vAuto said Wednesday it has purchased used-car reconditioning management platform iReconCars and is relaunching it as iRecon.
Co-founders Mike Boyd and Micah Tindor will stay on with vAuto parent company Cox Automotive. Boyd will be senior director of business enablement for iRecon, and Tindor will be business operations director for iRecon.
The iRecon platform is designed to let dealers automate the reconditioning process.
It will be available to customers and non-customers of vAuto’s Provision tool as well as for third-party recon partner platforms.
“Due to margin compression and market competition, it’s critical to have a reconditioning system partner to control, manage and maximize the reconditioning process in order for dealers to stay relevant and profitable,” Boyd said in a news release.
“With iRecon, we automate the reconditioning process by putting the right vendor on the right job at the right time and providing dealers with a ‘real-time’ connection to the consumer based on trust,” he said.
Randy Kobat, who is the senior vice president of inventory software solutions at Cox Automotive, said: “Reconditioning often slows the time it takes dealers to get used vehicles front-line ready, which can hurt a vehicle’s front-end profit potential.
“iRecon helps dealers efficiently manage the reconditioning workflow by providing real-time reconditioning reports and statistics that track every touch point until reconditioning is complete,” he said. “That’s why we believe in this technology and thank Mike and Micah for their thought leadership to develop a solution that solves a critical need for our clients.”
It’s already been an eventful 2019 for the XLerate Group.
The auction company announced a pair of acquisitions on Friday, adding Morton Auto Auction (MAA) located in Morton, Ill., and Southeastern Auto Auction (SEAA) based in Savannah, Ga.
With these acquisitions in the portfolio, XLerate Group now operates 12 auctions with sales in California, Florida, Georgia, Illinois, Michigan, Pennsylvania, South Carolina, Texas and Wisconsin. XLerate also operates robust digital and mobile sales platforms nationally.
MAA has been owned and operated by the Krupa family since 2006, serving both dealers and fleet/lease consignors. In existence since 1978, MAA is XLerate’s fifth Midwestern location and has served a broad swath of dealers in Illinois, Iowa, Wisconsin, Missouri and Indiana as well as key commercial consignors.
XLerate chief executive officer Cam Hitchcock said, “Adding MAA to the XLerate family helps solidify our Midwest footprint and adds another highly respected independent operator to our management team. We have stayed the course with XLerate ’s long-term strategy to grow our business, footprint and service offerings by acquiring high-quality independent sales with strong operating management and building upon this foundation.
“Steve and Ted Krupa have owned and grown the sale since purchasing it in 2006 from the Weihmeir family, MAA’s co-founders,” Hitchcock continued. “Steve is quite active in key industry groups and associations, promoting and protecting the interest of his independent auction constituents.”
The company indicated that Steve Krupa and general manager Shawn Glatz will continue to oversee MAA and will work closely with the XLerate sales teams to drive additional volume through MAA.
“We are honored that Steve’s family trusts XLerate with their legacy and employees at MAA,” Hitchcock said. “We intend to aggressively grow the sale and enhance key product offerings like digital and our mobile sale platform.”
Steve Krupa added that “we are thrilled to join the XLerate Group. My team and I feel that XLerate’ s resources, expertise and management structure are a perfect fit for Morton and its employees and will help us to better serve our dealers and commercial consignors.
“While it is never an easy decision to sell your family auction, it was clear that XLerate was the best fit,” Krupa went on to say.
MAA has dealer consignment, fleet/lease and financial institution sales each Wednesday at its 22-acre facility.
Details about SEAA acquisition
In a separate transaction, XLerate Group also boosted its footprint in the Southeast.
SEAA has dealer consignment, fleet/lease and financial institution sales each Wednesday at its Savannah, Ga., facility as well as a weekly public sale on Thursdays. The auction operates a four-lane arena and reconditioning facility on approximately 15 acres.
