Representatives from Cox Automotive and Dealertrack Technologies on Wednesday used the adjectives “important” and “key” to describe moves made by the Department of Justice to provide a pathway for the companies to finalize their agreement that’s been in the works since mid-June.
Furthermore, Cox Automotive elaborated a bit about one element of the Justice Department’s decision that focused on Dealertrack’s interest in Chrome Data Solutions.
In an announcement first released late on Tuesday, DOJ officials said Cox Automotive must undertake various obligations to prevent Cox Automotive from using Dealertrack’s interest in Chrome Data Solutions, a company that compiles and licenses vehicle information data for use in inventory systems and other automated solutions and services for the automotive industry.
“Chrome Data Solutions is a joint venture between Dealertrack and Autodata that provides vehicle information data utilized in the industry, including for inventory management applications,” Cox Automotive spokesperson David Doolittle told Auto Remarketing on Wednesday afternoon in an emailed message.
“We are committed to achieving open integration among our combined solutions and other third-party providers, including ensuring the availability of this data for all customers’ needs,” Doolittle continued.
“Accordingly, our commitment to the DOJ facilitates competition in the marketplace by facilitating data access that will deliver greater value and economic efficiency to our customers,” he went on to say.
The primary cause of the Justice Department concern about Cox Automotive acquiring Dealertrack was one company holding too much of the market for the service vital to dealerships.
The department’s Antitrust Division filed a civil antitrust lawsuit on Tuesday in the U.S. District Court of the District of Columbia to block the proposed acquisition. At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the competitive concerns alleged in the lawsuit.
According to the department’s complaint, Cox Automotive and Dealertrack are the two leading IMS providers. Officials calculated Cox Automotive’s acquisition of Dealertrack would increase its market share from 60 percent to 86 percent.
But Dealertrack has an agreement with DealerSocket for that company to acquire Dealertrack’s Inventory+ suite of inventory management solutions, including its AAX product in the U.S. and Canada, as well as its eCarlist websites, in a $55 million transaction.
“Cox’s proposed acquisition of Dealertrack would have allowed Cox to become the dominant inventory management solution provider in the United States,” Assistant Attorney General Bill Baer of the Antitrust Division said. “The divestiture will ensure that automotive dealerships in the United States continue to benefit from the competition that now exists among inventory management solution providers.”
Now with a plan in place orchestrated by the Justice Department, the agreement can be finalized after being delayed five different times since the initial announcement of the $4.2 billion deal back on June 12.
“The DOJ news is an important development and we are moving expeditiously to close the transaction,” Doolittle said.
In a separate email message to Auto Remarketing, spokesperson Alison Von Puschendorf said on behalf of Dealertrack:“The DOJ decision was a key step and we are moving expeditiously toward closing the acquisition.”
Auto Remarketing editor Joe Overby contributed to his report.
Dent Wizard International announced Tuesday its acquisition of Know How Systems Global (KhS), a provider of high-volume automotive services and repairs to OEMs and insurers.
The latter is a St. Louis-based company that features three primary offerings of diversified fleet services, claims management and appraisal services, with operations primarily in the U.S., Canada and Mexico.
“Utilizing a technology enabled service platform has been a differentiator for both companies, and our combined technological resources will allow for even better and more efficient technology based solutions for customers,” said Terry Koebbe, Dent Wizard’s president and chief executive officer. “This acquisition is a clear indicator of our commitment to invest in Dent Wizard and support our customers to successfully grow our business.”
KhS provides solutions to OEMs and insurance companies at manufacturing plants and transit sites where vehicles being shipped or held may receive damage. Its claims management program offers a direct repair program and expedient assessments of catastrophic event exposures.
Scott Blind will continue as the president of KhS as well as oversee all catastrophe and hail operations for Dent Wizard.
“The KhS team is excited to partner with Dent Wizard and is looking forward to the new opportunities and solutions we can bring to our clients,” Blind said.
For more information on Dent Wizard, visit its site here.
The latest move by the Department of Justice showed how crucial DealerSocket is to the Cox Automotive acquisition of Dealertrack Technologies being finalized.
