In Roadster, CDK sees digital growth

CDK Global Inc. is making a big push into online vehicle transactions with its acquisition last week of digital retailing provider Roadster.

The $360 million all-cash deal that closed Wednesday, June 2, gives CDK an established digital sales tool in Roadster, which counts nearly 2,000 dealership customers — a number of them in common with CDK. Roadster executives say linking up with CDK, the Hoffman Estates, Ill., dealership management system giant, also will help expand its business and improve the technology to make buying a vehicle online easier.

The merger will not affect dealerships that use Roadster's software today, said Roadster CEO Andy Moss. Going forward, he will head product and engineering for Roadster, of Palo Alto, Calif., and work more broadly on CDK's efforts to build what it calls a modern retail product strategy.

CDK will draw on its Fortellis open network development platform to improve Roadster's ability to integrate into dealerships' back-end systems, no matter which DMS or customer relationship management system a store uses, executives told Automotive News. Dealerships will not need to use CDK's DMS or consumer relationship management products to use Roadster.

The companies have not yet discussed whether CDK customers will receive any pricing incentives as a result of the combination, Moss said.

"It's very important that we continue to have a Switzerland approach and continue to work really closely with all of our other customers that might be on a different DMS or a different CRM system," Moss said, adding that the goal is to offer vehicle buyers an easier experience whether they complete a purchase online, at a dealership or in some combination of the two.

"The customer wants to be able to do that seamlessly across all those pieces," he said. "We felt this was the best way that you could put all those pieces together to really accelerate what we've been trying to do at Roadster for the last six or seven years."

Moss and CDK executives said the deal began to come together about six months ago after a longer partnership between the companies integrating Roadster with CDK's systems, including its Elead customer relationship management system.

CDK COO Joe Tautges said the company expects to be able to grow Roadster's customer base. He referenced CDK's experience of doubling the number of Elead dealership customer sites in the two and a half years after that company was acquired and said CDK leaders would be "disappointed" not to achieve a similar pace of customer expansion for Roadster. CDK did not disclose its current Elead customer count.

Mahesh Shah, CDK's chief product and technology officer, said the company has invested in digitizing the purchase process in recent years, from acquiring Elead in 2018 to investing in data and launching a remote e-signature tool, Sign Anywhere, last year during the pandemic.

The company's existing online retailing tool, Connected Store, provides payment and quoting capabilities and is used by about 1,000 dealership customers now, Tautges said. CDK said in May 2020 that it would provide the product at no cost to dealerships through the end of 2021.

It's not clear what CDK's plans are for Connected Store after the acquisition of Roadster. Tautges said more will be shared in the future, but CDK will have "one modern retailing process."

"We'll continue to support those [Connected Store] customers, and we're going to be very thoughtful as we bring the best of CDK both to the Connected Store customers as well as the Roadster customers," he said.

CDK in March completed the sale of its international business to private equity firm Francisco Partners in a $1.45 billion deal. CDK has said it will use the sale proceeds to invest in its North American operations and repay debt. The company also sold its digital marketing business in April 2020 to Ansira Partners Inc., a marketing agency owned by private equity investors.

The Roadster purchase is the result of CDK's efforts to "really strengthen our core focus and strengthen our balance sheet to be able to make strategic moves like this," Tautges said.

CDK said last week in a regulatory filing that it formed a wholly owned subsidiary, Spyder Merger Corp., for purposes of the merger with Roadster. Roadster, which employs 158, will continue as a CDK subsidiary.

CDK said Roadster will have an immediate effect on CDK's revenue and revenue growth, adding that the company will share details of the financial impact of the Roadster acquisition when it provides fiscal-year 2022 guidance with its fiscal 2021 full-year earnings results this summer.