“SEAA is the latest step in XLerate’s strategy to grow our business, footprint and service offerings by acquiring high-quality independent sales with strong operating management,” Hitchcock said. “Tommy Childs, Danny Williams and Wayne DeLoach started SEAA in 1987 and have expanded it several times since.”
XLerate alum and current SEAA operator Bill McCready will run SEAA, according to the company. McCready previously served as the assistant general manager of Charleston Auto Auction, another XLerate Group location about 100 miles away from SEAA.
XLerate executive vice president Chuck Tapp said, “We are pleased to officially welcome Bill back to the XLerate family.
“He is a proven operator with a laser focus on customer service. He has an intimate knowledge of the regional customer base as well as a great track record with commercial consignors," Tapp added about McCready, who was among Auto Remarketing’s annual Remarketing & Used-Car Industry’s 40 Under 40 honorees in 2016.
SEAA celebrated 22 years in business back in August.
“SEAA’s customers and employees will be well served by the resources and depth of product offerings that come with being part of the XLerate Group. I look forward to expanding SEAA’s base of business and continuing to drive its strategic growth,” McCready said.
DeLoach, added, “Danny, Tommy and I are excited for our dealers, institutional clients and our auction family. Joining the XLerate Group gives Southeastern Auto Auction capabilities it did not have as a single auction.
“During our thirty-plus years in business, we have had the pleasure of working with so many great people. We all say thank you to everyone who has worked for, or done business with, Southeastern Auto Auction,” DeLoach went on to say.
Along with analyzing how dealership values are changing, one transaction involving the Ken Garff Automotive Group highlighted the Q3 edition of The Haig Report released this week by Haig Partners.
The report indicated the number of private dealerships that sold in the U.S. increased 26 percent year-over-year, rising from 84 to 106.
In one large transaction, the firm recounted the Ken Garff Automotive Group purchased full ownership of 28 dealerships from an affiliated entity that drove much of this increase.
Excluding this transaction, Haig Partners noted that the number of dealerships sold in Q3 decreased 7 percent year-over-year. Meanwhile, the report showed the number of dealerships sold during the first three quarters of this year jumped 24 percent compared to the same span in 2017.
Haig Partners added that acquisition spending in the first three quarters of 2018 by publicly traded auto retailers decreased 33 percent compared to the same period in 2017.
The report goes on to mention profits at privately owned dealerships during the past 12 months through September came in 2.6 percent lower than for the full year 2017, mostly due to rising costs.
Haig Partners lowered the estimated blue sky multiple ranges for 12 of the 22 franchises that it covers by 0.25 times-0.5 times to reflect lower offers from buyers.
The firm explained the reduction in blue sky multiples is a result of several factors, including falling profits, an increase in the number of dealerships available for purchase, and the potential of rising interest rates which could reduce investment returns.
When lower profits per dealership are combined with reduced blue sky multiples, Haig Partners estimated the value of a privately owned dealership fell 4.6 percent from year end 2017 to Q3 2018.
Other key findings from the Q3 2018 Haig Report include:
—Macroeconomic indicators such as GDP, employment, number of miles driven and consumer sentiment remain highly favorable for dealers.
—Other trends such as higher interest rates, higher average monthly car payments and declining dealership profits are hurting dealers.
—Private dealers are increasing their focus on used vehicles with volume up 4.4 percent through three quarters, even as new-vehicle sales are declining.
—Fleet sales are up 9.3 percent through three quarters, but retail sales were down 2.2 percent.
—Declines in new and used gross profits per vehicle are being offset by gains in F&I and fixed operations.
—Floorplan interest expense has swung from a credit of $119 per vehicle in 2015 to an expense of $58 so far in 2018.
—Total sales and gross profits continue to increase at dealerships, but expenses are rising faster leading to earnings declines at many public and private dealers.
—The average dealership pre-tax profit for the 12-month period that ended in Q3 was $1.36 million, down 2.6 percent from the close of 2017.
