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INTEGRATIVE INSIGHTS
ON EMERGING OPPORTUNITIES

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About the Author:
Terry Kiwala
Vice President
Terry Kiwala has worked in finance and investment for more than two decades and joined First Analysis in 2019. He works with entrepreneurs as an investor and as an advisor on growth transactions to help build leading enterprise productivity software businesses. He is a thought leader in his sector, having authored widely read industry research. He serves on the boards of PCMI, SmartCommerce and Visage. Prior to joining First Analysis, he was chief financial officer of Vokal, a software development company, senior vice president at Tribeca Flashpoint Media Arts Academy, and associate vice president at National-Louis University. Earlier, he was an investment banking analyst at Lehman Brothers. He earned a bachelor’s degree in economics and government from the University of Notre Dame. He is a CFA charterholder.
First Analysis Enterprise Productivity Technology Team
Terry Kiwala
Vice President
Corey Greendale
Managing Director
Richard Conklin
Managing Director
Matthew Nicklin
Managing Director
First Analysis Quarterly Insights
Enterprise productivity
Labor, vehicle supply tightness drives more opportuity for tech in auto dealers
August 9, 2021
  • The pandemic accelerated dealers' adoption of technology, initially to serve customers during lockdowns and more recently to help provide access to maintenance, parts and other offerings amidst limited availability of vehicles and service personnel.
  • Investing in technology to optimize non-vehicle sales and profit is a very compelling proposition for dealers given the need to address challenges related to the pandemic and the high profitability of add-on product and vehicle service sales.
  • We have observed rapid growth among two main groups of companies that provide this technology via SaaS platforms: customer engagement and diagnostic companies and service technician workflow optimization companies. We briefly profile these two areas and highlight interesting providers in each group.
  • As the pandemic has shined a spotlight on the value of vehicle service and add-on sales technology, a broadening range of acquirers and investors has shown interest in the sector as a way to expand their markets, better engage with customers, and increase sales. Strong balance sheets enabled robust M&A activity before the pandemic, and that activity has resumed following the shock of the initial lockdown.

TABLE OF CONTENTS

Includes discussion of AN, DRVN and 14 private companies

Pandemic a catalyst for dealers to use more, better tech

Add-on product and service sales' high profitability compels investment in tech

Labor shortages force dealers to innovate and do more with less

Two prominent groups of fast-growing SaaS solutions

A changing acquisition landscape

First Analysis Enterprise Productivity Index resumes outperformance

Enterprise productivity M&A pace appears to moderate in Q3

Q3 enterprise productivity private placement pace accelerates

Pandemic a catalyst for dealers to use more, better tech

As in many sectors, the pandemic has ushered in a new set of priorities for how auto dealerships operate their businesses. Dealerships, which were treated as an essential service during lockdowns, initially focused on adjusting workflows to continue to serve customers while ensuring customer and employee safety. As lockdowns eased, a new set of challenges emerged, including supply shortages that disrupted the traditional model of selling and servicing cars. With lot inventory down by as much as 44% year-over-year and with 33 days of inventory on supply as of the end of May according to Bloomberg, dealers increasingly focused on consumers' heightened need for service, parts and related offerings for their existing vehicles given the tight supply of new and used vehicles. These factors accelerated dealers' adoption of technology to streamline workflows, communicate with customers and optimize technician utilization.

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