Industry News & Trends

Autotrader PURCHASED vAuto

The Autotrader and vAuto deal was just a rumor a little while ago, but now it is official.  Autotrader.com has purchased vAuto.  Congratulations to Dale Pollak! 

So what’s next Chip???……

And congrats to you Mr. Perry.  This was a very nice purchase.

Dealers:  expect to hear more about what this acquisition means soon.  Of course, we are curious to hear what you think now.

The Official Press Release from Autotrader.com

AutoTrader.com Agrees to Aquire vAuto

ATLANTA/CHICAGO – September 17, 2010 – AutoTrader.com and vAuto announced today an agreement under which AutoTrader.com will acquire vAuto, the automotive retail industry’s leading provider of advanced software tools for used vehicle management, pricing and inventory optimization. The terms of the deal are not being disclosed.

vAuto will operate as a subsidiary of AutoTrader.com and the two companies will operate largely independently, although they will collaborate in the areas of product development and customer training. Going forward, dealer customers of both AutoTrader.com and vAuto can expect to see enhancements to both companies’ products and services, such as more real-time, market-demand driven tools that will benefit their businesses.

“Over the past decade, the Internet has enabled consumers to have a tremendously more transparent view of used vehicle availability and pricing on a local, regional and national basis,” said AutoTrader.com President and CEO Chip Perry. “This huge consumer benefit has driven more than 75% of car buyers to shop online before making their vehicle purchase. This change in the way consumers shop for cars has created a strong need for dealers to efficiently manage and merchandise their vehicles in a way that ensures they remain competitive. As a result of these trends, the many dealers who use third party classifieds sites like AutoTrader.com and who also employ state-of-the-art inventory management and pricing tools like vAuto are generating strong growth and profitability even in the face of a soft automotive market.”

“AutoTrader.com is acquiring vAuto to further help dealers enhance their performance on the Internet by combining the power of AutoTrader.com’s 15 million unique visitor audience and 1,000-plus person consultative sales and service team with vAuto’s industry leading software tools for used vehicle pricing and inventory optimization,” Perry added.

Because AutoTrader.com and vAuto are committed to the interests of all auto dealers, AutoTrader.com will maintain all existing data relationships with the providers of dealer inventory management, pricing and optimization tools in the automotive industry.

vAuto will maintain its management team and Founder Dale Pollak and President Keith Jezek will remain with the company to continue their mission of helping dealers grow their business through effective use of the company’s powerful inventory management tools. vAuto will maintain its headquarters in Oak Brook, Ill., and its research and development center in Austin, Texas.

“I am excited to see vAuto join forces with AutoTrader.com because our two companies share a common passion for helping dealers leverage the Internet through strong product innovation and customer service,” said Pollak. “Together we are intent on ensuring that customers of both vAuto and AutoTrader.com will continue to benefit from the expertise and consulting services that they’ve come to depend on and trust. Another key benefit we expect to provide to both companies’ dealers is improved data products and services offered by both AutoTrader.com and vAuto.”

“I believe by working together AutoTrader.com and vAuto will accelerate the automotive retail industry’s adoption of efficiency and profit enhancing tools for used vehicle marketing, management and merchandising,” said Pollak. “This combination will enhance dealers’ performance through improved dealership profitability and operational efficiency, more real-time market pricing and merchandising, and stronger market transparency and responsiveness.”

Portico Capital Securities LLC acted as the sole financial advisor to vAuto.  David Washburn of Andrews Kurth LLP acted as outside counsel to vAuto throughout the transaction.

About AutoTrader.com

AutoTrader.com, created in 1997 and headquartered in Atlanta, Ga., is the Internet’s leading automotive marketplace and consumer information website.  AutoTrader.com aggregates in a single location millions of new cars, used cars and certified pre-owned cars from thousands of auto dealers and private sellers.  AutoTrader.com attracts more than 15 million unique monthly visitors who utilize the site to view vehicles for sale, research and compare vehicles, review pricing and specials, and read auto-related content like buying and selling tips, auto maintenance tips and coverage of major auto shows and automotive trends.  Through innovative merchandising functionality such as multiple photos, videos, detailed descriptions and comprehensive research and compare tools, AutoTrader.com unites new and used car buyers and sellers online to improve the way people research, locate and advertise vehicles. AutoTrader.com is a majority-owned subsidiary of Cox Enterprises.  The private equity firm Providence Equity Partners and the venture capital firm Kleiner Perkins Caufield & Byers are also investors.  For more information, please visit www.autotrader.com.