—Average estimated blue sky value per dealership dipped 4.6 percent in Q3 to $6.6 million compared to $6.9 million at the end of 2017.
—Potential threats from autonomous cars, ride sharing, and electrification have not yet had a measurable impact on dealership values, but dealers are increasingly thinking about these risks.
The firm added that more dealers are coming to the realization that scale will matter more in the future. They are preparing to “get big or get out,” according to the firm.
“The third quarter buy-sell activity was healthy but leveled out from the huge uptick we saw in the second quarter,” said Alan Haig, president of Haig Partners. “Auto retail continues to deliver attractive returns for dealers, particularly after the new tax code went into effect.
“Lenders are also bullish and we see them providing generous credit terms for most acquisitions,” Haig continued. “That said, there are many businesses for sale right now, and buyers are increasingly focused on the risks of higher interest rates in the future.
“As a result of having more choices and being more cautious, buyers are less aggressive than in prior years and they are reducing the multiple of earnings they are willing to pay for dealerships,” he added.
“Sellers with realistic expectations can still exit the industry with healthy valuations, but those who seek premium prices will likely sit unless they are located in booming markets like Texas and Florida,” Haig went on to say.
The Haig Report is published each quarter. Included in each edition are Haig Partners' blue sky multiples that can serve as a gauge for franchise values. To download the report, go to this website.
CarGurus is increasing its footprint in the UK with the planned acquisition of used-car motoring website PistonHeads.
The company announced Tuesday it had reached an agreement with Haymarket Media Group to buy PistonHeads, a website started in 1999 that includes an online motoring community, editorial and used-car marketplace.
It was acquired by Haymarket in 2007.
The current acqusition, should it meet certain closing conditions, is likely to close early next year.
“PistonHeads is one of the UK's most trusted and influential digital motoring brands, and we see it as a perfect fit with our own consumer-centric model and pioneering ethos,” CarGurus chief executive officer Langley Steinert said in a news release
“We look forward to applying CarGurus’ engineering expertise to unleash the full potential of the platform, while staying true to what makes PistonHeads so special to millions of motoring enthusiasts and shoppers in the UK,” Steinert said.
Once the purchase is final, the plan is for PistonHeads to be run as an independent brand, with technology provided by CarGurus to give the site’s user experience a boost. Additionally, CarGurus says it intends on providing its dealership listing services across platforms.
“Over the past 18 months we have invested significantly in our new and nearly-new car offer. The What Car? New Car platform is our primary focus as we continue to develop our New Car buying technology further. It is important that PistonHeads has a home with a company that can advance its unique place in the used car marketplace,” Haymarket CEO Kevin Costello said.
“CarGurus is well placed to make the important investments that will continue the rapid growth that PistonHeads has enjoyed under our ownership. I have no doubt the brand will be in good hands."
Added CarGurus chief operating officer Sam Zales: “CarGurus' momentum in the UK continues to build, and aligning the CarGurus and PistonHeads brands enables us to accelerate our audience growth, and continue to innovate our transparent marketplace.
“For dealers in the UK, this combination will make CarGurus an even more compelling platform that can help them connect with a larger audience of used car buyers at an attractive ROI.”
Kerrigan Advisors has expanded to the East Coast.
The California-based firm, which advises dealers on the sell-side of M&A, has opened its second office, setting up shop in the Washington, D.C. metro area.
The D.C. office will be led by Gabe Robleto, who joins the company as vice president of buy/sell advisory. Robleto was most recently the vice president of acquisitions at Capital Area Real Estate Services, which is also known as CARS.
“Gabe’s impressive background in dealership real estate transactions could not be more timely in a buy/sell market where real estate, for most dealers, is their most valuable asset – often exceeding franchise value, and representing an increasingly larger slice of auto retail buy/sell transactions,” firm founder and managing director Erin Kerrigan said in a news release. “We are delighted that Gabe has joined our growing company, enabling us to expand our expertise in dealership real estate and increase our firm’s reach across the U.S.”
