Beefing up competition in the DMS market

For former Auto/Mate CEO Mike Esposito, putting the dealership management system provider up for sale was part of his exit strategy.

As Esposito considered retirement, he said, he and his partners at the Albany, N.Y., company wanted to find a buyer that would take care of the company he ran for 15 years after a stint overseeing sales and marketing.

A failed merger with DMS giant CDK Global Inc. in 2018 — blocked as anticompetitive by the Federal Trade Commission — ultimately led to a successful acquisition in February by dealership technology company DealerSocket.

Esposito, 70, said he felt the time now was right to retire as his company continues to integrate with DealerSocket. His last day was July 31.

Auto/Mate grew from roughly 30 employees and 200 dealership customers when he took over as CEO in 2005 to 240 employees and more than 1,500 customers this year. The DMS market is more competitive today because Auto/Mate and other DMS vendors forced leaders CDK and Reynolds and Reynolds to compete on price and technology, he said.

"Taking on the Goliaths, if you will, did nothing but great things for the dealers," he told Automotive News.
Esposito spoke with Staff Reporter Lindsay VanHulle about building Auto/Mate, the merger and his plans for the future. Here are edited excerpts.

On building Auto/Mate: My focus [on] where Auto/Mate had to go — and we were on that path already — is to be the best at supporting the customers. Bar none. The absolute best in customer support. Best company to do business with if you were a dealer.

Having been a dealer, general manager of a large store and having dealt with one of the big two DMS companies, I knew what it was like from a dealer's perspective to be treated the way you don't want to be treated.

Back then, the whole industry was dominated by three companies and [they were] ADP, which is now CDK; Reynolds and Reynolds; and UCS. And obviously, now Reynolds and UCS are one company. And they probably got 99 percent of the market, so our business was really taking their business away, as it is still today. And it was looking at really the little mom-pop stores because most dealers that had large stores or were multiple-[store] groups wouldn't even look at us because, "Who are you guys? Nobody's ever heard of you." So we kind of grew that way.

On the unsuccessful deal with CDK: The FTC started to look at it and [in] 30 days came back and said, "We want to do a second request." What a second request is is we want all the information you've ever had about your company.

So they came in and took all of our laptops. We had to digitize all of our notebooks, all our emails from eight years, seven years, whatever it was, and they did the same thing with CDK.

And the interesting thing they found out was ... that CDK was buying us just to kill the company. And one of the couple of smoking-gun emails between some of the executives saying, "Well, we really need to buy Auto/Mate because they're the company that's been kicking our ass."

So the FTC came back and said, "Nope, we're not going to let it go. It's not a matter of market share. It's a matter of Auto/Mate keeps the competition honest, if you will, from the standpoint of pricing, keeps the technology moving, and we won't let it go through."

On tying up with DealerSocket: My father always used to say, "When one door closes, another door opens, and it's usually a better door." And he was absolutely right. This is the best door we could have ever hoped for.

[DealerSocket's approach] was hands-off. It was basically do no harm: "Auto/Mate knows what they're doing, they got a fabulous company, let them keep running it the way they're running it. Let's talk about integration strategies, both from the standpoint of the organizations but also from the standpoint of the software. Let's learn from them. Let's look at their best practices and our best practices."

On how the company dealt with the coronavirus pandemic: You want a team that's flexible and responsive enough that can, at a moment's notice, turn the ship around and move to a different direction. And that's really what happened at Auto/Mate and DealerSocket.

We first sat down and said, "OK, how do we get our people communicating and use Microsoft Teams and get all the technology guys in so that we know that everybody's working from home?"

But then, when we started talking about what do we do with our customers, one of the first things was the relief packages that we developed with our customers for April and May [that had] significant discounts and also offering them free products for trial.