Automotive Dealership News
December 18, 2017 @ 12:01 am
Latest suit against CDK comes from a heavyweight
Others have sued, but this opponent is largest
Cox Automotive, perhaps the only dealership vendor with enough scale to compete squarely against
CDK Global and Reynolds and Reynolds Co., took action against one of the dealership management system
giants last week, filing an 11-count lawsuit against CDK for anti-competitive business practices.
Cox is the largest of several companies to sue CDK on antitrust violations after Authenticom,
which filed an antitrust complaint against both CDK and Reynolds on May 1, opened the floodgates.
Over the past eight months, CDK and Reynolds have come under increasing legal fire. At least four
dealership vendors — Cox, Authenticom, Motor Vehicle Software Corp. and Superior Integrated Solutions —
have sued CDK, Reynolds or both companies for antitrust violations. At least four dealerships or dealership
groups have filed class-action lawsuits.
Authenticom, Motor Vehicle Software and Superior Integrated Solutions are small companies compared with
CDK and Reynolds. Their lawsuits made them Davids against two Goliaths.
But Cox Automotive fights in the same weight class as those two. With more than two dozen brands under
the Cox Automotive umbrella in the U.S., "we touch three out of four vehicle transactions in some way,"
Cox Automotive President Sandy Schwartz is fond of saying.
Cox's complaint, filed Dec. 11 in U.S. District Court for the Western District of Wisconsin, largely focuses
on anti-competitive behavior. Court documents don't specify how much Cox is seeking in damages, but state:
"The damage to Cox Automotive alone from its antitrust claims [exceeds] $200 million — before the automatic
trebling provided for by the nation's antitrust laws."
Among the counts in the lawsuit are alleged violations of the Sherman Antitrust Act in the form of conspiracy,
restraint of trade and monopolization, as well as breach of contract and unfair trade practices.
According to the complaint, CDK and Reynolds, which Cox called a co-conspirator but is not a party to the suit,
colluded to eliminate competition in dealership data integration.
The suit alleges that Cox's brands have been directly affected by CDK and Reynolds' collusion because Cox's
products and services compete with those offered by CDK and Reynolds.
It also alleges that CDK and Reynolds have destroyed competition in the data integration services market.
In recent years, CDK and Reynolds have provoked dealerships and vendors by charging hefty certification
fees for other parties' software that requires access to dealerships' data, the suit says. The companies have
said separately that the fees are necessary to pay for cybersecurity measures.
Through their data access programs, according to the suit, CDK and Reynolds are unreasonably restricting
dealership data to maintain their dominance in the dealer management systems market, favor their own products
and services, and injure competing products and services.
"Where CDK and Reynolds once themselves competed in that market, they have now entered into a written covenant
not to compete," Cox's complaint states, referring to evidence cited in Authenticom's complaint.
The complaint by Authenticom, a data integration services provider, unveiled a potential smoking gun:
a written agreement between CDK and Reynolds that implies collusion between the two companies.
In that document from February 2015, CDK and Reynolds agreed they would no longer compete in the dealership
data integration market. Under the agreement, CDK and Reynolds would be the exclusive data integration service
providers for data on their respective dealership management system platforms, the Authenticom complaint said.
In the lawsuits that followed Authenticom's, the plaintiffs in those cases cited the agreement in their
complaints and amended complaints.
Moreover, in its third-quarter 10-Q filing, CDK disclosed that the Federal Trade Commission issued a Civil
Investigative Demand in June requesting documents that relate to any agreement between CDK and Reynolds.
CDK "believes there has not been any conduct by the Company or its current or former employees that would
be actionable under the antitrust laws in connection with the agreements between ourselves and Reynolds and
Reynolds," the filing said. "At this time, the Company does not have sufficient information to predict the
outcome of, or the cost of responding to or resolving this investigation."
Cox, Authenticom and Motor Vehicle Software are all working with law firm Kellogg, Hansen, Todd, Figel &
Frederick in Washington, D.C. Judge James Peterson is the presiding judge for the Authenticom and Cox
Automotive cases in Madison, Wis., near Authenticom's headquarters.
The finding of liability in one case would be applicable to the others, so a favorable ruling for Cox
or any of the other vendors could be a victory for many dealerships and vendors affected by CDK and
Reynolds' allegedly anti-competitive behavior. Sources say Cox's lawsuit could even have a ripple effect of
more dealerships and vendors coming forward.
Damage to the industry because of CDK and Reynolds' behavior "has been immense," Cox's complaint said. Cox
aims to recover those damages, prohibit CDK's illegal conduct and fend off further injury to vendors and
dealerships, the complaint said, adding: "The industry and market can no longer endure such abuses."