Robleto spent a decade at CARS, where his experience included underwriting and financing more than $300 million of car dealer real estate, which came in the form of sale leasebacks via buy/sell transactions and dealer estate planning.
He headed up a $1 billion-plus portfolio of real estate investments by CARS. That portfolio included leases to dealer groups.
“As the scope of our business has broadened in a buy/sell market that continues to be robust, the need for a consistent East Coast presence has become clear,” Kerrigan Advisors managing director Ryan Kerrigan said. “Our new Washington DC metro office, under Gabe’s leadership, will enable us to be even more hands on with our clients in the Eastern and Southeastern U.S. and to better serve the retail automotive market nationwide.”
Robleto added, “I am delighted to join the Kerrigan Advisors buy/sell advisory team. There is no other firm in the industry with the expertise, professionalism and, most importantly, track record of success in the dealership buy/sell market. I look forward to working with our clients on the successful sale of their dealerships.”
Only a couple days following the launch of a dealer-driven program, Automatic made an acquisition designed to broaden its service offering further.
The SiriusXM company that can bring the power of connectivity to most vehicles on the road on Thursday announced the acquisition of PayTollo, a mobile payment platform for toll roads and bridges that can give both drivers and toll authorities a streamlined payment option.
PayTollo’s GPS toll recognition technology algorithm and user interface can deliver the ability to notify, verify and charge a user for toll crossings. PayTollo is currently an accepted payment option for tolls in Florida and California.
PayTollo is designed to simplify the tolling experience, from paying tolls across different toll roads and bridges to account management and billing, all through the use of the PayTollo mobile app.
For toll authorities transitioning to all-electronic tolling, PayTollo can reduce costs, time needed to collect funds, DMV look-ups, billed invoices and enable real-time verification.
“The acquisition of PayTollo is exciting for Automatic as we continue to expand our consumer convenience and safety offerings,” said Joe Verbrugge, executive vice president and general manager of emerging business for SiriusXM.
“PayTollo provides a convenient service for drivers and authorities alike,” Verbrugge continued. “We believe it will fit nicely within the Automatic platform as we add new features and services for our customers.”
PayTollo complements Automatic’s consumer convenience and safety services.
“PayTollo is thrilled to be under the Automatic umbrella,” said Abenezer Yohalashet, the former chief executive officer of PayTollo and now director and head of Tolling for Automatic.
“The synergy between connected vehicle services and toll payment are considerable and together, SiriusXM, Automatic and PayTollo will accelerate the growth of our platform and enable us to more quickly offer tolling solutions to drivers across the country,” Yohalashet went on to say.
With Automatic’s install-it-yourself adapter and consumer friendly mobile application, most vehicles model year 1996 or later can be transformed into connected vehicles, giving drivers access to important services like Crash Alert, roadside assistance, real-time vehicle location monitoring and sharing, vehicle health and performance monitoring, recall notifications and service reminders and now tolling.
For more information on Automatic, visit www.automatic.com. For more information on PayTollo, visit www.paytollo.com.
F&I Express now will operate as a wholly owned subsidiary of Cox Automotive after this announcement became public.
Brian Reed, chief executive officer and co-founder of F&I Express, joined Nick for this episode of the Auto Remarketing Podcast to discuss how the acquisition came together and what it means for dealers and service providers.
The full discussion can be found below.
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An acquisition that first came to light back in July came to fruition late last week.
CDK Global announced that it has received all customary regulatory approvals and has completed the acquisition of ELEAD1ONE, a leading provider of fully integrated customer relationship management software solutions for automotive dealers.
The company said the acquisition is expected to be modestly dilutive to earnings in fiscal 2019 and accretive to earnings by fiscal 2020. CDK added that it will provide additional information about the acquisition along with updated guidance when it reports fiscal year 2019 Q1 results.
“This combination of two industry leaders provides our dealer customers with a best-in-class customer acquisition and retention platform,” said Brian MacDonald, president and chief executive officer of CDK Global.
