CDK Global says it will acquire fellow information-technology company Auto/Mate Dealership Systems and integrate their respective product offerings.

CDK CEO Brian MacDonald calls it a “planned acquisition” and a “natural fit” that will help his company better serve smaller dealers.

Auto/Mate specializes in dealership-management system software. The firm’s client base consists of more than 1,000 new-car dealership sites.

The impending merger will result in “offering a broad range of products designed to improve dealership returns and the consumer experience,” says MacDonald.

Mike Esposito, president and CEO of Auto/Mate, is a former dealership general manager. His company’s trademark slogan is “Designed by car people for car people.” In the CDK-Auto/Mate merger announcement, Esposito cites his company’s “unparalleled customer service.”

CDK along with main competitor Reynolds & Reynolds are the industry leaders in automotive IT and digital services. CDK clients include several automakers and about 28,000 dealers in more than 100 companies.

CDK is the former ADP Dealer Services, a unit spun off by parent ADP three years ago.  

The sale is subject to customary closing and regulatory approvals. The transaction is expected to close this summer. Terms were not disclosed.

In a Q&A, WardsAuto speaks with MacDonald about the deal.

WardsAuto: What’s the thinking behind the acquisition?

MacDonald: We have been watching Auto/Mate and its success in the marketplace for some time. It decided to put itself up for sale. It was a very traditional sales process.

We serve the largest dealers in the land, all the way up to AutoNation (the No.1 dealership chain). But there is a segment of the market, smaller-footprint dealers, for which Auto/Mate is a best-in-class, fit-for-purpose product. We felt we could blend that with the power of our other products and bring those combined forces to a part of the market that’s a bit underserved.

WardsAuto:  What does Auto/Mate have that CDK wants the most?

MacDonald: Essentially that fit-for-purpose product for smaller dealers. It doesn’t have a website company like we have. It’s roughly a $20 million revenue company. They have limitations on investments they can make on internal IT and other things. As a $2 billion company, we make a lot of investments across our products and internal infrastructure.

WardsAuto:  Does this fill a gap in your product lineup?

MacDonald: Our core product is called Drive. It really powers automotive e-commerce in North America, up to the largest dealer groups.

We have smaller footprint dealers where Drive might not be the product for them. It might have more horsepower than they need. With the acquisition, we’re able to bring a complement of services to those dealers that aren’t available to them today, products that generally are available to only the multiple-store dealer groups.

WardsAuto:  Are there any concerns about overlap?

McDonald: Maybe a little bit, but we’ll work through that. Overlap doesn’t really make the top-10 list of things to work through.

WardsAuto: What would be on the top-10 list? Platform integration seems to be the usual suspect in such situations.

MacDonald: Yes, integration is hard in any merger acquisition. We’ve been working collaboratively with the Auto/Mate team for a number of weeks now on a pretty defined process. We hold weekly meetings on integration. It’s important to us and our dealers that we do this right.

WardsAuto:  Is it fair to say CDK will do more acquisitions soon?

MacDonald: That depends on how you define “soon.” But we’re open to acquisitions. They have to be the right thing strategically and financially.

We do a lot of work internally to make our products and services better, but at times there are just things you want to get from the outside.

So we’re open to acquisitions, yet we’re largely happy with the products and services we have today. But this acquisition speaks to CDK’s investment in the industry and our commitment to serve dealers large and small.

sfinlay@wardsauto.com