Welcome to another edition of The Friday 5 with Steve Greenfield, Founder and CEO of Automotive Ventures, an auto technology advisory firm that helps entrepreneurs raise money and maximize the value of their companies.
What a strange year it’s been. Starting off strong, we ran headlong into a global pandemic that started to quite literally shut down the economy in mid-March. But the U.S. consumer, and their appetite to buy and service vehicles, proved to be incredibly resilient, as both OEMs and Dealerships experienced record profitability levels in Q3.
Ironically, we’ll exit this year with many auto industry players in far better shape than they were entering the year, and stock markets at or near all-time-highs.
As we reflect back over the year, Steve Greenfield reviews the 10 biggest automotive tech deals, and the implications they have on the industry. So, with no further ado, and counting downwards, here we go!
10. Waymo
You sometimes hear about startups raising money at a billion-dollar valuation. But how often do you hear about startups actually raising over a billion dollars?
Well, it happened early this year, as Alphabet’s self-driving car company Waymo raised a whopping $2.25 billion in their first external funding round.
The funding round was led by Silicon Valley investment firms including Silver Lake and Andreessen Horowitz, as well as AutoNation, who disclosed that they invested over $50 million in Waymo.
The external funding is a sign that some of Alphabet’s ‘other bets’ companies like Waymo need much more capital than Alphabet is willing to provide on its own. Most ‘other bets’ companies are funded through revenues generated by Alphabet’s cash cow Google, which makes most of the company’s profits thanks to its dominant digital ads business.
9. AutoList
Automotive classified site AutoList was acquired by CarGurus for an undisclosed amount, to add both incremental users and consumer audience to help fortify CarGurus’ position as a market leader.
This may have been a small deal by size, but was the first acquisition by CarGurus, and signaled their interest in inorganic growth. CarGurus would execute a much larger acquisition later in the year, but we’ll get to that transaction in a bit.
Congratulations to AutoList founder Corey Lydstone and the AutoList team for a great exit to CarGurus.
8. Vast and CarStory
We have Vroom’s acquisition of Vast and CarStory. The deal, announced late this year, is worth approximately $120 million dollars and is expected to close in January 2021.
CarStory provides artificial intelligence-based analytics and digital services to the auto retail industry with the aim of providing the most complete accurate view of predictive market data.
Vroom Chief Executive Officer Paul Hennessy says that the addition of CarStory will strengthen and extend the reach of the company’s eCommerce platform.
Congratulations to John Price, Chad Bockius, and the Vast/CarStory team down in Austin!
7. S&P Global and IHS Markit
This is the largest deal of the year by size, with IHS Markit selling to S&P Global in an all-stock transaction that values IHS Markit at an enterprise value of $44 billion dollars, which includes $4.8 billion of net debt.
S&P Global and IHS Markit explained that their unique and highly complementary assets will leverage cutting-edge innovation and technology capability, including Kensho and the IHS Markit Data Lake, to enhance the customer value proposition and provide the intelligence customers need to make decisions with conviction.
This is a big deal for the automotive data space, as IHS Markit owns the old R.L. Polk business, as well as Carfax and AutomotiveMastermind.
6. TrueCar, ALG Business, and J.D. Power
Next, we have TrueCar divesting the ALG business to J.D. Power for $135 million dollars.
TrueCar bought ALG, which provides residual value forecasting and other analytics services, back n 2011 from DealerTrack.
In August, J.D. Power CEO Dave Habiger said ALG will complement Power’s existing data and analytics tools and valuation expertise.
Both JD Power and AutoData now sit under global Private Equity player Thoma Bravo, who seems to be executing a strong thesis around automotive data players.
It’ll be interesting to see how active Thoma Bravo and their JD Power platform are in 2021!
5. BringATrailer
At number 5, we highlight one of my absolute favorite websites, as Hearst, the parent company of the Car and Driver and Road & Track brands, acquired BringATrailer.
If you love cars, like Greenfield love cars, there’s no better site out there than BringATrailer.com. That daily list of new cars and auctions ending soon is my favorite morning email to read.
Bring A Trailer has set the bar for building a community around a passion point. What co-founders Randy Nonnenberg and Gentry Underwood have developed is truly special, and what they deliver to their audience is so much more than transactional. They’ve built a community, developed trust and have become an invaluable part of the automotive landscape.
Thank you BringATrailer for feeding my addiction each and every day!
And to the Hearst folks, we beg you, please don’t mess with this site!
4. BackLot & KAR Global
Coming in at number 4, we have a really big transaction in the wholesale auction space: BackLot Cars’ sale to KAR Global.
KAR Global reached a deal to purchase BacklotCars, an online dealer-to-dealer wholesale platform, for $425 million dollars.
This deal augments what is already a number of digital marketplaces under KAR, which has purchased such entities as TradeRev, DRIVIN and CarsOnTheWeb in recent years, and acquired OPENLANE about a decade ago.
The addition of BackLot Cars to TradeRev will help them compete better against ACV Auctions, which is rumored to be going public within the next month.
The wholesale auction space is near and dear to my heart, and a hot space currently, and we love seeing some of these big deals happening in the B2B marketplace segment.