“ELEAD1ONE’s innovative CRM, service and call center solutions delivered through an integrated service platform complement the focus CDK places on delivering business-essential solutions with an outstanding experience for dealers,” MacDonald went on to say.
If your franchised dealership sits among a total of eight rooftops within a span shorter than a test drive, experts say that at least one operation — perhaps where you sit now — has gained new ownership during the past four years.
And it appears that buy/sell pace could intensify.
Kerrigan Advisors pointed to a pair of reasons why the number of second-quarter transactions spiked after a slow start to the year.
According to The Blue Sky Report generated by Kerrigan Advisors and released on Wednesday, new tax law and improved economies of scale and scope are among the trends driving a robust buy/sell market.
The report indicated 75 transactions were completed in Q2, a 92-percent increase over Q1. With consolidators and publicly-traded auto retailers seeing increased earnings as a result of these factors, profitability at dealerships holding steady, and dealerships embracing innovative, profit-driving business models, Kerrigan Advisors predicts that 2018 will mark the fifth consecutive year to see more than 200 transactions.
“We estimate one in eight dealerships have changed hands since 2014 and we believe increasing consolidation means this number will only increase,” said Erin Kerrigan, managing director of Kerrigan Advisors. “Consolidators are leveraging significant opportunities to increase earnings with accretive acquisitions by achieving economies of scale and scope post-transaction.”
Ryan Kerrigan, managing director of Kerrigan Advisors, also added, “Consolidators are finding new ways to grow earnings by employing technology and streamlining their business models, changing their selling systems and introducing new products across their platforms, while the ‘to-be-consolidated’ are squeezing more profit out of their existing business models. And both are being positively impacted by reduced taxes as a result of tax reform.”
However, the Kerrigans did note that while blue sky values remained high in Q2, they were below 2017 levels, partly as a result of rising interest rates and floor plan cost increases.
But, despite a plateauing seasonally adjusted annual sales rate for new-model delivers, The Kerrigan Index, which tracks publicly-traded auto retail companies, continues to rise, indicating that Wall Street believes that scale matters and that anticipated disruptions to auto retail will disproportionately benefit the largest dealership groups.
“There is little doubt that size will be a key driver for future success in auto retail,” Ryan Kerrigan said.
The Blue Sky Report, published by Kerrigan Advisors, is the auto industry's most comprehensive and authoritative quarterly report on dealership M&A activity, as well as franchise values. It includes analysis of all transaction activity for the quarter, and lays out the high, average and low blue sky multiples for each franchise in luxury and non-luxury segments.
Seven other key highlights from the Q2 report include:
• 114 dealership buy/sell transactions were completed in the first half of 2018, compares to 101 transactions in the first half of 2017.
• The number of franchises sold rose 22 percent over the first half of 2017.
• The number of multi-dealership transactions increased to 33 during the first half of 2018, versus 23 in the first half of 2017.
• Domestics maintained their leading position, followed by import non-luxury franchises and import luxury franchises.
• The publics are tracking towards nearly $1 billion of US acquisition spending in 2018, a level that would surpass all prior years, except 2014 when Lithia Motors acquired DCH Auto Group.
• Private dealership groups continue to represent the largest share of dealership acquirers. Only 22 of the estimated 192 franchises that changed hands in the first half of the year, were acquired by public companies.
• Dealership rents rose as compared to 2017, creating concern: the average dealer now has a rent to gross profit of 11.2 percent, a 3.7-percent rise over the 2017 ratio.
The Q2 report outlines three key trends that Kerrigan Advisors anticipate will have a significant impact on the buy/sell market for the remainder of 2018 and into 2019. They include
• Consolidators focus on geographic concentration
• Successful business models command higher blue sky values
• Expense reduction becomes a major consolidation driver
In addition to expense reduction and a focus on geographic concentration, the report emphasized the importance of successful and innovative business models to increased valuations, citing the recent sale of Wilsonville Toyota and Wilsonville Subaru, both of which effectively utilized a no-negotiation sales model, resulting in profitability far higher than industry standards.
