receive the same industry-leading results and customer service that they have become accustomed to,” Harmon said. “His involvement also provides a great opportunity for our employees and our company.”
KAR Global said Thursday it has completed its purchase of BacklotCars, a $425 million deal first announced in September.
In a news release, KAR said the acquisition “supplements” its existing crop of digital marketplaces like TradeRev, ADESA.com and OPENLANE, while also growing KAR’s presence in key markets and “anchoring continued expansion into new geographies to meet dealer demand.”
“We are laser-focused on providing dealers with the most efficient, convenient and economically advantageous digital marketplaces to sell and source inventory,” KAR president Peter Kelly said in a news release. “BacklotCars is one of the fastest-growing dealer-to-dealer platforms in the country, and TradeRev’s growth continued to accelerate through the third quarter.
“Combine that strong momentum with the buyer-base, technology, analytic capabilities and expertise from ADESA and across the KAR platform, and I think you’ve got a pretty compelling solution for any dealer in any market,” Kelly said.
BacklotCars co-founders Justin Davis, Ryan Davis, Josh Parsons and Fabricio Solanes will remain with the company. Justin Davis, who is the president of BacklotCars, will report to Kelly.
KAR and BacklotCars are integrating. However, there are not any “immediate changes” to the products, pricing or customer agreements for either KAR or BacklotCars.
“There is so much energy and excitement around this combination with our employees and with our customers,” Justin Davis said in the release. “I’m proud of what the BacklotCars team has built and the thousands of strong dealer partnerships we’ve developed over the past six years. And I can’t wait to introduce the innovation, power and fierce entrepreneurial spirit of KAR Global to our culture, our products and our customer base.”
Kelly added: “We’re committed to a disruption-free integration for our customers and advancing BacklotCars’ vision of making wholesale easy so that dealers can be more successful. We are excited to be part of that vision and to bring the BacklotCars offering to more dealers across the United States.”
Shortly after the deal was announced in September, KAR's leadership shared limited details on what BacklotCars would bring to its table.
There were only so many specifics KAR Global’s executive leadership could provide, pending regulatory approvals, but a conference call Tuesday with the investment community offered a glimpse into the strategy behind KAR’s agreement to buy BacklotCars for $425 million and what the dealer-to-dealer online auction platform may bring to the company.
First, the basics.
KAR announced Tuesday it has reached a deal to purchase BacklotCars, an online dealer-to-dealer wholesale platform, for $425 million.
The purchase is subject to certain regulatory approvals and other customary closing conditions.
Assuming those conditions are met, KAR expects the deal to close by the end of the year. Once it does, BacklotCars’ core leadership, including its four co-founders, will continue on with the company. KAR also plans to keep the company’s headquarters in Kansas City, Mo., where it was founded in 2015.
Justin Davis is the chief executive officer of BacklotCars and one of its co-founders.
In Tuesday’s release, Davis said: “KAR Global is the most innovative and progressive digital remarketing company in the world, and their entrepreneurial roots and culture are a great match for BacklotCars.
“We’re excited to expose Backlot sellers’ inventory to KAR’s active buyer base while expanding buyer access to quality wholesale inventory beyond their respective local markets,” he said. “We look forward to completing the transaction and leveraging the power of our combined technology solutions and industry expertise to help our companies and our customers succeed.”
This deal would augment what is already a bounty of digital marketplaces at KAR, which has purchased such entities as TradeRev, DRIVIN and CarsOnTheWeb in recent years, and acquired OPENLANE about a decade ago.
Which leads us to the question likely on the minds of many in the industry: Wait, doesn’t KAR already have a dealer-to-dealer platform in TradeRev?
Yes, but what BacklotCars brings is a bit different.
Similarities & differences with TradeRev
Though the product is “similar to TradeRev,” KAR chief executive Jim Hallett explained during the call that the actual format of its auctions is “slightly different” in that it uses a bid-ask marketplace that’s open 24-7. TradeRev uses timed auctions.
BacklotCars also uses auto mechanics to conduct its inspections, through a blend of employees and independent contractors. Additionally, it operates in 46 markets, including some where KAR does not have a presence, Hallett said.
In terms of the size of BacklotCars, KAR chief financial officer Eric Loughmiller said “it’s comparable” to TradeRev, declining to share more details until antitrust clearances are met.
As far as additional markets that BacklotCars would bring, Loughmiller said KAR could not get specific, again citing regulatory stipulations, but said “their focus has been in the middle of the country, the Midwest. And those types of markets where we may not have an auction operation would be what we’re referring to.”
