Industry News & Trends

AutoTrader.com is Sold to Providence Equity Partners

Cox Enterprises Inc. will sell a 25 percent interest in its AutoTrader.com unit to Providence Equity Partners.

This is a few days old now and I’m not sure of any immediate impact it could have, but figured some might want to know.

Cox will maintain majority ownership and operating control of AutoTrader.com, an online auto classifieds marketplace. Providence’s ownership will have no impact on day-to-day operations, but the private equity firm will get two seats on AutoTrader.com’s board of directors.

Chip Perry, AutoTrader.com president and chief executive officer, said the partnership with Providence Equity would help the online business pursue “many organic growth opportunities, as well as strategic acquisitions, that will help improve the products and services we offer.”

Cox said the deal gives it access to additional investment capital and expertise to help accelerate AutoTrader.com’s growth.

“This agreement demonstrates our commitment to AutoTrader.com’s continued success and will speed its future growth as the leader in the online auto space,” said Jimmy Hayes, president and CEO of Cox Enterprises, in a news release. “Providence Equity has a strong track record of working with communications, media and Internet companies to promote growth and encourage strategic expansion.”

Separately, AutoTrader.com reported it landed a financing arrangement with Goldman Sachs Lending Partners LLC and Wells Fargo Bank to provide $525million in senior secured revolving credit and term loan facilities. The facilities will be used to fund the redemption of certain shares of AutoTrader’s outstanding capital stock and for working capital and other general corporate purposes of the company.

What would a private equity firm want with 25% of AutoTrader.com?

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    It's obvious
  • May 9, 2010
AutoTrader has to buy Vast.com inc because they have made huge pool against them uniting everybody from KBB to Aol from 'publishers side' and all Autotrader competitors in car inventory... and 525M is in the range of Vast value
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    Andrew Wright
  • May 10, 2010
Private Equity loves businesses with recurring revenue streams. Companies like pest control, lawn fertilization, cleaning companies, etc. I'm sure that is what is prompting this investment. They probably see some opportunities to cut costs and boost cash flow while maintaining and/or growing the recurring income stream. Should be interesting to watch play out...
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    Jimbo in LImbo
  • May 10, 2010
They will load it up with debt and cash out while the business will go bankrupt.


For an example, see: <a href="http://www.nytimes.com/2009/10/05/business/economy/05simmons.html" rel="nofollow">http://www.nytimes.com/2009/10/05/business/econom...</a>
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Jimbo - The differences between the deal announced by AutoTrader.com and the leveraged buyout/private equity deals, like Simmons, quoted in the NY Times story are profound. Most importantly AutoTrader.com will still be controlled by Cox Enterprises.

Perhaps this says more about Cox than about AutoTrader.com. ATC has been profitable for years, but has been been paying back the huge initial investment Cox and it&#039;s other investors made at the beginning. This influx of capital dramatically speeds up that repayment. Much of Cox&#039;s portfolio is made up of businesses in shrinking segments; Newspapers, TV, Radio, Auto Auctions, etc. AutoTrader.com is a rare commodity for them: A business unit with a growing valuation.

AutoTrader.com has been, and I think will continue to be, a media success story. When other media outlets were seeing drops in advertising revenue during the tough economy, ATC was holding it&#039;s own. With a recovery they could easily be back to double-digit growth rates.
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    John Smith
  • May 20, 2010
COX has been having a very hard time selling AutoTrader, they&#039;ve had them on the market since 2008, and all the major players like YAHOO, Comcast, Google, AOL, MSN, KBB have not been interested.
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    Kelly
  • May 21, 2010
KBB or AOL buy Autotrader.com ROFL thats funny! AOL is hardly in business and just how big of a company do you think KBB is?


Autotrader.com is a prfitable company already so does COX really need to sell it?
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AutoTrader has to buy Vast.com inc because they have made huge pool against them uniting everybody from KBB to Aol from &#039;publishers side&#039; and all Autotrader competitors in car inventory... and 525M is in the range of Vast value
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    Eric Hinkle
  • June 22, 2010
ATC didn&#039;t need to sell 25% to an equity investor. Kleiner Perkins could have easily jumped up with more cash (for more equity) if they thought the company was in peril and/or believed it was a good investment. The fact KP didn&#039;t jump in for the extra 25% is very telling. Ed Brooks is right for the most part. He spent time with ATC and understands the culture of the company. At the inception of ATC, the board moved people from the Atlanta newspaper company (Cox owned) to run the show. These were died in the wool newspaper people. I believe some of the early years provided slower growth than the investors liked. In the past few years, some of the old newspaper executives have moved on and retired. This has left openings near the top for younger/faster blood.


Take the fact KP didn&#039;t want the other 25% coupled with the assumption ATC can get a substantial line of credit from just about anyone. Since KP has been there since the beginning; do they simply not trust the guys with a half billion more(?). There is more here than we&#039;re being told. And that&#039;s their choice. When you run in the Corporate circles that the executives at Cox run around in...you know a LOT of people with a LOT of money. This could have just been a &#039;sweetheart&#039; deal. Maybe it&#039;s just that simple.


One can do a lot of damage with $525MM. It&#039;s my assumption ATC is recognizing the upward shift in the auto industry and they are going into acquisition mode. And why not? That&#039;s what I would do. If in fact ATC goes on a buying spree (and chooses the right acquisitions), then I applaud Providence for their investment. ATC has the name recognition and talent pool to pull off some serious revenue and profit generators. I&#039;d look to buy DMS/CRM and mend them into the AT software. Could be an intersting summer.
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    Dave
  • July 5, 2010
I hope one day that the &quot;magazine&quot;,will return. Its been a year since it dissolved,and I miss working for one of the best jobs of my life. Only wishfull thinking. Thanks for the memories.
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Autotrader is a cash cow but their business model is not sustainable as the market shifts to a pay for performance model. They know that and are smart enough to use that money to start to buy assets like KBB to create some sort of competitive advantage
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    Live
  • February 21, 2011
Q: What would a private equity firm want with 25% of AutoTrader.com?

A: To buy them out. ATC's floor management fucked over many employees!!
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