Since the AutoTrader.com announcement to purchase VinSolutions in mid May, I have been polling dealers and industry leaders on their perspective of the acquisition.
Some have said that the consolidation wave in our industry was started when ADP decided to purchase Cobalt. Some commented that this acquisition marked a new push to provide more value to dealers while other were unsure of what the future would hold.
The commentary that I did not hear is that Autotrader’s buying spree may not deliver anything more significant than an attractive package to roll-up into an IPO. Could Chip Perry be more focused on creating a shiny IPO apple rather than delivering real value and integration for dealers?
The jury of the automotive community is divided.
If you have not been watching the financial news lately, there is a strong uptick in initial public offerings (IPO). In fact some have said that the market has IPO fever once again.
With the recent IPO success of LinkedIn, I can guarantee that a wave of new filings and IPO debuts will be scheduled this year. It’s once again fashionable to be in the IPO game. The small float of shares made available in the LinkedIn IPO created a high demand which resulted in the stock trading over double it’s opening price on its first day of trading.
The LinkedIn IPO, according to popular Mad Money TV host Jim Cramer, was reminiscent of stock market games that got us in trouble with the dot com bubble. While smaller IPO’s come to market, the granddaddy of IPO’s will surely be Facebook. This will surely heat up the IPO market and that means spill-over in our industry.
I’ve been told stories of how past acquisitions in the automotive service sector from larger entities resulted in nothing more than a media bubble. These consolidations lost momentum once the shine was off the apple. Is the Autotrader buying spree a new breed of roll-up activity?
Only time will tell what the Autotrader acquisition spree of the last 12 months will yield, but I predict they are preparing for an IPO.
Is this good for dealers? Let’s see how this plays out.