In order to prevent Cox Automotive from holding an estimated 86 percent market share of that service segment, DOJ officials announced late on Tuesday that it will require Cox Automotive to divest Dealertrack’s full-featured inventory management solution business in order for Cox Automotive to acquire Dealertrack through an approximately $4 billion tender offer first revealed back in June.
The department’s Antitrust Division filed a civil antitrust lawsuit on Tuesday in the U.S. District Court of the District of Columbia to block the proposed acquisition. At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the competitive concerns alleged in the lawsuit.
“Cox’s proposed acquisition of Dealertrack would have allowed Cox to become the dominant inventory management solution provider in the United States,” Assistant Attorney General Bill Baer of the Antitrust Division said. “The divestiture will ensure that automotive dealerships in the United States continue to benefit from the competition that now exists among inventory management solution providers.”
According to the department’s complaint, Cox Automotive and Dealertrack are the two leading IMS providers. Officials calculated Cox Automotive’s acquisition of Dealertrack would increase its market share from 60 percent to 86 percent.
DOJ recapped that inventory management solutions use algorithms and sophisticated analytics to assist automotive dealerships in managing their vehicle inventories. They are used most frequently by large franchised and independent dealerships, “which are more dependent on robust, automated solutions to manage their businesses,” according to DOJ.
Officials believed the elimination of competition between Cox Automotive and Dealertrack would likely result in higher prices and lower quality for dealerships that use this technology.
DOJ explained the proposed consent decree, which requires Cox Automotive to divest Dealertrack’s IMS business to DealerSocket, or to another buyer approved by the United States, remedies the loss of competition in the IMS market.
DealerSocket said back in August that it forged an agreement to acquire Dealertrack’s Inventory+ suite of inventory management solutions, including its AAX product in the U.S. and Canada, as well as its eCarlist websites, in a $55 million transaction.
The proposed consent decree also requires Cox Automove to enable the continuing exchange of data and content between the divested IMS business and other data sources, Internet sites and automotive solutions that Cox Automotive will control.
Additionally, officials mentioned Cox Automotive must undertake various obligations to prevent Cox Automotive from using Dealertrack’s interest in Chrome Data Solutions, a company that compiles and licenses vehicle information data for use in inventory systems and other automated solutions and services for the automotive industry.
Cox Automotive already has firms Manheim, vAuto, HomeNet Automotive, Autotrader and Kelley Blue Book in its portfolio. But this Dealertrack acquisition has been delayed multiple times with Cox Automotive saying it expected to close in October.
DOJ pointed out that Cox Automotive’s total annual revenue in 2014 was about $4.9 billion, of which its U.S. IMS revenue was a “small part.”
Officials added Dealertrack’s total annual net revenue in 2014 was about $854 million, of which its U.S. IMS revenue again was a “small part.”
As required by the Tunney Act, the proposed consent decree, along with a competitive impact statement, will be published in the Federal Register. Any person may submit written comments concerning the proposed settlement within 60 days of its publication to:
James Tierney
Chief, Networks & Technology Enforcement Section, Antitrust Division
U.S. Department of Justice
450 Fifth Street N.W., Suite 7100, Washington, D.C. 20530.
At the conclusion of the 60-day comment period, officials noted the court may enter the final judgment upon finding that it is in the public interest.
More than two years have passed since Copart acquired Salvage Parent, which had conducted business primarily as Quad City Salvage Auction, Crashed Toys and Desert View Auto Auction.
During last week’s conference call with the investment community, Copart chief financial officer Will Franklin indicated the company has “cycled completely through the integration pain of the QCSA acquisition.”
That process stemmed from the acquisition that gave Copart management the task of how to leverage the human capital, business practices and more at 39 locations in 14 states in the best way possible.
“More importantly is we are starting to see again the efficiencies that are endemic in our model,” Franklin told Wall Street observers after Copart wrapped up its most recent fiscal year. “We’re starting to see the benefit of what we call fixed cost absorption in our processing cost.
“Sean Eldridge, our chief operating officer and his team have worked extremely diligently to carve out any waste in our system and he has been very successful in last year in doing so,” Franklin continued.
“Going forward, I wouldn't expect to see a meaningful change. I think that we'll control the cost, but I wouldn't expect to see significant reductions going forward,” he went on to say.
