Mystery man behind merger

Dealers know Bob Brockman as a tough, opinionated, hard-nosed businessman who delivers terrific dealership management software.

For years, the 65-year-old Texan stayed under the radar as boss of little Universal Computer Systems, the Houston company he started 36 years ago in his living room.

Brockman, a shy tech nerd who maintains a second home in Aspen, Colo., declined all requests for interviews after public disclosure of his plan to take over its much larger rival, Reynolds and Reynolds Co.

But it may not be possible for Brockman to stay under the radar much longer. With dealership management software in nearly 11,000 North American dealerships, the combined companies would be an industry powerhouse. Last week Reynolds filed documents with the Securities and Exchange Commission that shed new light on the $2.8 billion deal:

• Brockman played hardball during negotiations, threatening to take his offer directly to shareholders if Reynolds chief Fin O'Neill and the Reynolds board said no.

• Reynolds accepted the offer only after it had contacted three other companies that turned down potential merger deals.

• The new entity would be a wholly owned subsidiary of Brockman's privately held company. O'Neill would be CEO of the new subsidiary. But Brockman's future role remains unclear.

In a statement e-mailed Friday through Reynolds public relations director Mark Feighery, Brockman says his role will be further defined "after the merger goes through."

"It will most likely be in an advisory role in the product development area due to my 40-plus years of industry experience," the statement said.

Nervous customers

The companies lease computer hardware and software to dealers, who use their systems to handle accounting, finance and insurance, customer relations, service and parts.

Some customers know Brockman as a tough negotiator who sets rigid terms in contracts and enforces those terms to the letter. Some dealers who don't like Brockman's business methods now are reluctant to sign long-term deals with Reynolds.

A manager at a dealership group, who asked not to be identified, says his company was going to switch all its stores from UCS systems to Reynolds and Reynolds. Then news of the merger broke.

"We won't go with Reynolds because we fear UCS will have influence on the new company," says the manager. "I think that it is inevitable that some of the business practices of UCS will find their way into the day-to-day life of Reynolds and Reynolds. To what degree that might happen, I'm not sure."

Avoiding the press

Brockman has declined repeated interview requests since the companies announced the proposal Aug. 8, but aides say that's not surprising.

"It's not normal for him to be very public," says Trey Hiers, a senior marketing manager and spokesman at UCS.

The company doesn't even keep on file a biography of Brockman, its founder and CEO, Hiers says. "I don't think his role into the future has been determined."

Reynolds' archrival, ADP Dealer Services, is trying to capitalize on the uncertainty by touting its "stable, predictable business relationship" with dealers. On Aug. 14, ADP President Steven Anenen sent letters to customers of Reynolds and UCS.

Anenen's letter says "many questions remain unanswered" about the Universal-Reynolds deal, and "there is considerable uncertainty around the future direction and focus of the new company, whereas ADP's strategy has been very consistent and clear in the marketplace."

ADP is the other key player in the dealership-software market, with about 11,000 dealership clients.

Reclusive salesman

In 1964, Brockman began his career as a marketing trainee with Ford Motor Co. After joining IBM Corp. in 1966, he became the leading U.S. salesman in IBM's service bureau.

In 1970, Brockman founded UCS in his living room. Initially he provided local dealerships with weekly reports of their parts inventory. UCS sold its first in-dealership computer system in 1982.

In a recent article, the Houston Business Journal noted that Brockman is one of Houston's wealthiest but least-known businessmen and an "intensely private millionaire."

Jane Copeland, president of API International, a dealership consulting firm in Austin, Texas, does not expect Brockman to retire.

"Bob is a Texan, the kind who works hard, and I don't think he's got any plans to stop working," Copeland says. "I just think he's very dedicated to what he does and always has been. So I don't see (the deal) necessarily as an exit strategy. He's a hands-on person. I don't see him going away."

Copeland predicts it will take two years or so to figure out what kind of combined company will emerge. "Nobody can really predict what the outcome will be because I think it's a voyage of discovery," she says.

What can dealers do?

Reynolds, of Dayton, Ohio, and UCS say each company's dealership management system would be marketed to dealers under the Reynolds brand. The new company will provide technical support for both systems.

Reynolds has 10,000 dealership customers in North America; Universal Computer has 750.

The dealership group that backed away from Reynolds after the UCS bid was fed up with UCS' long contract periods and "completely inflexible" contract terms, the manager says. "They'd rather litigate than negotiate."

So the group is turning to ADP for its software, hardware and services. It's too bad, the manager says, because UCS has good software and superb service technicians.

Carousel Toyota in Glen Mills, Pa., signed a new contract for a Reynolds system the day after the merger announcement "partly because I had committed to it and also because I thought Reynolds would be the surviving entity," Dan Diskin, president of the dealership, said in an e-mail.

But now that more information has come out - and key information is lacking - "I am a little less comfortable with the situation," Diskin said. "But not so uncomfortable that I will try to get out of the new contract. I'm sure that whatever changes happen will not take place overnight. And if the merged company fails to deliver adequate service, I'll look to make a change then."

Dealer principal Joe Catania at Southern Ford in suburban Houston says UCS was inflexible and expensive. But he has seen the vendor change its tactics.

"In the beginning it was an absolutely atrocious relationship," Catania recalls. "It was their way or the highway."

About five or six years ago, "I basically exploded," blasting them for the poor way they treated customers, Catania says.

"After I did that, it seemed like the company made an about-face. We renegotiated my contract. They are now very responsive."

His monthly bill from UCS was slashed from about $20,000 a month to about $7,000 a month, Catania says. "I think they have made a philosophical and cultural change to understanding that the customer does have some rights."

Loyal dealer

Dan Chernault, CFO of Russell & Smith Auto Group, a Ford-Honda-Mazda dealership group in Houston, uses UCS systems in all three stores and has no plans to switch. "Bob is a very opinionated person, and he expects to get his way," Chernault says. "But I've never found him to be unreasonable."

While the relationship can be difficult at times, Chernault says, he is satisfied with UCS products and his relationship with the vendor. Chernault likes the merger plan because the combined company will be in a better position to make continual improvements to the UCS system.

Consultant and dealer Paul MacDonald tells his clients that if they are considering a Reynolds system, now is the time to act before the merger is completed.

"The question is: Those dealers coming off their current contracts, what's going to be the business model presented to them? That's the unknown," says MacDonald, president of TriMac Automotive Advisory Group and vice president of Bountiful Mazda and Bountiful Lincoln-Mercury in Bountiful, Utah.

The guinea pigs will be those dealers with expiring Reynolds contracts in the next six months to a year, MacDonald says. "It's a great window of opportunity because it still is Reynolds. So now would be the time to contract with them."

You may e-mail Ralph Kisiel at [email protected]