CDK Global charts future with new ownership and leadership

CDK Global Inc., under new ownership, is looking to its past for new leadership to fulfill the company's future vision.

The Hoffman Estates, Ill., dealership technology company last week named former CEO Brian MacDonald to fill the role on an acting basis.

MacDonald, 57, led the company from January 2016 to November 2018 and succeeds Brian Krzanich, who stepped down following the completion this month of CDK's sale to investment firm Brookfield Business Partners.

CDK also added Ron Frey, an auto retail consultant who was the company's chief strategy officer from 2017 until 2019, to its board upon the Brookfield deal's closing.

The decision to bring back past CDK insiders — coupled with the exits of several top executives in place before the Brookfield acquisition — signal a change in personality as well as structure for the provider of dealership management systems and other auto retail software. At the same time, MacDonald says the company is committed to investing in its technology to help dealerships sell and service vehicles and does not plan to waver in its support of its customers.

"The company's made some very good acquisitions, started the process on modernizing the technology, has made some very good investments in improving customer service and employee engagement," MacDonald told Automotive News.

"There's been a lot of positive changes at CDK and enhancements to the products, and our job is to continue that trajectory."

Brookfield Business Partners — a unit of global alternative asset management firm Brookfield Asset Management's private equity group — this month closed on its $8.3 billion acquisition of CDK, for a total transaction cost of $8.7 billion including other expenses and fees.

CDK's stock no longer is publicly traded. The company is a unit of Brookfield, which itself is publicly traded, though CDK's financial information won't be broken out.

MacDonald said the Brookfield acquisition was "a second chance" to take CDK private, after an unsuccessful attempt in late 2017 and 2018 while he was CEO. That earlier attempt, he told Automotive News, was thwarted by public speculation about a potential sale that raised CDK's stock price to the point that a deal couldn't be done.

MacDonald said he and Brookfield leaders have had a working relationship since before CDK's current sale process and have been in discussions about CDK for several months. Doug Bayerd, managing director of private equity at Brookfield Business Partners, said Brookfield asked MacDonald to rejoin CDK.

CDK was an outlier as a public company when its DMS rivals and the vast majority of its dealership customers are privately held, MacDonald said, and Brookfield will enable CDK to be more nimble to react to industry changes.

"As a public-company CEO, you're always focused on the long term, but you also have this quarterly scorecard that your shareholders and investors expect from you," he said. "By being private, it allows us to make the right long-term investments and the right long-term trade-offs."

MacDonald said he made a "substantial" personal investment into CDK alongside Brookfield, though he declined to disclose the amount. Although he is in an acting role, his tenure does not have a defined end date, he said, adding: "I plan to be here for a long time."

Bayerd said Brookfield takes a long-term view of the businesses it acquires and is focused on helping CDK set and achieve its path forward.

"We believe that if we're able to achieve it, the exit — what that exit looks like — really takes care of itself," Bayerd said. "We believe today we have the clear market leader and a mission-critical software provider and we just need to execute upon it to show everyone else what we have, and I think we'll have people lining up to be the next owner of this business."

Taking CDK public again is "absolutely" a possibility, Bayerd said.

Several executives have left or soon will depart the company, including Krzanich, CFO Eric Guerin and Amy Byrne, chief human resources officer. Former COO Joe Tautges now is a special adviser to the CEO. MacDonald said the COO role was eliminated to flatten the organization's leadership structure, and that Tautges will stay on for a few months to help with the executive transition.

CDK declined to make Tautges available for comment, deferring to a regulatory filing from last week that detailed the executive changes.

MacDonald said he plans to meet with dealership customers and examine the company through a "fit and focus" lens.

"Let's go through some of our product plans and what we're doing on the product development side," he said, "and making sure we're very, very focused on what matters to dealers."

The company will phase out some older products, MacDonald said, including the cloud-based Drive Flex DMS product in favor of modernizing its broader DMS platform. And it will continue to invest in others, including the Elead customer relationship management system acquired in 2018, while MacDonald and Frey were at CDK, and the Roadster digital retailing provider CDK bought last year.

MacDonald said he and Brookfield leaders have discussed possible future acquisitions, but he declined to elaborate.