When it comes to international expansion strategy, KAR Auction Services has typically emphasized “being asset light,” says chief executive Jim Hallett.
But even in its latest international purchase — the planned acquisition of Belgium-based CarsOnTheWeb that was announced late last month — there are parts of KAR’s existing business that it can “layer on” to this digital wholesale auction platform.
“Our strategy has been to focus on being asset light,” Hallett said of how KAR has expanded internationally. “With the online model or digital model, it’s very easy to expand and to grow into the future. With that said, you take the existing platform that CarsOnTheWeb is operating off of now, we feel that we have assets that we can layer on.”
The CarsArrive transportation and logistics services first come to mind, Hallett said, but the possibilities elsewhere in KAR’s business are deep, too.
“You think about the company we acquired a few years back, DRIVIN, and the data and analytics that we’re doing here in North America. CarsOnTheWeb has their own data and analytics, but now we can add even more horsepower (to) that data and analytics and actually cast a wider net,” Hallett said during a phone interview after the deal was announced.
“And then you think about some of the technologies that we have here in North America that may enhance the technology at CarsOnTheWeb, whether that be anything from what we’re doing within OPENLANE to what we’re doing within TradeRev to what we’re doing within ADESA.com — all those things have the opportunity to enhance the overall service offerings that currently are being offered by CarsOnTheWeb.”
More details on purchase
KAR announced the morning of Nov. 28 that it had reached a definitive agreement to buy COTW for roughly 91 million euros in cash, as much as 65 million euros more that would be staggered over a specific time frame.
The latter figure would be contingent on certain terms and conditions as well as performance by COTW. Pending regulatory approvals, the potential transaction is expected to close in the first quarter of 2019.
The purchase would give KAR an “anchor” in Continental Europe’s wholesale market and beyond.
“CarsOnTheWeb is a leading cross-border automotive remarketing platform in Continental Europe, and their addition to our family of companies will instantly anchor KAR in the international marketplace,” Hallett said in the news release announcing the deal.
“CarsOnTheWeb’s proven, profitable operating model will bring innovative technology, experienced leadership and an active European customer base to our organization. Upon closing, these highly complementary assets and capabilities will help fuel KAR’s continued growth and allow us to deliver more globally integrated solutions to our customers,” Hallett said.
KAR currently has operating locations in the U.S., U.K., Canada and Mexico, with 120 countries in its customer base. The operations and capabilities of COTW, as described by KAR, are quite comprehensive, as well. It serves the wholesale markets in Continental Europe and has sales operations in Belgium, France, Germany, Italy, the Netherlands and Spain.
COTW connects automakers, fleet owners, wholesalers and dealers, providing various auction, transport and related services to sellers in the six aforementioned nations and buyers in more than 50 countries.
Its online and mobile tools are available in 19 languages. COTW’s offerings include real-time search, bid, payment and logistics scheduling tools, payment, document transfer and post-sale processes VAT-compliant. Those services, KAR said, support 97 percent of cross-border related customer transactions.
And that can be a somewhat tricky proposition to navigate in Europe.
“Cross-border transactions are particularly complex for European remarketers,” said Benjamin Skuy, KAR’s executive vice president for international markets and strategic initiatives, in the news release.
“CarsOnTheWeb’s unique platform and logistics solutions directly address these challenges and have the power to deliver seamless, convenient and connected services on a global scale,” Skuy said. “By leveraging KAR’s broad portfolio of technology, strong industry relationships and existing ADESA UK operations, we can enhance these offerings and develop new opportunities to serve wholesale customers.”
COTW has 170 employees as well as seven offices in six different countries. Its online auction types include what it describes as: dynamic auctions, target auctions, buy-now auctions, blind auctions and “x-Time” auctions.
KAR plans on keeping COTW’s current operating locations, employees and key leadership/management upon closing of the deal. Among those key leaders is Johan Meyssen, COTW’s chief executive.
“KAR and their affiliated brands are some of the most recognized and respected names in our industry,” said Meyssen, who will report to Skuy. “We look forward to obtaining the necessary regulatory approvals and leveraging the expertise and talents of both companies to drive growth and better serve our customers.”
This was KAR’s second major purchase announced in November. Earlier in the month, KAR announced the purchase of Clearplan, a Reno, Nev.-based digital platform for recovery agents, drivers, forwarders and lenders that acts as a centralized, mobile “cloud-based hub” for repo workflow and logistics management.
‘Right and appropriate vehicle’ for expansion
During the phone interview after the transaction was announced, AuSM also talked with Skuy, KAR’s EVP for international markets and strategic initiatives.
Asked about the similarities and differences between the North American and European wholesale markets to keep in mind, Skuy said: “The biggest item to think about in Europe is how many cars transact physically and how many millions of cars move within Europe.
“And the fact that there are multiple consignors who have their own platforms because they’ve found no easy opportunities to go to a provider like an ADESA, etc.,” Skuy said. “So, with their cross-border expertise — which is outstanding in Europe — being able to bring the brands and the customer relations that we have and the market that already is comfortable digitally, we found that this is the right and appropriate vehicle to expand significantly and opportunistically in that market and with this entity.”
Skuy said there’s no overlap between KAR’s existing European businesses and COTW, as KAR currently operates in the U.K., whereas COTW is in mainland Europe, selling from six countries. There are buyers in 50- countries.
“Their logistics sites are well positioned to move cars within Europe to the different buying countries. But there’s no overlap whatsoever; this is an absolute unique opportunity and step for us,” Skuy said.
On integration & learning as they go
Asked what pieces of KAR’s business might COTW best integrate with, Hallett said in the phone interview: “As we look at it now, it’s really being able to take CarsOnTheWeb and integrate some of our North American businesses. But I also think that there’s lots to learn as we get more familiar with the operations of CarsOnTheWeb.
“Obviously, we’ve done our diligence, and we understand what they do and how they do things,” Hallett said, but there are still opportunities for learning along the way.
For instance, he gives the example of the OPENLANE acquisition in 2011.
“We weren’t even thinking about CarsArrive, and we weren’t even thinking about RDN,” Hallett said. “And these were two little companies at the time that were buried within OPENLANE, and they turned out to be real surprises for us, where we grew, just in North America, we grew CarsArrive significantly. I mean, the number of vehicles we move now. And we’ve expanded RDN significantly.
“We think that we’ll learn things within CarsOnTheWeb which may cause us to think differently about how business gets done within all of KAR, whether it be in North America or whether it be the U.K., European or Mexico.”
And there may be white-label opportunities for consignors in Europe, as Hallett said the market would “welcome the opportunity” for KAR to provide such services.
“Many of our customers are global customers,” Hallett said. “And we need to be a global company. When global companies are making decisions, they’re not looking to choose different providers in every geography. In many cases, they want to put an RFP out, where one provider like KAR can provide the services in all the geographies where they’re operating.
“And that’s our real international strategy as we continue to grow; to be able to be that one provider that provides these services in all the various markets.”
In light of that, Hallett added that KAR and CarsOnTheWeb are “highly complementary to each other.”