Another component of Copart’s business that took root back in 2013 and now is producing fruit is the company’s mobile technology. Chief executive officer Jay Adair said that Copart first launched its iPhone app two years ago and one for Android devices earlier this year.
He said Copart received more than $8.8 billion worth of bids and sold 12.5 percent of its vehicles through mobile devices during the past fiscal year.
“It has become a very strong part of our platform,” Adair said. “I think back to the days of having to physically sell through auctions and putting those auctions online how it allowed buyers to eliminate travel and weather and all the other friction points.
“Now you don’t even have to be in your office,” he continued. “You can literally be bidding on vehicles from the local Starbucks and we are seeing that now as 12.5 percent of our bids are coming in through mobile devices.”
Group 1 Automotive announced Monday its acquisition of a Mercedes-Benz store in Georgetown, Texas.
Part of the greater Austin metropolitan area, the dealership will continue to operate as Mercedes-Benz of Georgetown.
The store is expected to generate $100 million in estimated annual revenues.
“We are delighted to strengthen our relationship with Mercedes-Benz and further expand our scale in the Austin metropolitan market, which leads the nation as one of America’s fastest-growing cities,” said Earl Hesterberg, Group 1’s president and chief executive officer.
Mercedes-Benz of Georgetown also features a Mercedes-Benz Sprinter commercial vehicle franchise as well as a Smart car franchise.
Late on Thursday, Cox Automotive and Dealertrack Technologies issued a one-sentence update on the planned acquisition first announced back on June 12.
The companies have extended the tender offer four times and now say the transaction is expected to close in October.
Regulatory hurdles and securing a majority of shareholder approval have been some of the hurdles Cox Automotive and Dealertrack have encountered in an attempt to finalize the $4.2 billion acquisition.
When Cox Automotive completes the acquisition, its portfolio will include not only Dealertrack but also major industry players Manheim, Autotrader, Kelley Blue Book, vAuto and NextGear Capital.
When Cox Automotive first announced it was going to acquire Dealertrack Technologies, officials believed the deal would be finalized during the third quarter. The companies will just make that timeframe if the deadline for the fourth extension of the tender offer is met.
The companies said on Wednesday that the offer previously set to expire at midnight ET that day was extended until midnight ET on the last day of September and the end of the third quarter.
"The merger agreement sets forth our rights with respect to extending. We are still optimistic we’ll be closing around the end of the third quarter, however," Cox Automotive spokesperson David Doolittle said in a message to Auto Remarketing on Wednesday.
Officials indicated details of the merger agreement remain unchanged. Cox Automotive intends to purchase all of the outstanding shares of common stock of Dealertrack for $63.25 per share, net to the seller thereof in cash, without interest and subject to any withholding taxes required by applicable law and upon the terms and subject to the conditions set forth in the offer to purchase dated June 26. It’s an offer worth $4.2 billion.
Perhaps what’s holding up the culmination of the deal is the acquisition is subject to a minimum tender of at least a majority of outstanding Dealertrack shares on a fully diluted basis, customary regulatory approvals and closing conditions.
Officials from American Stock Transfer & Trust Co. — the depositary for the offer — tabulated that approximately 21,831,315 shares of Dealertrack had been validly tendered and not validly withdrawn pursuant to the offer — not including 32,900 shares tendered pursuant to notices of guaranteed delivery for which shares have not yet been delivered in settlement or satisfaction of such guarantee. That large figure represents approximately 39.50 percent of Dealertrack’s outstanding shares, short of the majority threshold.
When the companies announced an offer extension on Sept. 14, the tendered share level stood at 36.20 percent. Back on Aug. 21 when the offer was extended for the second time, that share figure was at 32.79 percent.
And when the string of extensions began on July 24, officials pegged the tendered share level at 30.31 percent.
"We do not believe this will be an issue," Doolittle said when asked about what Cox Automotive might do if the minimum tender is not reached.
Also during the journey, Cox Automotive and Dealertrack encountered regulatory hurdles, prompting a $55 million cash transaction with DealerSocket for Dealertrack’s inventory solution.
Along with naming a top executive for EDGE Marketplace, Auction Edge announced on Wednesday that it entered into an agreement to purchase Auto Auction Solutions of Pensacola, Fla., in a deal that is expected to close Oct. 30.