You can reach Hannah Lutz at [email protected] ___________________________________________________________________________________________
July 18, 2017
Authenticom Granted Preliminary Injunction in CDK, Reynolds Lawsuit
MADISON, Wis. — Authenticom scored a tentative victory on Friday in its antitrust lawsuit
against CDK Global and Reynolds and Reynolds. The data integration provider was granted a
preliminary injunction that prevents the two software makers from blocking access to their
DMS offerings while the case proceeds.
The order, signed by Judge James Peterson of the U.S. District Court for the Western District
of Wisconsin, calls for all three parties to “agree on all terms of the injunction” or submit
“competing proposals” by July 21, effectively creating a framework by which Authenticom can —
with dealer authorization — continue to access data entered into CDK and Reynolds’ systems.
“The Court’s ruling today is an important step forward not only for Authenticom, but for the
automotive industry as a whole. Authenticom can now meet the data integration needs of both
dealers and vendors without the threat of Authenticom’s dealer-authorized data access being
blocked,” said Steve Cottrell, Authenticom’s founder and chief executive, in a prepared
statement. “We look forward to providing secure, cost-effective, and reliable data
integration services to our existing and future customers, finally without the threat of
being hindered by CDK’s and Reynolds’ anticompetitive conduct.”
Authenticom’s directors filed suit against CDK and Reynolds on May 1, claiming the
data-security measures undertaken by the two DMS providers have threatened its survival
by limiting access to data stored in their DMS offerings and may be a violation of the
federal anti-monopoly Sherman Act.
Describing the case as “complicated, both legally and factually,” Judge Peterson’s order
states, in part, “Authenticom’s evidence establishes at least a moderate chance of success
in proving that defendants have violated the Sherman Act. And the balance of harms tips
sharply in favor of Authenticom, because Authenticom is clearly at risk of going under
without a preliminary injunction.”
In separate statements, CDK and Reynolds executives expressed disappointment in the ruling.
In an email to F&I and Showroom, Reynolds and Reynolds spokesman Tom Schwartz said the
company plans to appeal the court’s final injunction once it is issued.
Making reference to the testimony of Eric Rosenbach, former head of cybersecurity efforts
for the U.S. Department of Defense, Schwartz said Rosenbach and Reynolds’ directors agree
the company’s policies are designed to “protect the operational integrity and security of
its DMS” on behalf of its dealer clients.
“Reynolds continues to believe that unauthorized access to its DMS is unlawful and Reynolds
intends to file counter claims in the litigation to that effect,” Schwartz said.
May 24, 2017 08:30 AM Eastern Daylight Time
CDK Global to Acquire Auto/Mate Dealership Systems CHICAGO & ALBANY, N.Y.--(BUSINESS WIRE)--
CDK GLOBAL (Nasdaq:CDK) and Auto/Mate Dealership Systems today announced that they have entered into
a definitive agreement whereby CDK will acquire Auto/Mate, a privately held company that provides a suite of
DMS (Dealer Management Systems) products and solutions to over 1000 new car dealership sites.
"This planned acquisition reinforces CDK’s commitment to dealers, regardless of size, by offering a broad range of
products designed to improve dealership returns and the consumer experience”
CDK plans to integrate the Auto/Mate DMS into its product lineup to better address the full spectrum of dealership
needs, providing dealers with the choice and flexibility to combine the Auto/Mate DMS product offerings with fully
integrated access to the CDK solution suite.
“This planned acquisition reinforces CDK’s commitment to dealers, regardless of size, by offering a broad range of
products designed to improve dealership returns and the consumer experience,” said Brian MacDonald, president
and CEO of CDK Global. “Auto/Mate’s products are a natural fit with CDK solutions and provide an intuitive, flexible
and fit-for-purpose DMS solution that will offer strong value to dealerships.”
“My team and I are looking forward to working closely with our new and existing customers to deliver solutions that
will provide them with numerous operational benefits, including speed, efficiency, and flexibility in managing their
businesses and serving their customers,” said MacDonald.
“I am confident the traditions of unparalleled customer service and ever-evolving technology that Auto/Mate customers
have grown to expect will continue under CDK, and we are excited for the new opportunities that the combined
companies will provide to help our customers succeed,” said Mike Esposito, president and CEO of Auto/Mate.
The transaction has been approved by each company’s board of directors and is subject to customary closing
requirements and regulatory approvals. The transaction is expected to close later this summer. Terms of the
transaction were not disclosed.
Presidio Technology Partners is acting as exclusive advisor and McNamee, Lochner, Titus & Williams, PC and
Jenner & Block LLP are serving as legal counsel to Auto/Mate in the transaction.
