Hot U.S. auto sales and the rise of online shopping have triggered a frenzy of merger and capital-raising activities among auto-retailing vendors.
Last week, payroll and benefits giant ADP said it plans to spin off ADP Dealer Services as an independent public company.
ADP Dealer Services is a major seller of dealership management software. The company also offers marketing products, including dealership Web sites and digital marketing, through its Cobalt unit.
Also this month, TrueCar, the online auto-shopping service, announced plans for a $125 million initial public offering of common stock.
Dealertrack Technologies, which sells credit-application and other software to dealers, completed the sector's biggest acquisition this year. It purchased Dealer.com, which provides Web sites and digital-marketing services, for about $1 billion in cash and Dealertrack stock.
Also, the owners of Cars.com plan to sell the car-shopping site, according to a report last month by Bloomberg.
Dealertrack CEO Mark O'Neil said last week that the timing is right for digital marketers to consolidate.
Dealers want marketing and other software that works well together and eases the job of entering customer information into computers, he said.
Consolidation by big players such as Dealertrack can smooth that integration and give dealers fewer vendors to manage, he said.
"Dealers are frustrated that their [software] solutions don't talk with each other," he said.
Meanwhile, many digital marketing companies are healthy from several years of strong auto sales, O'Neil said.
ADP Dealer Services hasn't yet filed with federal regulators for its stock offering so it is too early to say how much capital it intends to raise.
Reynolds and Reynolds and ADP provide about 80 percent of the dealer management systems in the United States. The dealer management system is the critical operating software of a dealership that handles tasks such as payroll, inventory, customer finance and customer retention.
Annual global revenue at ADP Dealer Services is nearly $2 billion. Its parent, ADP, expects to receive at least $700 million tax-free from the spinoff.
Leadership at ADP Dealer Services is expected to stay intact.
Steve Anenen, the 61-year-old group president of ADP Dealer Services, is expected to become CEO of the new public company, an ADP spokeswoman said last week. Al Nietzel, 52, an ADP Dealer Services executive, is set to become CFO, she said.