Company officials highlighted Auto Auction Solutions will operate as a division of Auction Edge called EDGE AAS with now former Auto Auction Solutions president Kathy Williamson assuming the position of division vice president reporting to Auction Edge president Scott Finkle.
Finkle highlighted the acquisition further strengthens the already significant network of independent auctions using Auction Edge’s suite of integrated products that range from line-of-business applications to online platforms.
“The addition of Auto Auction Solutions to Auction Edge’s portfolio significantly expands our footprint of independent wholesale and public auctions, and provides tremendous opportunity for Auction Edge to grow its online platforms including EDGE Pipeline, EDGE Simulcast and EDGE Lookout,” Finkle said.
Finkle insisted that the expectation is the Auto Auction Solutions system, team and customers to be "first-class citizens" in the Auction Edge ecosystem as the company plans to invest significant resources to add new auctions, scale the platform and support all necessary integrations with industry partners.
Williamson explained that becoming part of a larger organization will allow Auto Auction Solutions to realize its full potential as the system is enhanced to support larger auctions and additional partner integrations.
“We are pleased to become part of a larger technology group with a vision for where they want to grow both their product offerings and business,” Williamson said.
“We know our existing customers will benefit from the investment Auction Edge will make in the Auto Auction Solutions system,” she continued. “We have worked with the team at Auction Edge for years, and are confident in their vision and leadership.”
The company pointed out Williamson will continue leading software development as well as handling day-to-day operations of the group. Meanwhile, Eric Williamson will assume the position of director, client services and will be in charge of installations, training and support.
Auction Edge went on to mention that having a modern, PC-based auction management system will make it easier for more auctions to become part of the Edge network at a price point that makes sense for them.
“It’s important for independent auctions to have options when it comes to auction management systems,” said auction owner Dave Angelicchio of Winchester Auto Auction, a current customer of Auto Auction Solutions and a subscriber of EDGE Pipeline, EDGE Simulcast and EDGE Lookout services..
“One size does not fit all, and the fact that Auto Auction Solutions will be enhanced to work better with EDGE Pipeline, EDGE Simulcast and EDGE Lookout. It’s just a win-win for everyone,” added Angelicchio, who previously was president of the National Auto Auction Association.
For more details about Auction Edge and its products and services, call (206) 858-4800 or go to www.AuctionEdge.com.
Auction Edge taps VP for Edge Marketplace
Auction Edge also revealed on Wednesday that the company added Colette Marcilliat as vice president, EDGE Marketplace. The company indicated Marcilliat will focus her extensive online experience in the remarketing industry on developing the strategy to launch EDGE Marketplace, an online platform built with Openlane to provide an online auction channel to EDGE Pipeline customers.
Marcilliat brings more than two decades of executive marketing and sales leadership with companies such as ADESA, Openlane, Manheim OVE, Onlane and AutoTradeCenter. The vast majority of her experience is the crafting of vehicle remarketing channels and growth of online sales.
“From launching the industry’s first private label website to holding key leadership roles across both auction and internet remarketing providers, Marcilliat has a rich history of championing the successful transition from brick and mortar auctions to web enabled marketplaces,” Finkle said.
“We know that the addition of Colette to the Auction Edge team will advance the sales opportunities and capabilities of the independent auctions and all of the customers they serve,” Finkle continued.
Marcilliat added, “I am so excited to join the expert team at Auction Edge whose sole pursuit has been the provisioning of a full range of products and services that give the independent auctions every competitive advantage of operational ease and robust sales channels in the vehicle wholesale arena.
“I look forward to serving our member auctions and working with our many industry partners to continue that pursuit,” she went on to say.
EDGE Marketplace is expected to launch in 2016.
The deadline for Cox Automotive’s tender offer for Dealertrack Technologies has been extended for a third time in a move to finalize the all-cash $4.2 billion acquisition.
On Monday, Cox Automotive extended the offering period of its previously announced tender offer to purchase all of the outstanding shares of common stock of Dealertrack for $63.25 per share, net to the seller thereof in cash, without interest and subject to any withholding taxes required by applicable law and upon the terms and subject to the conditions set forth in the offer to purchase dated June 26.