“Buyers of dealerships today are students of auto retail. Most spend their days and nights thinking of ways to enhance their business’ profitability and strategically drive earnings growth,” Erin Kerrigan said. “Acquisition opportunities that provide an expanding group with new strategies to grow earnings will command a premium in today’s buy/sell market.”
Kerrigan Advisors monitors conditions in the buy/sell market and publishes an in-depth analysis each quarter in The Blue Sky Report, which includes Kerrigan Advisors’ signature blue sky charts, multiples and analysis for each franchise in the luxury and non-luxury segments. To download the entire report, go to this website.
The company also releases monthly The Kerrigan Index composed of the seven publicly traded auto retail companies with operations focused on the U.S. market. The Kerrigan Auto Retail Index is designed to track dealership valuation trends, while also providing key insights into factors influencing auto retail. To access The Kerrigan Index, go to this website.
One of Kia’s flagship dealerships has new owners.
Kerrigan Advisors represented and advised Car Pros Automotive Group in its recent sale of Carson Kia — which the firm said is the highest volume Kia dealership in the U.S. since 2016 — to southern California-based Trophy Automotive Dealer Group (TADG).
Opened in 2017, Kerrigan Advisors highlighted that the dealership's new state-of-the-art facility spans 72,000 square feet and is a flagship in OEM’s national distribution network. This transaction marks the fifth dealership that TADG has purchased in southern California in recent years.
“This was a very big decision for our family. While we have no intention of leaving the car business, we felt that selling our large Kia store in Carson made sense, both for our family and for the strategic direction of the group,” said Matthew Phillips, chief executive officer of Car Pros Automotive Group and son of the founder and chairman, Ken Phillips.
In addition to the Carson store, Car Pros Automotive Group comprises six dealerships in northwest Washington and southern California.
The Phillips family has retailed more than 100,000 Kia units in the U.S., more than any other store.
“I opened my first dealership in Des Moines, Wash., in 1984, based on the ideals of honesty and integrity,” founder Ken Phillips said. “As I look back, for the past 35 years, we’ve held true to those standards in everything we’ve done.
“I am proud to say that our recent transaction was handled in the same fashion,” Ken Phillips continued. “Kerrigan Advisors really helped to provide the expertise we needed to transition our Group toward the next phase of Car Pros automotive retail.”
Kerrigan Advisors has represented on the sale of 72 dealerships since July 2015
“I’d like to thank Kerrigan Advisors for smoothly guiding us through this process, with such a high level of professionalism. They truly understand everything a seller goes through and offered sensitivity, a keen understanding of the current (and future) automotive landscape and support every step of the way,” Matthew Phillips said.
Along with turning new metal, the dealership is also among Kia’s top performers for retailing certified pre-owned vehicles.
“Ken and his family are the top Kia retailers in the United States and have been a huge part of that brand’s success on the West Coast — which is also one of the most demanding and cutting-edge automotive markets in the world,” said Ryan Kerrigan, managing director of Kerrigan Advisors. “From the start, in handling this transaction, we focused on that innovative spirit. This is a crown jewel for the KIA brand, and we were proud to be able to offer Carson Kia the representation it deserved.”
Erin Kerrigan, also managing director of Kerrigan Advisors, added, “We were honored to represent the Phillips family on this big transaction.
“This is a landmark dealership in the Kia network, and we have enjoyed working with the Phillips family to develop their game plan for the next leg of their group’s growth,” she went on to say. “We congratulate Trophy Automotive Dealer Group on adding Carson Kia to their portfolio of Southern California dealerships.”
Gus Paras and Bert Rasmussen of Scali Rasmussen served as legal counsel to Car Pros Automotive Group. Aaron Jacoby of Arent Fox served as legal counsel to Trophy Automotive Dealer Group.
