Cox, Dealertrack chiefs hit road to explain $4 billion acquisition
Cox Automotive Inc. President Sandy Schwartz has heard dealer concerns about product prices and services now that Cox has completed its $4 billion purchase of Dealertrack Technologies Inc. following a lengthy government antitrust review.
The acquisition closed today.
Schwartz is asking those dealer customers to judge the combined entity by how it executes the integration and whether they really see major price increases, given the ultracompetitive market for dealer software and digital media.
“It’s all about how we behave,” Schwartz told Automotive News today.
Sensing the need to assuage dealer worries and communicate the new vision for Cox Automotive, Schwartz and Dealertrack CEO Mark O’Neil will be going on the road together over the next two weeks to meet with auto retailers big and small. O’Neil and his executive team are staying on to continue to oversee their part of the business.
The tie-up of Cox Automotive with Dealertrack creates a software and marketing giant with annual sales of about $6 billion. Even so, the companies are complementary with few overlapping product and service lines.
Cox Automotive contributes to the merger brands that are well-known to dealers, such as Manheim, AutoTrader.com, Kelley Blue Book, vAuto, VinSolutions and Xtime.
For its part, Dealertrack is the established leader in lending software, digital marketing through its Dealer.com unit and retail tools that allow dealerships to offer vehicle shoppers the ability to complete most of a transaction online.
The $4 billion cash deal took more than two months to close because of an extensive antitrust vetting by the U.S. Department of Justice. With the $4 billion, Cox Automotive bought out Dealertrack’s publicly traded common shares at $63.25 per share.
Inventory business sale
In the end, Cox Automotive was prompted by the Justice Department to make just one small divestiture to gain approval.
Dealertrack agreed to sell its inventory-management software business, called Inventory+, to DealerSocket Inc. for $55 million in cash.
Cox Automotive was willing to trade the unit for regulatory clearance because it already has the industry’s largest inventory-management software unit in its vAuto subsidiary.
VAuto has about 7,500 dealership customers vs. about 2,000 for Dealertrack’s inventory-management business, which was created following earlier acquisitions of AAX and eCarList.
Schwartz said he learned through the Justice Department review that O’Neil and the Dealertrack culture he guides is closely in line with the way Cox Automotive prefers to do business.
That is, he said, to be responsive to customers and willing to take chances to lead on software technology, such as Dealertrack’s digital retail suite that allows dealers to offer vehicle shoppers an opportunity to do most of the transaction online.
Schwartz said he also saw more clearly how many sharp software competitors have crowded into auto retailing and that the Cox-Dealertrack combination needs to improve products consistently.
He said that at the pace technology is changing, “we’re competing against everybody all the way from two guys in a garage.”
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