The offer, which was previously scheduled to expire at midnight ET on Monday, has been extended until midnight ET on Sept. 23, unless it is extended further under the circumstances set forth in the merger agreement.
“All terms and conditions of the offer shall remain unchanged during the extended period,” company officials said while adding their expectation that the acquisition will close in the third quarter remains unchanged.
The two companies announced the extension to Monday’s deadline back on Aug. 21. But since that point. Dealertrack sold its inventory tool to DealerSocket in a $55 million deal.
Officials indicated that American Stock Transfer & Trust Co., the depositary for the offer, advised Cox Automotive and Dealertrack about the status of shares. The firm said that as of 5 p.m. ET this past Friday, approximately 20,349,447 shares of Dealertrack had been validly tendered and not validly withdrawn pursuant to the offer (not including 33,900 shares tendered pursuant to notices of guaranteed delivery for which shares have not yet been delivered in settlement or satisfaction of such guarantee).
That larger figure represents approximately 36.20 percent of Dealertrack’s outstanding shares.
“Shareholders who have already tendered their Shares of Dealertrack do not have to re-tender their shares or take any other action as a result of the extension of the expiration date of the offer.
Officials added that the acquisition is subject to a minimum tender of at least a majority of outstanding Dealertrack shares on a fully diluted basis, customary regulatory approvals and closing conditions.
Two dealer-centric events and another one coming up later this month all are giving DealerSocket chief executive officer Jonathan Ord plenty of opportunities to interact with current dealership clients as well as prospects.
Along with four primary wants, Ord shared the two main strands of questions he’s received as the leader of the company that’s made four significant acquisitions since the start of the year.
Ord recollected during a recent phone conversation with Auto Remarketing that, “The real interesting question for the whole industry’s perspective is and what gets asked of me quite frequently is, ‘What are you guys doing?’
“Sometimes it’s with the wonderful smile on their face and them saying, ‘I’m glad you’re doing what doing. I’m glad you’re providing these wonderful services for the dealerships,’” he continued. “Other times, it’s ‘Hey, are you trying to control all of my data? Are you going to raise the fees on everything I’m currently doing today? Are you going to make like difficult on me long term?’”
While it’s plausible an executive could consider the latter questions a bit hostile in light of DealerSocket adding DealerFire, FEX DMS, AutoStar Solutions and Dealertrack’s Inventory+ business, Ord took the opposite approach last month as the company hosted a special event ahead of the Texas Independent Automobile Dealers Association annual convention as well as its annual User Summit.
Ord and the DealerSocket team will have yet another intimate go-round with dealers beginning on Sept. 20 in Fort Worth, Texas, during Innovate: The Independent Dealer Industry Conference.
“I love the fact that they ask those questions on either side,” Ord said of the company’s dealer client base with is already approaching 10,000. “In one sense, they’re very positive and excited that we’re doing more in the space. And on the other side, I can allay some fears and destroy some rumors about why we’re doing what we’re doing.
“I love the vocal dealers because they’re the ones who teach us and the ones who also help us to figure out how to get through in the space in a way that makes a lot of sense. It lets them know we’re here for them,” he added.
And DealerSocket is out to fill the needs Ord indicated he keeps hearing from store owners and managers such as:
— Improved used-vehicle acquisitions to enhance inventory
— Upgraded access to valuation data
— Compliance guidance to navigate regulatory demands
— Customer experience assistance to make it more mobile friendly
DealerSocket’s business approach
During the wide-ranging conversation with Auto Remarketing, Ord acknowledged that dealership owners concerns are valid as more consolidation happens. Part of the reason DealerSocket was able to acquire the Dealertrack tool stemmed from regulatory concerns as Cox Automotive moved to bring Dealertrack into its portfolio that already includes properties such as Manheim, Kelley Blue Book, Autotrader and vAuto.
“Dealers are rightly in fear because they see a lot of things happening in both the new-car and the used-car space that are concerning,” Ord said. “The big players in the new-car space are optimizing on EBITA and really are financially motivated and trying to figure out how to return more dollars to their investors and really putting a blind eye to innovation and the progression that happens when we as technology companies invest money and aren’t solely focused on financial metrics.