He would later add, “There are markets where we both operate … and again, in many markets where one or the other probably has a more share in that local market than the other. So, we see a lot of synergies.
“They address the middle of the country and I would tell you they address many markets where they aren’t being served by the large physical auction businesses,” Loughmiller said. “So, we see a great deal of opportunity here. We’re excited about putting them together and think that we can actually have a strong offering to the buyers, and really give them an attractive offering to keep the process of selling wholesale used vehicles very efficient and cost-effective for the buyers and sellers.”
Asked if there was any overlap (with one being a timed auction and the other a 24-7 one) of dealers operating on both the TradeRev app and the BacklotCars app, Hallett said: “They could be operating on multiple apps right now and they will continue to operate on individual apps until we get to (the closing of the transaction). And then we’ll have to do decide how we go forward.”
More details on BacklotCars
Sharing what details they were permitted to on BacklotCars, Loughmiller said KAR noticed the company’s “very efficient capital model” and noted that BacklotCars has “incurred minimal losses.”
He added that BacklotCars has invested in inspections, with mechanics taking care of those and giving buyers “an expert” for that service. The company’s combined use of inside and outside sales “has been very efficiently deployed,” Loughmiller said.
He also turned to their bid-ask marketplace format.
“It takes the pressure off of a buyer having to be on his phone at the right time to make sure he gets the car. their listings will be up for anywhere from one to three days,” Loughmiller said. “They will execute the transaction very efficiently with a lot of information. And there’s actually a lot of interaction available between the buyer and seller as part of that process with their construct.
“So, it’s a very attractive model,” he said. “I would call it complementary to the offerings of KAR and we’re excited about adding them to our business.”
KAR declined to discuss the financial profile of BacklotCars, per regulatory guidance, “but I will tell you, the business operates very efficiently,” Loughmiller said, indicating KAR was “very pleased” with how the company has performed.
He said BacklotCars has “maintained modest losses throughout their history,” operated with an efficient model and grown quickly.
“There will be, we think, an opportunity for some synergy on the operations side, combining BacklotCars with the various offerings of KAR on the operations side,” Loughmiller said. “And we’re looking forward to getting those, that planning started as soon as we can, but not until we receive clearance and are able to work more closely with the Backlot teams on (what) the businesses will look like together.”
Funding and investment
In an earnings call earlier, KAR had mentioned it had roughly $1 billion in available cash on “and that number’s growing,” Loughmiller said in Tuesday’s call. KAR will use cash on its balance sheet to complete the BacklotCars transaction, he said, and it won’t draw on its revolver or incur any debt, Loughmiller said.
Asked about future investment in TradeRev, Loughmiller said: “We can’t say much and actually we can’t finalize our plans. At this point, both businesses will continue operating until we receive clearance on antitrust and close the transaction. However, when that’s completed, I think what you would expect is, we will continue investing in the dealer-to-dealer space, the capital needed to be competitive in that marketplace. I think you’ll see some synergies from the combined operations and you’ll see the investment continue.
“The good news is, as Jim (Hallett) mentioned in his comments, they’re very close to break-even. In fact, the path to profitability is very clear and apparent to us, for all of these businesses. And we think this strengthens the financial power of the organization, by having again, reaching scale at a much quicker pace by combining the two businesses, if we receive clearance, when we receive clearance.”
‘Why BacklotCars and why now’
You might be asking that same question. And in the conclusion to his opening remarks in Tuesday’s call, Hallett addressed that.
“First, our strategy is clearly directed at being a leader in the digital transformation of the wholesale auction business,” Hallett said. “We have also recently articulated our goal of increasing our market share to become more competitive in the dealer consignment segment of our business.
“We have made many changes at TradeRev and have proven the business model can be profitable and we believe will be even more profitable at scale. And finally, the recent disruption of the wholesale auction industry has accelerated the adoption of digital transactions by both sellers and buyers,” he said. “I’m confident that the combination of BacklotCars with ADESA and TradeRev will accelerate our growth in the dealer consignment space.”
During the call, the executives were asked if KAR would put more emphasis on mergers and acquisitions going forward.
“I think the starting point is you don’t always get to pick the timing when opportunities come to you. And this is an example of that,” Loughmiller said. “BacklotCars initiated the process. We got involved very early and were successful in reaching an agreement. and hopefully we’ll close in the very short term — before year-end for sure, is our plan.
“And our priorities after that, again, we’re very focused on asset-light businesses and continuing the digital transformation of our industry … I don’t think we should decide whether it’s build versus buy and things like that. We’ll try to deploy capital the most efficient way we can, with a return on invested capital being the key component of our analysis,” he said. “And we think this transaction has an opportunity for a very nice return on invested capital over the next several years.”
