M&A Action in Automotive Retail Heats Up as 3 Monster Deals Take Shape

M&A Action in Automotive Retail Heats Up as 3 Monster Deals Take Shape

May 6, 2024 — A flurry of transactions in April indicates that investment and acquisition activity among tech players in the automotive retail space is starting to heat up after a slow 2023 and early 2024. 

Anchoring the activity are three pending monster deals that, if completed, could raise multiples for other companies looking for exits or investments in the back half of 2024. The transactions likely will occur during mid-to-late summer. 

LARGE TRANSACTIONS COMING THIS SUMMER

S&P Global. According to a Reuters report last week, the publicly traded financial information company is rumored to be looking to offload its Mobility division. This division includes the Polk, CARFAX, Market Scan, and Automotive Mastermind dealer products and manufacturing and sales forecasting solutions for manufacturers and suppliers. 

The Mobility division was created as part of S&P’s $44 billion all-stock acquisition of IHS Markit in 2022. S&P added Market Scan in February 2023. While several of Markit’s pieces made sense for S&P, the automotive products were a stretch and the least synergistic. 

Acquiring S&P’s Mobility division will likely cost $12 billion (the number quoted in the Reuters article) to $14 billion, which places an approximate 18x-22x multiple on EBITDA or 8x-10x on revenue. Somewhat of a wide range, but it depends on how competitive the bidding process is. 

The price will set a record for transactions in the automotive retail space, eclipsing Brookfield’s $8.5 billion acquisition of CDK Global in 2022, which commanded a 14x multiple on EBITDA.

Potential bidders will likely be solely large PE firms. The price tag and expected regulatory issues would put it out of reach of strategic acquirers. 

J.D. Power. Recent reports indicate that private equity giant Thoma Bravo is seeking an exit for J.D. Power in the $8 billion neighborhood — approximately 20x EBITDA or 8x revenue. 

Thoma Bravo acquired J.D. Power for $1.88 billion in 2019 and embarked on an aggressive acquisition strategy, adding eight companies to the Power/Autodata portfolio, taking revenue from $300 million to over $900 million. Autovista, its most recent addition earlier this year, gives J.D. Power a European beachhead to make further acquisitions, creating an attractive narrative for Thoma Bravo as it pitches to potential buyers.

Like S&P Mobility, another large PE firm will likely be the buyer. However, a dark horse play could combine J.D. Power with S&P’s Mobility division. The products are complementary (if not synergistic), creating a powerhouse that would command a significant IPO in a couple of years. 

Companies J.D. Power/Thoma Bravo has added:

  • Trilogy Automotive – 2020
  • Inventory Command Center (ICC) – 2020
  • ALG – 2020
  • EpiAnalytics – 2021
  • Superior Integrated Systems (Darwin) – 2021
  • We Predict – 2022
  • Tail Light – 2022
  • ZappyRide – 2023
  • Autovista Group — 2024

Solera. Vista Equity Partners is seeking to offload Solera in a potential $1 billion IPO this summer. Vista Equity took Solera private in 2016 in a $6.5 billion deal. 

In 2021, Vista Equity attempted to take Solera public via a SPAC deal with blank check firm Apollo Strategic Growth Capital, a $15 billion merger that would have combined Vista portfolio firms DealerSocket and Omnitracs under the Solera umbrella. 

The deal fell apart due to bad luck with timing. As Solera and Apollo began putting the play together, tech stocks faltered, causing investors to balk at the price. After the deal was killed, Vista combined Solera with DealerSocket and Omnitracs, creating a comprehensive data and services entity that provides solutions to a wide range of players in the automotive space.

Vista likely will succeed this time, as the overall market is seeing a resurgence of IPOs this year after a slow 2023. 

MORE DEALS COMING

In addition to the large transactions, TBR is aware of several deals in play that should be announced in the next several weeks. 

Momentum will likely continue throughout the third and fourth quarters as several companies have been waiting for valuations to recover beyond what they have been in the last couple of years.

COMPLETED DEALS IN 2024

Although the first quarter was slow with two acquisitions completed, April heated up with another eight announced transactions or investments.

CarNow. Runway Growth Capital invested in CarNow via a $40 million loan commitment that the automotive technology platform will use to expand and speed up its product development. 

CarNow announced industry veteran Kayne Grau as its new CEO last September after raising approximately $55 million ($40 million led by investment firm Battery Ventures) since its inception in 2014.

STELLA Automotive AI. Reynolds and Reynolds announced in late April that it had led a $19.7 million Series A round in STELLA Automotive AI, an intelligent conversational AI technology provider.

The investment is Reynolds and Reynolds’ fifth transaction in just over a year. 

Other investors in the round include Qvale Auto Group, OREMOR Automotive Group, Mills Automotive Group, Bowers Automotive Group, MileOne Autogroup, Flow Automotive, MBB Auto Group, Ford Family Investments, and West Herr Auto Group.

The raise, which The Presidio Group put together, included newly invested capital and outstanding convertible notes that converted into the Series A round. 

Crystal Fusion. In late April, APCO Holdings acquired Crystal Fusion Technologies, an innovator in automotive glass-protection solutions. 

Ray Doran, who founded Crystal Fusion in 2007, is staying with the company along with President Gary LoCicero. Doran built the company into one of the country’s leading automotive glass suppliers with more than 1,000 automotive, boat, and RV dealership clients.