About CDK Global
With more than $2 billion in revenues, CDK Global (Nasdaq: CDK) is a leading global provider of integrated information
technology and digital marketing solutions to the automotive retail and adjacent industries. Focused on evolving the
automotive retail experience, CDK Global provides solutions to dealers in more than 100 countries around the world,
serving approximately 28,000 retail locations and most automotive manufacturers. CDK solutions automate and integrate
all parts of the dealership and buying process from targeted digital advertising and marketing campaigns to the sale,
financing, insuring, parts supply, repair and maintenance of vehicles.
Auto/Mate Dealership Systems is a leading provider of dealership management system (DMS) software to retail automotive
dealerships, typically saving dealers thousands of dollars per month from their current provider. Our Automotive Management
Productivity Suite (AMPS) is a user-friendly, feature-rich DMS in use by more than 1,200 auto dealers nationwide. Auto/Mate
has received DrivingSales Dealer Satisfaction Awards in 2012, 2013, 2014, 2015 and 2016. Auto/Mate has approximately 180
employees and is based in Albany, NY.
Cox Automotive™ to Invest in Customers and Auto Industry with $4 Billion Acquisition of Dealertrack® June 15, 2015
Strategically combines two industry leaders known for innovation, customer focus and delivering results Creates broader
suite of open solutions that provide greater value to consumers, dealers, lenders and manufacturers
ATLANTA & LAKE SUCCESS, N.Y. --(BUSINESS WIRE)--
Cox Automotive, Inc., a leading provider of digital marketing, wholesale and e-commerce solutions across the automotive
industry, and Dealertrack Technologies, Inc. (NASDAQ:TRAK), a leader in software solutions and services for automotive
retailers, today announced that they have entered into a definitive merger agreement.
Cox Automotive will acquire Dealertrack in an all-cash transaction valued at $4 billion, or $63.25 per share. The acquisition
is subject to a minimum tender of at least a majority of the outstanding Dealertrack common shares and customary closing
conditions, and is expected to close in the third quarter of 2015. The Dealertrack Board of Directors has unanimously
approved the acquisition and recommends that Dealertrack stockholders tender their shares in favor of the transaction.
The combination of Cox Automotive and Dealertrack will create a broader suite of open solutions that deliver greater
value to consumers, dealers, lenders, manufacturers and the overall automotive industry. Dealertrack's broad solution
set for dealers is an excellent complement to Cox Automotive's vehicle remarketing services and digital markets and
software solutions that serve the wider automotive ecosystem. In addition, the combination will better serve customers
across global markets through each company's respective international footprint. Together, Cox Automotive and
Dealertrack will be well positioned to help customers grow their businesses and increase efficiencies as they navigate
a rapidly changing global automotive industry. "This is a great investment in our customers and in the auto industry,"
said Sandy Schwartz, President of Cox Automotive. "We have long admired the Dealertrack team and its highly
respected brands. Integrating our platforms will be a big step forward in our shared vision of providing open, cost-effective
and efficient solutions for dealers, lenders, manufacturers and consumers. We look forward to working with Mark O'Neil
and his team as Mark continues to lead the acquired businesses and as we continue to innovate for our customers."
Mark O'Neil, Chairman and Chief Executive Officer of Dealertrack, said, "I am confident that with Cox Automotive, we will
fully unlock the potential of our combined brands and teams in the service of our clients. Dealertrack team members
have been a critical element in the tremendous success our company has achieved, and I want to thank all of our team
members as we move forward into this exciting new chapter of growth. I am extremely enthusiastic about our future
with Cox Automotive." O'Neil added, "This provides a significant premium and immediate cash value for Dealertrack
stockholders at closing. After careful and thoughtful analysis, with the assistance of our independent legal and financial
advisors, we concluded that this transaction provides our stockholders with the opportunity to tender their shares at a
price that recognizes the superior value of Dealertrack's industry partnerships, solutions, technology, financial
management and international industry position." The transaction is fully financed and is not subject to a financing
condition. The acquisition will be funded through an existing bank facility, a new $1.85 billion bank term loan arranged
by Citigroup Global Markets Inc. and a $750 million common equity investment from BDT Capital Partners. BDT & Company
and Citigroup Global Markets are serving as financial advisors, and Wachtell, Lipton, Rosen & Katz is serving as legal
counsel to Cox Automotive. Evercore is acting as financial advisor and O'Melveny & Myers LLP is serving as legal advisor
About Cox Automotive
Cox Automotive is a leading provider of vehicle remarketing services and digital marketing and software solutions for
consumers, dealers, manufacturers and the overall automotive industry. Cox Automotive includes Manheim®,
Autotrader®, Kelley Blue Book®, vAuto®, Xtime®, NextGear Capital®, and a host of global businesses and brands.
