I’ve fielded a few calls and e-mails from those who know I was the driving
force behind the creation of URG in 1996 and the push to build Pinnacle
after ADP/Hollander purchased AutoInfo.
Solera Acquires Actual Systems: What Now?
Seems like Déjà vu. Sixteen years ago, my yard was the largest single user of AutoInfo software, and I was upset when ADP purchased AutoInfo and announced they would not be upgrading it.
Solera, the company that owns Hollander, has announced its acquisition of Actual Systems (ASA), owner of Pinnacle. The sale has been announced but has not closed yet because it takes time for the acquiring company to finalize the purchase agreement, do due diligence, and get regulatory approval. Last time, ADP “forgot” to answer the question on the regulator’s form that asked how much of the market for yard management software they would control after the acquisition.
We thought too much, so we started URG to create a new management information system (MIS) for auto recyclers. A lot went into Pinnacle. Many contributed capital and time that could have been given to their businesses. It was an unprecedented effort and will never be repeated because it would be prohibitively expensive and offer no way to recover the investment.
To create Pinnacle, URG members contributed over $6mm and became part of a joint venture with Actual Systems. Some of URG’s charter members even invested additional money when URG funds were not enough. URG and the developer settled a dispute over ownership of Actual Systems in 2001. URG lost. ASA became 100% owned by Peter Riddle, who recently sold it to Solera.
Though Peter cooperated with URG and continued to develop the system for more than a decade, I regret that control of the software is not in URG’s hands because of how much the recyclers put in to it to create it. Few really understand how much time, money and effort.
Recyclers gave a lot, but so did Peter. He gave 16 years of his life to Actual Systems and Pinnacle. He owns it and it was his to sell. We may wish that he had offered it to URG, but he may have gotten an offer too good to refuse. As believers in free enterprise, how can we condemn him for taking the money? Nevertheless, we ought to ask some questions:
- Is the buyout good for industry? I think not. We need competition; it’s why Pinnacle was created.
- Is it best for Hollander users? Perhaps. Buying Pinnacle is a quick way to make Hollander better.
- Will it be good for Pinnacle users? Probably not. Solera probably will not work as closely with recyclers as Actual Systems did.
- Is the combination legal? I don’t know. I think that the same anti-trust issues that triggered the unwinding of the first transaction by ADP are still in play for this one.
However, Pinnacle isn’t going away. I am 100% confident of that.
Consider the buy from Solera’s point of view:
- Solera has the money and has purchased competitors in vertical markets it serves.
- Solera is much larger than Actual Systems and has strategic reasons for the buy but needs to keep Pinnacle as a going concern to justify the purchase, so Pinnacle will not be going away anytime soon.
- Solera can use Pinnacle to improve Hollander.
- Solera wanted control over the data generated by recyclers. With ASA, Solera controls the data of all of the best recycling operations, except LKQ. Controlling the data and the interchange is going to yield huge opportunities for Solera if they manage it well (well may not be the same as fairly).
- Solera has strategic reasons. I believe this is by far the most important. Solera sees the potential to expand worldwide. Recyclers. Aftermarket. Insurers. Collision repair. Interchange license fees. Tolls on sales using the interchange, like eBay. Interchange doesn’t exist in the rest of the world, so insurers don’t have access to data to reduce the severity of claims, and collision repair shops don’t have access to recycled parts. Imagine the auto recycling business of 1980. Eighty percent retail. No insurance estimates using recycled parts. Think what it would mean if your company had the ONLY interchange and access to the data worldwide? Solera is thinking big. VERY BIG. There is no secret “gotcha” for Pinnacle users; it’s simple capitalism.
I understand that Solera’s reasons do not change my opinion that they have created an unlawful monopoly which is not good for our industry. Consumers will see less competition, as will recyclers, insurers, collision repairers and other stakeholders in the used auto parts industry.
Hollander has always maintained that it owns the data that users of the system generate. Now that its parent owns the only viable competitor, yard owners will have no choice about what software to use and no choice about giving up control of the data to Solera. Competition assured more access and choices. URG enjoyed control of the data because it collaborated with ASA to create the system by and for recyclers. It is hard to believe that without competition, recyclers will be treated as well.
If URG members do not want to lose control of Pinnacle, they should unite and demand that Solera do what’s right. Recyclers can’t count on regulators to force Solera to divest ASA, but they should be ready and united if that happens.
URG should start a special campaign to raise a hundred dollars a month for a year from each of its members so that URG is prepared to deal with events as they unfold. Every member can afford to give this small amount and doing so would give URG $500k to represent the industry’s interests. If you want to help protect competition in yard management software and help URG be in a position to represent your interests, contact Michelle Alexander, the URG manager.
At the same time, we should be pragmatic and ready to respond favorably whenSolera offers an olive branch. We should be willing to listen and to give Solera the opportunity to demonstrate respect for URG’s sovereign status and for users of Pinnacle.
It’s not going to be easy. It’s going to require preparation, strong support from a unified URG membership, deft maneuvering by URG’s leadership and Solera’s willingness to provide the kind of support Pinnacle deserves. It is a tall order, but still possible.
Remember only you can make business great!
Ron Sturgeon, business owner, consultant and peer bench marketing leader, combines over 35 years of entrepreneurship with an extensive resume in consulting, keynote speaking and business writing. Ron can be reached at 5940 Eden, Haltom City, TX 76117, 817-834-3625 or by email at rons@MrMissonPossible.com.