Adding more context, Hallett said it’s clear KAR has long been on a mission to digitalize the auction business.
“There’s certainly no question that COVID accelerated that transformation and it caused us to be able to react much earlier. We’ve continued to sell 100% of our vehicles in a digital format, and we want to make sure that we are addressing every segment of the market, that we’re providing a platform for every buyer and every seller,” Hallett said. “And I don’t think it’s one platform (that) takes all.”
And within KAR, there are several online platforms, including OPENLANE, TradeRev, ADESA.com, ADESA Simulcast and soon, BacklotCars.
Hallett emphasized that it’s about, “making as many vehicles available to as many buyers as we can across the entire nation. Not only here in the U.S., but in Canada, as well. And perhaps others in the future.”
KAR Global has reached a deal to purchase BacklotCars, an online dealer-to-dealer wholesale platform, for $425 million.
KAR announced the definitive agreement Tuesday morning, and the purchase is subject to certain regulatory approvals and other customary closing conditions.
Assuming those conditions are met, KAR expects the deal to close by the end of the year. Once it does, BacklotCars’ core leadership, including its four co-founders, will continue on with the company. KAR also plans to keep the company’s headquarters in Kansas City, where it was founded in 2015.
This deal augments what is already a bounty of digital marketplaces at KAR, which has purchased such entitites as TradeRev, DRIVIN and CarsOnTheWeb in recent years, and acquired OPENLANE about a decade ago.
In the news release, KAR chairman and chief executive Jim Hallett said: “KAR has led the digital transformation of the remarketing industry for over a decade, and we’re 100% committed to providing dealers with the best, most advanced platforms to sell and source inventory.
“BacklotCars has grown rapidly in the highly competitive dealer-to-dealer space and is the perfect complement to our current capabilities and footprint,” Hallett said. “I’m confident the addition of Backlot’s leadership, technology, and exceptional customer-service model will quickly benefit our combined customers, enhance KAR’s competitive position and accelerate growth for both organizations.”
BacklotCars offers a 24-7 “bid-ask” marketplace along with vehicle inspections and is used by dealers in 46 states. It aims to “address dealer pain points associated with digital transactions,” like inspections, transportation and dealer financing, according to a KAR news release.
KAR said once the deal closes, BacklotCars “will further diversify KAR’s broad portfolio of digital capabilities and accelerate the company’s strategy to be a leading digital dealer-to-dealer marketplace provider” and “build on the successful foundation of the company’s TradeRev auction platform and provide dealers with greater choice, enhanced transparency, and access to an expanded buyer and seller population.”
Justin Davis is the CEO of BacklotCars and one of its co-founders. In the release, he said: “KAR Global is the most innovative and progressive digital remarketing company in the world, and their entrepreneurial roots and culture are a great match for BacklotCars.
“We’re excited to expose Backlot sellers’ inventory to KAR’s active buyer base while expanding buyer access to quality wholesale inventory beyond their respective local markets,” he said. “We look forward to completing the transaction and leveraging the power of our combined technology solutions and industry expertise to help our companies and our customers succeed.”
Just a little more than a month since spinning off as its own entity, IAA, Inc. announced the purchase of an electronic lien and title technology firm on Wednesday afternoon.
IAA said it has acquired Lexington, S.C.-based DDI Technology for approximately $17 million (a purchase price that could climb by $4.1 million during the next three years upon terms/conditions and performance metrics).
IAA completed its spin-off from KAR Auction Services and began trading the “regular way” on the New York Stock Exchange on June 28.
“As part of the IAA family, DDI will help drive our continued focus on building strong client relationships and delivering a broader set of technology solutions that will enhance our current platform,” IAA chief executive officer and president John Kett said in a news release.
“DDI’s products will work within the IAA suite of total loss solutions and will focus on services critical to reducing the cycle time of closing an insurance claim and selling a total loss asset,” Kett said.
DDI, which pulled in approximately $8.3 million in revenue in the past 12 months, will keep its current headquarters, employee base and management team. DDI will report through Tim O’Day, who is IAA’s president of U.S. operations.
DDI’s tech is directly integrated with more than 5,370 financial institutions and 25 state departments of motor vehicles. The Premier Solutions technology solutions at DDI focus on such areas as electronic vehicle registration, electronic lien and title processing and electronic lien payoff.
Added DDI CEO and president Glenn Thames, “The DDI team is excited about this next phase of growth for the company. IAA is recognized as a technology leader in the industry, and we are thrilled to join their team to drive greater innovation and value for our customers.”
