Reynolds & Reynolds Targets Auto Dealers: Acquisitions and partnering help transform and diversify the venerable firm

Reynolds & Reynolds Co. doesn’t make, sell, transport, finance, or service automobiles. But it’s a player in many of those and myriad other activities and transactions along the far-flung supply chain that culminates in the retail sale of cars to North American buyers. Dayton, Ohio-based Reynolds is the dominant developer and installer of the systems, web connections, and related services that form the nerve centers of U.S. and Canadian automotive retailers. Its “integrated solutions” enable dealers to keep copious records, expedite schedules, stay in touch with the manufacturers, and handle the endless number of other essential tasks involved in selling, maintaining, and financing cars. Once an old-line producer of business forms, the 138-year old Reynolds morphed into a technology juggernaut through a series of transformative steps begun in the 1990s that have included judicious use of acquisitions and partnering – notably a collaboration with Microsoft Corp. Now firmly established in the North American automotive retailing space, the company is branching out. A late 2003 acquisition gained a strong technology support position in Europe while a 2002 deal landed a firm that services boat dealers and activated plans to penetrate channels related to auto retailing. Although Reynolds has significant ability to power expansion internally or via its Microsoft partnership, the company opts for acquisitions when buy trumps build. Acquisitions fill gaps, bulk up existing operations, or quickly augment capabilities, says Douglas Ventura, Vice President and head of the company’s New Market Ventures Group. He says Reynolds staked out automotive retailing for openers because it was “one heck of an opportunity” – offering an expansive market with annual sales of $1.7 trillion and lots of transactions and functions that need to be facilitated with modern computer and web-based systems. “We are helping in the transformation of automotive retailing,” Ventura notes, “helping dealers become better retailers, and helping retailers improve their relationships with their customers and with manufacturers.” The acquisition strategy was to a great degree set with the first major acquisition, HAC Group, which was folded in during 2000. While Reynolds was concentrated in the “back” of the dealership – parts and service – HAC put it in the “front” with systems for sales, finance, insurance, etc., and added to the company’s consulting capacity. Subsequent additions included Networkcar Inc., which provides systems for automobile diagnostics and for tracking stolen cars, and Third Coast Media, which bulked up web solution capabilities. Since making the decision in 1998 to go totally into solutions for auto dealers, Reynolds has followed through on its objective of establishing a national platform and an infrastructure that can be leveraged for growth and diversification. The October 2003 acquisition of automotive retailing software provider Incadea AG – identified with Microsoft’s assistance – carried through on one phase of the expansion by hitting Europe in big-time fashion. Acquisition was necessary there, Ventura states, because it allowed Reynolds to become a “true local company” with operations in 20 countries, existing personnel, and ongoing relations with European auto dealers, who operate differently than dealers in the U.S. “They (the dealers) operate through thoroughly different business models. There is more direct influence by manufacturers and there are fewer multi-franchise dealers.” In 2002 Reynolds moved into markets “adjacent to automotive” with the acquisition of BoatVentures Inc., which serves boat dealers. Related markets have been identified as sports and recreation, which includes power sports, recreational vehicles, and marine dealers; commercial, which covers heavy-duty truck and heavy equipment dealers; and non-franchised auto retailers, such as independents and sales arms of car rental companies. These are natural extensions, notes Ventura, because they perform many of the same tasks as auto dealers and need many of the same systems, and there is a high incidence of “common ownership.” Auto dealers often own boat dealers or truck dealers, he adds. Copyright 2004 Thomson Media Inc. All Rights Reserved. http://www.thomsonmedia.com http://www.majournal.com