A new business model -- and maybe a new owner, too
Bob Brockman isn’t talking about his plans. But a news report last week said he’s interesting in selling Reynolds and Reynolds.
In the six years that software entrepreneur Bob Brockman has owned Reynolds and Reynolds, car dealers have seen a steady cadence of new software to help run their businesses, even though fewer dealers are buying it.
Now, with Brockman’s strategy of a smaller but stronger company well established, his era at Reynolds may be ending.
The press-shy Houston millionaire, a self-taught computer programmer and avid outdoorsman, is lining up advisers for a leveraged buyout by other investors, Reuters reported last week, citing unnamed sources.
If Brockman indeed is selling Reynolds -- company officials are not commenting -- he will shed a company that has fewer dealer customers than six years ago, industry sources say.
But the customers on average are spending more per store for a Reynolds suite of software that Brockman has broadened and modernized, say industry observers. Dealer-management software handles accounting, payroll, inventory, customer retention and many other aspects of dealership operations.
“That’s been Bob’s formula. He doesn’t want 10,000 dealers paying $1,000 per month. He wants 1,000 dealers paying $10,000,” said Mike Esposito, CEO of Auto/Mate Dealership Systems, a smaller competitor of Reynolds for dealer management systems.
Esposito estimated that half of the 150 dealers who have come to Auto/Mate in the past year to boost the vendor’s customer count to 900 were from Reynolds. The rest were from the other industry giant, ADP Dealer Services, and other players such as DealerTrack Inc., he said.
Another industry source, who spoke on condition of anonymity, estimated that Reynolds has culled its customer base for dealer management systems from about 9,000 stores when Brockman bought Reynolds in 2006 to about 6,000 today.
Reynolds does not disclose customer counts, said spokesman Tom Schwartz.
Reynolds is a private company, so financial details about its operations are not publicly available.
Competitor Esposito said Reynolds products are good but pricey. He said Reynolds’ base ERA software costs about twice as much as Auto/Mate’s. That includes monthly service fees that average $4,000 to $5,000 per store for Reynolds software, compared with less than half that amount for Auto/ Mate’s, he said.
Brockman’s software company, Universal Computer Systems, bought Reynolds, of Dayton, Ohio, for $2.8 billion in 2006. The two companies were combined under the Reynolds name. In 1992, Brockman purchased Ford Motor Co.’s inhouse dealer management systems business.
The Reuters story said Brockman wants about $5 billion for the company today.
The initial unification of the companies caused a major culture clash.
Brockman, an ex-Marine, declined to hire smokers and required workers to get a physical each year to retain health insurance.
Among customers, Brockman quickly earned a reputation for being immovable on price and unwilling to grant dealers any quarter to get out of the long-term contracts typical in the industry.
What customers couldn’t immediately see was the discipline and software development that Brockman demanded when he took the reins.
“The commitment to product development has never been clearer than during the recession, when Reynolds added programming resources instead of cutting back like so many others had to do,” Reynolds President Ron Lamb said in a written statement.
Brockman declined to be interviewed for this story.
Russell & Smith Automotive Group in Houston, which has Ford, Honda and Mazda stores, pays about $70,000 per month for Reynolds’ top-of-the-line Power software suite, said Dan Chernault, the group’s CFO.
Power is the best system available for the dealership to wholesale parts to other dealers and independent shops, Chernault said. In October alone, the dealership sold $3.5 million of Ford parts in Texas, Louisiana and northern Mexico, he said.
The dealership has used Power software for 20 years, and Chernault said he has gotten to know Brockman from working on Reynolds’ Power Dealer Advisory Board.
“Bob has really seemed to focus things,” Chernault said.
He said he has seen useful sharing between Power and Reynolds’ more popular ERA software. Two years ago Power integrated ERA’s better service pricing guide into Power, he said.
And the Ignite version of ERA, introduced last year, cut the number of screens needed to do tasks by two-thirds and was completely redesigned for the Microsoft Windows environment.
Additionally, Reynolds says it is seeing solid sales to dealers of its docuPAD computer screens to hasten customer sales in finance and insurance departments.
A Reynolds unit that helps dealers with their online marketing also has been rebranded “Naked Lime” to contrast it with the more staid dealer management software side of the business.
Dealership CFO Chernault said Brockman is passionate about the technical side of the business.
When Reynolds held an event in Houston two years ago, Chernault loaned the company some cars to use.
Brockman later came for a tour of the store. He didn’t get much farther than the computer room, Chernault said, where a programmer engaged Brockman in a 45-minute conversation about software.
Said Chernault: “There’s not a lot of pretense about Bob.”
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