3. Tekion
At number 3, we have Tekion raising $150 million dollars, and now being valued at over $1 billion. This year’s Series C round was led by global PE player Advent International.
Other investors in the latest round were Index Ventures, Exor (which is the holding company of Fiat Chrysler and Ferrari), Airbus Ventures, and FM Capital.
Tekion is aiming to solve the issue of technology fragmentation that has plagued the industry for decades. With its modern cloud-based platform complete with a centralized accounting system built on a secure data platform, Tekion says dealers can access their company’s data from anywhere while also providing seamless access to vendors via its set of APIs.
Tekion has the two biggest SaaS companies in the space clearly in it’s sites: being CDK Global and Reynolds & Reynolds.
Tekion will definitely be a disruptive force in the industry for us to keep our eyes on.
2. CDK Global & Francisco Partners
At number 2, we have a deal that is going to fuel some additional M&A in the space: as CDK Global divests their international operations for $1.45 billion dollars to private equity firm Francisco Partners.
The Chicago-based company says it will focus on its core North American operations and repay debt as it considers future capital investments.
CDK’s international business, has operations in Europe, Asia, the Middle East and South Africa.
The sale is expected to close in the third quarter of its 2021 fiscal year, and will add over $1 billion dollars to CDK’s warchest for acquisitions. It’ll be interesting to watch what they decide to acquire as a result of this strategic move.
1. CarGurus & CarOffer
And finally, at Number 1, we have CarGurus’ acquisition of CarOffer.
CarGurus, a leading global online automotive marketplace, late this year announced it entered into a definitive agreement to acquire a 51% interest in CarOffer at an enterprise valuation of $275 million dollars, with the ability to buy the remaining equity interest in the company over the next three years.
CarOffer is an automated instant vehicle trade platform that is disrupting the traditional wholesale auction model with technology that enables dealers to bid, transact, inspect and transport seamlessly. The acquisition will add wholesale capabilities to CarGurus’ portfolio of dealer offerings, creating a complete and efficient digital solution for dealers to sell and acquire vehicles at both retail and wholesale. The expansion to wholesale is a key component of CarGurus’ overall platform strategy, which also includes acceleration of a robust digital retail offering for dealers and consumers.
I’ve spoken numerous times about the blurring of lines between wholesale and retail, and this is a great example of this evolution in the space.
Congratulations to Bruce Thompson and the CarOffer team for what might be the fastest creation of wealth and exit in the industry.
Year of the SPAC
As Greenfield thought this over, there is one other trend that he needed to call out.
We would be remiss if not to recognize a major theme in the market as 2020 will be remembered as the YEAR OF THE SPAC.
If you’ve been tuning in regularly, you’ll know that we’ve been saturated this year with a number of electric vehicle manufacturers going public via special purpose acquisition corporations or SPACs.
SPACs, often dubbed as blank-check companies, have disrupted the traditional IPO market. SPACs are flourishing in the EV market, helping startups to avoid the complexity and strenuous paperwork associated with the traditional IPO. Many EV companies chose to go public this year via reverse mergers with SPACs, a faster, simpler, and less demanding process than the conventional means of making a debut on the stock market.
And the best barometer of just how frothy the SPAC market is, we even got a Shaq SPAC in 2020. Talk about jumping the shark.
We will exit 2020 with over 473 IPOs, the most in any calendar year, ever. The next closest year was back in 2000 with 397 IPOs, at the peak of the Dot.Com bubble.
Carvana’s high market capitalization has been a result of executing a brilliant consumer experience, as well as a COVID-inspired interest in online automotive shopping experiences has fueled a few public offerings this year. Specifically, Vroom IPO’d earlier this year, followed by competitor Shift Technologies going public via SPAC. In addition, Carlotz is scheduled to go public via SPAC in early 2021. All of whom have been fueled by Carvana’s stock price being up 200% in 2020 to just shy of a $50 billion dollar market cap.
We’ve seen numerous automotive technology companies going public via SPAC in 2020, most notably a slew of electric vehicle, or EV, manufacturers.
This year saw, FISKER, Nikola Corp, Canoo, Lordstown Motors, and Hyllionn Holdings.
Do we really need this many EV manufacturers on the public markets? There are more to come with EV manufacturer Arrival, and I’m certain many more.
Only time will tell if consumer demand can support all of these EV automakers. But in the meantime, it definitely was the YEAR OF THE SPAC. But I don’t see this slowing down any as we enter 2021.
So there you have it. That concludes our special edition of the Friday 5’s 2020 Big technology deals of of the year. We did see many additional deals this past year, but Greenfield tried to select the ones that were either the most interesting, and/or had the biggest potential impact on the industry.
As we think about all that we’re thankful for this year, at the very top of our list is all of you, connections that we’ve made in the automotive space over the past 20 years that have become our second family. So thank you for your support and for tuning in each week to the Friday Five.
It’s an exciting time to be in the automotive space, and we’re going to come out of the gates in 2021 with even more big automotive technology deals.
Thanks, as always, for tuning in to CBT News for the Friday 5, and we’ll see you next year!
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