Ron Frey & Eric Denlinger on recent M&A activity in the auto industry

2020 was an incredibly active year for M&A activity in retail automotive and the M&A market doesn’t seem to be slowing down anytime soon. On today’s show, we’re pleased to welcome Ron Frey, Strategic Advisor to the Industry with RL Frey and Eric Denlinger, Partner at Portico Capital.

Denlinger begins the conversation, by giving viewers a little background about Portico Captial. Portico Capital as a firm has been around for 22 years. They advise companies on M&A and private equity capital advisory. Within the different sectors, they deliver sass or data solutions to the industries in which they participate in.

With 13 closed auto tech transactions since October, Portico has carved out a leadership position in the sector. They’re a handful of different factors, driving the transaction activity in the auto software sector. Denlinger says it’s been incredibly remarkable to see how the industry bounced back through the challenges of the pandemic. Many of the companies, Portico worked with provide software and data solutions, that help the dealers move things from an offline setting to online, which was a huge driver in their transaction activity. 

Frey said, going through Covid, he thinks dealers are now more focused on what they’re looking for in terms of solutions to advance auto retail. It’s helping to drive innovation and solutions are coming together in the platforms, that better serve dealers.

Denlinger recently announced three significant M&A transactions in digital retail software – the sale of Darwin Automotive to JDP, Gubagoo to R&R, and CarStory to Vroom. Frey says he sees the trend where dealers are trying to meet their customers where they want to transact. Oftentimes, that includes wanting to take care of a number of things before the customer comes in. Covid was an accelerator into digital retailing and dealers feeling a need to have a position there. He also says having dealers and customers talk to each other and getting them on an end-to-end platform, is what dealers find attractive and can be efficiencies for both of them.

Denlinger advised CarOffer and TradePending on significant transactions. He says CarOffer really helped dealers be more efficient, by moving vehicles around from a dealer to dealer, in a wholesale setting. The chip shortage has only made sourcing and getting enough inventory to meet the customer’s demand, that much more important. 

Denlinger wraps up the conversation by giving advice on what businesses should focus on to maximize their valuation and what investors and acquirers are looking for current M&A activity. He says it’s about growth, and how your company is growing. Secondly, it’s having a customer-centric mindset. Lastly, it’s a need to have a solution.

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