The acquisition expands APCO’s reach as a leading automotive Finance and Insurance administration provider, giving it access to a new market. 

It is APCO’s sixth acquisition since January 2023, when it added National Auto Care using an infusion of capital from majority investor Ontario Teachers’ Pension Plan. 

In 2023, APCO also acquired the assets of Dealer Capital Group, LDR Enterprises, Relentless Dealer Services, and Option One in separate transactions. It also owns the EasyCare and GWC Warranty brands.

Colonnade Securities LLC acted as the exclusive financial advisor to Crystal Fusion.

Adpearance. Advance Local recently acquired Adpearance from David Steinberg, who started the digital marketing firm in 2009. FourEyes, the sister company to Adpearance, was not included in the transaction.

It is the fourth acquisition in the automotive space for Advance Local, a national media company comprised of local media outlets, marketing agencies, and technology solutions. The company began building out an automotive play in 2019 with the purchases of Motominer and Hoot Interactive in 2020. Advance Local then acquired Search Optics in late 2022. 

In 2020, the company launched Zero Sum, an automotive marketing software platform that leverages data science. In 2023, Zero Sum launched Could Theory, a platform that analyzes Zero Sum’s data to provide predictive insights in the automotive space. 

AutoVista Group. J.D. Power, backed by PE giant Thoma Bravo, completed the acquisition of the European and Australian data firm Autovista Group from Hayfin Capital Management for an undisclosed amount. 

With its six brands—Autovista, Eurotax, Glass, Schwacke, Rødboka, and EV Volumes—Autovista Group standardizes and categorizes hundreds of technical attributes for virtually every vehicle produced in its markets, providing clients with a 360-degree view of detailed vehicle data for use in valuations, forecasts, and repair estimates.

Adding Autovista should help Thoma Bravo secure attractive bids for J.D. Power this year. The company turns J.D. Power into a true global entity with a platform to grow internationally. 

RBC Capital Markets served as the exclusive financial advisor, and Kirkland & Ellis served as legal advisor to J.D. Power. TD Cowen served as exclusive financial advisor, and Macfarlanes, Cravath, Swaine & Moore and Mishcon de Reya served as legal advisors to Autovista Group and Hayfin.

Guardian Auto Transport. ACERTUS acquired Guardian Auto Transport, completing the second transaction of the year in early April. 

ACERTUS is the country’s largest automotive logistics-as-a-service platform (LaaS). The acquisition positions ACERTUS as a leading logistics platform for moving, storing, reconditioning, titling, and registering vehicles. 

CEO Michael Bulshteyn and Eric Field, who co-founded Guardian in 2018, will stay with the company as part of the transaction. 

The late William Billiter founded MetroGistics in 2010 and acquired McNutt, Metro Title Services, and AmeriFleet before rebranding the company as ACERTUS in 2018. Current CEO Trent Broberg replaced Billiter in 2021. The company has since added VehicHaul TMS, RCC Logistics, and the recent Guardian Transport. 

TD Cowen was the exclusive financial advisor to ACERTUS in the transaction. 

Champ Titles. Electronic titling startup Champ Titles closed an $18 million Series C round in late March, raising the total to more than $45 million since 2018. 

Point72 Ventures led the latest round, which included existing investors W.R. Berkley Corporation, Eos Venture Partners, Guidewire Software, and Rev1 Ventures.

Champ Titles is leading the charge in modernizing the U.S.’s archaic vehicle titling, registration, and lien systems.

Vehicle titling and registration is the last real obstacle to creating a true automotive digital online sales process, but it was one few entrepreneurs considered tackling in part due to states having their own proprietary systems and relationships. 

But Champ Titles appears to be breaking down those barriers, having onboarded Kentucky, New Jersey, and Illinois last year while expanding its relationship with its first state partner, West Virginia. 

Champ Titles promises to eliminate more than 5 million pieces of paper annually per state while reducing processing time from 40-60 days to a few hours. 

The company is also one of the original Electronic Secure Title and Registration Transformation (eSTART) Coalition members, which launched in March. Other founding members include ACERTUS, Cario, Inc., Carvana, Decision Dynamics, LLC, Dealer Services Network, DLRdmv, DocuSign, Insurance Auto Auctions, Inc., MOBI, National Automobile Dealers Association (NADA), Private Auto, Proof (formerly Notarize), SimpliGov, Unite Digital, Upstart, VITU, and YASSI.

Since its launch, the Coalition has added several members, bringing its total to 79 today. 

Founding members established the Coalition to work with government officials and decision-makers to educate and advocate for modern solutions to replace the paper-based processes currently dominating state and local DMV operations.

Automotive Transformation Group (ATG). U.K.-based Keyloop acquired the Automotive Transformation Group, an automotive, omnichannel retailing, and retention solutions provider, from Inflexion Private Equity in early May. 

ATG was created in 2021 via a merger between the Inflexion-backed Autofutura and GForces in 2020, followed by the acquisitions of Chrysalis and Salesmaster in 2021. 

Private equity firm Francisco Partners acquired CDK Global’s international division in 2021, rebranding it as Keyloop. The company also has a presence in Canada. 

Houlihan Lokey and Taylor Wessing advised ATG, King & Spalding and Paul Hastings LLP advised Keyloop and Momentum Corporate Finance advised ATG management.

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