About vAuto

Headquartered in the Chicago suburb of Oak Brook, Ill, vAuto also maintains a research and development center in Austin, TX. vAuto’s innovative “Live Market View” technology allows dealers to manage their used-vehicle inventories based on actual supply-and-demand for their specific market. Today, more than 3,000 dealerships across the country use vAuto’s pricing, appraisal, stocking and merchandising systems. Dale Pollak, vAuto’s Founder and Chairman, is the author of two books featuring best practices and strategies for the used car department, Velocity: From the Front Line to the Bottom Line and Velocity 2.0: Paint, Pixels & Profitability. Additional information about vAuto is available at www.vauto.com.

About Bain Capital Ventures
Bain Capital Ventures has been an active investor in vAuto since 2006, serving continuously on the Board of Directors since that time and playing a significant role in supporting the company’s growth for the last four years. Bain Capital Ventures is the venture capital and growth equity affiliate of Bain Capital, headquartered in Boston.  Bain Capital Ventures has approximately $1.5 billion in assets under management and invests in business services, consumer and retail, healthcare, internet, mobile, and software companies across the spectrum of stages of development.  With a team of more than 30 investment professionals, Bain Capital Ventures offers entrepreneurs a hands-on approach to strategic and operational opportunities.  Bain Capital’s history of investing in growth-stage companies dates back to 1984.  Since then, the firm has made over 125 growth-stage investments in companies such as Archer Technologies, DoubleClick, Gartner Group, iPay Technologies, Liberty Dialysis, LinkedIn, ProfitLogic, Staples, SolarWinds and Taleo.

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    Jeff Kershner
  • September 17, 2010
I hear the 2 companies will be run separately and Dale is to stick around for a few years.
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    Jay
  • September 17, 2010
Good job Dale. Now in the next months we're gonna have to buy banner ads for our Stocking Tool! "BUT EVERY OTHER DEALERS DOING IT."
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Great deal for Dale (no doubt) but with more and more similar tools popping up each and every day I doubt AT is going to benefit as much. It's time for dealers to start thinking outside the box and breaking away from what "every other dealer is doing" as Jay so eloquently put it. Its time to quit being held hostage by "the big guys" and start utilizing tools like Facebook, Foursquare and the other social media assets available since I think we are all in agreement that the Internet is here to stay;-) It is the savvy automotive marketer that is going to get ahead and stay ahead. Doing the same old thing and expecting different results is...(we all know the rest). So, Rock On, Dale and, I am sure there is an "Alpha" addition coming to vAuto in short order.
Congratulations Dale! Autotrader is definitely getting a great product and fantastic additions to their staff. Everyone I ever worked with at vAuto was always top-notch.

Dale - masterful timing! You are one of the wise ones.
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    jfriday
  • September 17, 2010
Dale is an extremely smart businessman. This acquisition will give the VAuto engine unlimited access to retail data, however, I do have a few concerns that are at opposite ends of the spectrum......I read thay AutoTrader also feeds data to VAuto's competitors and that this is going to continue. However, I wouldn't expect it to continue too much longer for obvious reasons. On the other hand, used inventory management tools are data driven and put a wealth of information at the hands of their users. This is great but with all of the other data driven tools that help to influence the decision making process in the dealership, just how much more can dealers take???? Many of the ones I talk to are in information overload......lol
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    Steve Sulgrove
  • September 18, 2010
What a sad day for the car business. vAuto is one of the few tools out there that brings true value to dealers. I know Dale is a really rich guy now, but he couldn't have sold his vAuto to a worse company. He may control it "separately" for a few years, but ultimately it will be surrendered to the losers who run AutoTrader now. How many times has AutoTrader been torn a new one on this site? We had a couple guys who sit on their "Advisory Board" defend them to the hilt.....BTW right after they just returned from an all expense paid trip, courtesy of AutoTrader to Las Vegas. It won't be overnight, but vAuto will be diluted in value the longer they are under the AutoTrader wing. Sad, sad news.
D
To all,


I would just like to thank you for both the support and the concern expressed here. I’d like to share a few thoughts with all of you.


First, I just want to go on record saying that I wouldn’t have sold to AutoTrader if I wasn’t proud to be associated with them. Yes, I know that it wasn’t but just a few years ago that if you mentioned the name AutoTrader, dealers would respond with a lot of negativity. Fortunately, AutoTrader also knows this fact, and has spent the last few years working very hard to change its ways.