“One of the biggest things that I tell our dealers in the education we try to get out in the space is that we optimize on innovation,” he continued. “We optimize on creativity. We believe that profitability and success follow innovation and hard work wherever it goes. We really believe in the dealer both independent and (franchised). We believe in their value to the consumer. What we try to do is create better products and solutions that allow them to do what they do best.”
Ord mentioned how DealerSocket is able to accomplish these tasks because of its financial relationship with Vista Equity Partners, a private equity firm with more than $14 billion in committed capital focused on investments in software and technology-enabled services companies. That alliance first materialized last May “to accelerate growth.”
The DealerSocket boss highlighted that growth has come while the company still is turning a profit in the “high single digits” with an eye toward much loftier figures. And Ord pointed out DealerSocket isn’t just hoarding cash.
“We’re investing a ton into our R&D department, a ton into our support departments, a ton of money into the increase abilities of companies like Finance Express, AutoStar, AAX and DealerFire,” he said. “We’re giving them more access to resources and ability to create and be innovative. We’re excited about that because we feel like if we keep the dealer at the heart of everything we do and try to innovate and create a boatload of value, the business side will work itself out long term. We don’t need to optimize and pleasing investors when we should be worried about our customers.”
Next dealer interaction opportunity
DealerSocket is putting the finishing touches on its plans for Innovate, which is set to include more than 80 in-depth classes that will dive deep into compliance, collections, finance, accounting, operations, marketing, sales and more. Conference hosts expect more than 600 attendees at this year’s event, including more than 50 major exhibitors and financial institutions that were hand-picked through an invitation-only sponsor selection process.
“We are beyond excited to welcome one of the auto industry’s most admired brands into our growing Innovate family,” DealerSocket chief marketing and sales officer Matt Redden said. “We’ve enjoyed a longstanding partnership with Cars.com on the franchise side of DealerSocket’s business for more than a decade. Their new investment in Innovate will further promote our shared commitment to the independent dealer market.”
Innovate will take place at the Fort Worth Convention Center in Fort Worth, Texas.
“Today’s franchise dealers are enticing more consumers than ever before with sophisticated digital marketing practices,” said Greg McGivney, Cars.com’s vice president of strategy and business development. “It’s time for the independent industry to level the playing field with their own world-class solutions. We look forward to strengthening our partnership with DealerSocket and the independent market.”
What might be next
Ord hesitated to share with Auto Remarketing the exact ingredients of DealerSocket’s “secret sauce,” but he did state the company remains in acquisition mode. And reportedly its partner Vista Equity is, too.
An online report from Bloomberg indicated Vista Equity is in the running to acquire Solera Holdings, which earlier this year purchased DMEautomotive, a Florida-based company that provides risk and asset management software and services to the automotive and property marketplace.
“Combining DMEa’s proprietary technologies with Solera’s existing portfolio will enable Solera’s customers to increase customer retention and drive loyalty through tailored and frequent digital contact across the entire automotive ownership lifecycle,” Solera said in an Auto Remarketing report back in April.
No matter how many more properties are collected in the portfolio, Ord pledged that DealerSocket would work to make all the parts fit together into a single solution offering that benefits all kinds of dealerships.
“It’s not an easy job to integrate companies,” Ord said. “It’s not an easy job to take disparate groups of people who have been working in silos for years and wrangle them into one solid vision around the dealer and how their products and services fit into an overall platform landscape that can really transform and disrupt the way dealers do business today. That’s our goal and that’s what we’re doing.
“Contrary to how acquisitions have been done in our space for a long time, we are trying to roll these acquisitions together from the git-go,” he continued. “We’re not leaving them as separate companies. Our goal is fundamentally different.”
So when the leaves begin to fall in autumn of next year, where might DealerSocket stand?
“One of our big culture statements internally is it’s all about the relationship and the progression and enhancement that happens to individuals as they interact with each other. That’s the reason why we exist. It’s on our walls at our offices,” Ord said.
“It’s not so much about business or financial metrics. It’s about we progress with the relationships we have with our customers, with our partners and most often with our internal employees as we grow and learn together,” he continued.
Ord later added, “Next year, I would hope there is tremendous buzz in the space that DealerSocket not only acquired these great companies but that they also made it work really well for dealers.”