Headquartered in Atlanta, Cox Automotive employs nearly 24,000 employees in over 150 locations worldwide.
The company partners with more than 40,000 dealers, as well as most major automobile manufacturers, and touches
car buyers in the U.S. with the most recognized brands in the industry. Cox Automotive unites more than 20 brands in
this space, providing an end-to-end solution to transform the way people buy, sell and own cars every day.
Cox Automotive is a subsidiary of Cox Enterprises, an Atlanta-based company with revenues of $17 billion and
approximately 50,000 employees. Cox Enterprises' other major operating subsidiaries include Cox Communications
(cable television distribution, high-speed Internet access, telephone, home security and automation, commercial
telecommunications and advertising solutions) and Cox Media Group (television and radio stations, digital media,
newspapers and advertising sales rep firms). About Dealertrack (www.Dealertrack.com) _______________________________________________________________________________________________________
Revenue Loss And Credit Downgrade Due To Dealer Services Spin-Off Will Negatively Impact ADP
May 23, 2014
Opinions expressed by Forbes Contributors are their own. Trefis Team,Contributor
Automatic Data Processing, the largest payroll processing and human capital management solutions provider
in the U.S., recently announced that it will spin off its Dealer Services segment. ADP’s Dealer Services provides
integrated dealer management systems, digital marketing solutions and other business management solutions to auto,
truck, motorcycle, marine, recreational vehicle, and heavy equipment retailers, distributors, and manufacturers. The spin-off
will create an independent publicly traded entity with its own management team that will be completely focused on managing
the services that the segment provides to the retail automobile industry. ADP expects to generate at least $700 million once the transaction is completed in October this year. The proceeds from the spin-off will be utilized to repurchase ADP’s shares.
ADP believes that the major benefit from the spin-off is that the company will be able to focus on its core business, i.e. human
capital management, and the Dealer Services segment in particular can focus on automobile retail services – which positions
them well for long term growth. However, in the short term, the spin-off will have some negative impacts on ADP.
Below, we look at these impacts and how they affect ADP’s value.
See our complete analysis of ADP here http://www.trefis.com/company?hm=ADP.trefis#
Loss of Revenue
ADP’s decision to spin off the Dealer Services has come at a time when the U.S. automobile industry is booming.
The Dealer Services segment has grown at an average rate of 13.3% per year since fiscal year 2010, driven by
growth in the U.S. automobile industry. In fiscal year 2013, it generated $1.81 billion in revenues, 16% of ADP’s overall
revenue. Considering the high growth rate of ADP’s Dealer Services segment and the booming automobile industry,
we believe that the segment’s potential for revenue generation is substantial. However, ADP will lose out on future revenue
from the segment after the spin-off.
Credit Rating Downgrade
After the announcement of the spin-off, leading credit rating agencies Moody and Standard & Poor downgraded ADP’s
credit rating. Moody downgraded ADP’s rating from AAA to Aa1 on account of the loss of future revenue. Similarly,
Standard & Poor downgraded ADP’s rating from AAA to AA, citing loss of diversification in the company. A lower credit
rating means that loans will become costly for ADP leading to an increase in interest expense. This will have a negative
impact on ADP’s net income. The rating downgrade will also impact its ability to take on more debt, thereby limiting its
ability to raise funds for acquisitions, capital expenditure or stock repurchase. However, ADP believes that the rating
downgrade will not have any material impact on the company’s financials. Decline In Intrinsic Value We currently have
a price estimate of $66.61 for ADP’s stock, of which the Dealer Services segment
contributes 12%. Once the spin-off is completed, our price estimate for ADP’s stock will decline 12% to around $58.6
since cash flows from the Dealer Services segment will no longer be a part of our valuation.
ADP Dealer Services Group Gets New Name
Posted by Cliff Banks
Once the spinoff of ADP’s Dealer Services Group is completed — most likely in October — the new company will be
branded CDK Global Inc. The name is derived from the three dealer-related business units currently owned by ADP:
Cobalt Digital Marketing; Dealer Services; and the global Kerridge Computer Co., a company in the UK which was
acquired in 2005. The Dealer Services group generates close to $2 billion in annual revenue for ADP. The spinoff is
expected to generate more than $700 million for ADP which has said it will use the proceeds for share buybacks for
investors. The move was announced in April and will add to what has been a busy year for automotive retail
vendors on the acquisition front. DealerTrack’s $987 million purchase of Dealer.com; TrueCar’s IPO; KKR’s $1.1 billion
buy of Internet Brands (CarsDirect), and Gannett Co.’s purchase of Cars.com valued at $2.5 billion.