For example, are you aware that there wasn’t a single dealer price increase in 2009, there won’t be a single price increase in 2010, and I understand that they made a commitment for no dealer price increases in 2011? What does this say about their commitment? It’s also very easy to be critical of any company that holds the dominant position of leadership in the market. If anyone believes that this company is insensitive as a result of their leadership position, then they don’t know Chip Perry, Alan Smith and others that run the company. Believe me I could not have sold the company to AutoTrader if I didn’t believe this to be true.


I think that there is still a lot of residual discontent from the past, and I also recognize that various individuals have personal agendas to promote. On balance however, I ask those that trust in me to allow our two organizations to demonstrate and execute the common philosophy of putting dealer’s interests first.


There is no doubt that the responsibility is now on us to demonstrate that this is a win for dealers. I recognize it and I’m motivated by the challenge of proving it. Please expect nothing less of vAuto, AutoTrader or me. In fact, you have the right to expect more from our newly united teams. I ask anyone that has any questions, doubts or concerns to communicate directly to me. My cell phone number is 630-343-9016, email [email protected] I’ll work very hard and do my best to be sure that this is a win for everyone. Finally, thank you Jeff and Alex for providing this forum, it’s a very valuable tool for our industry.


Dale
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FYI, Dale Blog has more insight into the sale. Dale&#039;s replies are noteworthy: <a href="http://www.dalepollak.com/2010/09/17/true/" rel="nofollow">http://www.dalepollak.com/2010/09/17/true/</a>
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    sean wolfington
  • September 19, 2010
Well said Dale. To AutoTrader&#039;s credit, they have done a very good job dominating the online used vehicle market and they made a great decision buying vAuto.
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    Richard Valenta
  • September 23, 2010
I&#039;m with Sean. AutoTrader made a great decision buying vAuto.
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    Jeff Kershner
  • September 23, 2010
Dale, thanks for commenting and offering the community your response.

Reading through many the comments and responses I still wonder where this was such a great buy for AutoTrader. I hear the price tag was in the 180-200 million area.

AutoTrader is going to need to really sell the shit out of vAuto in order to turn a profit on this purchase. Unless of course there is something else they are going to do with it. Maybe tie the data into something else that they already have in place or something else they are looking to purchase.

vAuto is not so much about the tool itself. It&#039;s the &quot;Velocity&quot; / Dale Pollack process that currently works. These tool just make it easier to read your market.

And once every dealer is using vAuto or some pricing tool - we will all be chasing the bottom line (it&#039;s already happened in several markets where these tools have saturated a region - I&#039;ve seen it). No matter how you roll the dice, no matter how pretty your words, and it will take years for it to happen, but these tools will change our dealer profitability on the used car side.

But maybe hat&#039;s just be the evolution of the business.
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If its $200 mill paid, it sounds like a lot, but is it? Lets pull out the crystal ball and plug in some numbers (aka Uncle Joe&#039;s best guess ;-).


$55 mill vAuto revenues annually (3100 rooftops at $1500 p/top)

$17 mill COGS (Cost of Goods Sold)

$38 mill annual vAuto profit


Software companies are highly profitable (...as is any company ;-) Publically traded software companies average 75% gross margin. I plugged vAuto in at 70% gross margin.


Assuming that &#039;Trader consumed all the profits, their break even is 5.2 years out IF NOTHING CHANGES. Surely Chip and Dale hit the squirrel cages hard and saw synergies that will amplify vAuto&#039;s revs. So far, I see no stretch by either party.


The 200million dollar question is will the marriage of vAuto and &#039;Trader create new opportunities for whom they serve? Or, as is everyone&#039;s worry, will this marriage create a new monster that devours dealer profits?


Over the years, Dale and his customers have had many personal conversations. Chip Perry knows Dale&#039;s customers are going to have push back and Dale is seeing 1st hand all the baggage that AutoTrader has with it&#039;s reputation. Chip is going to need Dale&#039;s character and leadership to hold it all together in the transition.


This will be a great thread to re-read in 5 years. I&#039;ll leave a note for myself for 2015...


Dear Dale Pollack,

It&#039;s been 5 years since you sold vAuto to AutoTrader.com. Where are your Dealers now?



references:
<a href="http://vauto.com/uploadedFiles/sharedContent/PDF/press_releases/vAuto%20Achieves%202%20New%20Company%20Milestones%20Aug%2027%20FINAL.pdf" rel="nofollow">http://vauto.com/uploadedFiles/sharedContent/PDF/...</a>
<a href="http://seekingalpha.com/article/10166-chart-software-companies-gross-profit-margins" rel="nofollow">http://seekingalpha.com/article/10166-chart-softw...</a>
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