I’ve fielded a number of calls and emails from those that knew I was the driving force to concerns in 1996 concerning the
unlawful acquisition of AutoInfo by ADP/Hollander.
THE SKY IS NOT FALLING-PINNACLE ISNT
GOING AWAY!
Seems like Déjà vu. I was the impetus behind URG and Pinnacle, when ADP/Hollander
unlawfully acquired Auto Info in 1996. Sixteen years have passed; I can’t
believe it. My operation was the largest single user of AutoInfo software at
the time, and I was not happy when ADP announced they wouldn’t be upgrading the
software.
Now Solera, who owns Hollander, has announced the acquisition of Actual Systems (ASA),
owner of Pinnacle. It’s my understanding that the transaction has been
announced, but has not closed yet, which would be typical as the acquiring company
reaches a definitive purchase agreement but continues dilligence and regulatory
approval if required. On the last transaction, ADP “forgot” to answer the
question on the approval form, where they were to state the percentage of the
market they would control before and after the acquisition.
URG was formed to create a new management information system (MIS) for auto recyclers
that genuinely met their needs. A lot of blood, sweat, and tears went into
Pinnacle, by recyclers, for recyclers. Many of my colleagues contributed
heavily to the effort to make it all happen.
They initially contributed capital and time, appointing a subgroup to
design the system from the ground up, and the members of that group met many
times. Its members gave a lot of time to creating Pinnacle that could have been
devoted to their businesses. It was an
unprecedented effort, a Herculean Lift. NEVER TO BE REPEATED. (The fact is that
it will never be repeated, as there is no financial incentive or ROI
opportunity. The prohibitive cost to field a new competitive system assures
that competition has been eliminated) More than a few of these individuals
suffered financially from the hard work and diversion that this effort
required, but they kept this dream of Pinnacle alive. The dream became a reality
after URG members contributed over$6mm and became part of a joint venture with
Actual Systems. Some earlymembers even invested additional money in the venture when URG funds were not
enough to keep the project afloat. That money and effort was lost in a dispute
over ownership of the joint venture. As a result of binding arbitration in 2001,
Actual Systems became 100% owned by Peter Riddle, who recently sold it to Solera.
Though Peter was a good steward of the software, cooperating with URG and recyclers and
continuing to develop the system, it is sad that recyclers lost control of
Pinnacle. Few know of the early struggles to create Pinnacle, financial,
strategic and philosophical.
Yet, free enterprise and Capitalism have endured. Surely we couldn’t expect that Peter
would never sell? Peter gave 16 years of his life to Actual Systems and
Pinnacle, not to belittle the human and financial capital of URG members and
other stakeholders. He decided, at his sole discretion, that it was time.
Perhaps he should have offered it to URG, but didn’t. A large pile of money
most likely influenced that decision, but who can condemn him for taking the
money? It was never anything but a business for him, with high quality business
friends, and a mutual goal to produce the best yard management software. (That
was achieved, by the way)
- Was it the best for the industry? I think not, we need competition; it’s why
Pinnacle was created. - Was it best for Hollander users? Perhaps, what better way to gain access to all the
latest technologies needed to make Hollander better? (though many Hollander
users would tell you that their system is perfect as is) - Was it the best for Pinnacle users? It seems unlikely that Solera will work as
closely with recyclers as Actual Systems did, but (almost) nothing is forever.
Solera will do as they see fit, let’s hope that will be to continue the
continuous mantra of improvement that Pinnacle enjoys, much more so than
Hollander users have seen. Without improvement, why would steady improvement be
needed? - Was it lawful? I don’t know, but it seems to me that the same anti-trust issues
remain that triggered the unwinding of the first transaction by ADP.
However, Pinnacle isn’t going away. I am 100% confident of that.
Why did Solera buy Actual Systems?
- They have money for acquisitions, and have been openly acquisitive, especially in
vertical markets that are strategic to their growth. - They bought a solid profitable company, but the size of the company and profits is tiny
compared to their corporation, this acquisition was strategic. Notwithstanding
that, they needed to justify the purchase financially. They did not buy the
company to disband it and do away with Pinnacle. That’s a certainty. - They wanted the technologies and tools to improve Hollander and/or to offer upgrades
to Hollander users. - They wanted more control over the data. With this acquisition, they likely control
70 percent or more of the data generated by recyclers in my estimation, and for
sure they control all the data and the systems of the largest, highest quality
operators, except for LKQ. The Internet is in its infancy as well, and
controlling the data and the interchange is going to yield huge opportunities
if managed properly. (That may not always be the same as managed fairly,
however) - Strategic reasons. I believe this is far and away the main reason. They see a huge
potential to expand worldwide. Recyclers. Aftermarket. Insurers. Collision
repair. Interchange license fees. Tolls on sales using the interchange, like
Ebay. DATA. I studied this about 10 years ago. Did you know that interchange doesn’t exist in the rest of the
world? As a result insurers don’t have access to data to reduce severity of
claims, and collision repair shops don’t have access to recycled parts to
repair cars. Imagine the auto recycling business of 1980. Eighty percent
retail. No insurance estimates utilizing recycled parts. Think what it could
mean if your company had the ONLY interchange and access to the data worldwide?
Solera is thinking big. REAL BIG. There is no secret “gotcha” for Pinnacle
users, simple capitalism at its best. Or worst.
Now this doesn’t mean I don’t regret this happening, and it doesn’t mean that I think
this acquisition was anymore lawful than the last. The monopoly created is the
same, and it’s hard to fathom that the market share they now control isn’t a
monopoly. Consumers will see less competition as will recyclers, insurers,
collision repairers, and other stakeholders in the automotive industry. It’s also naïve to think Solera won’t flex
that monopoly control muscle, in the interest of growth and profits. Again,
Capitalism at its best. Or worst.
Hollander has always been proprietary with vendors that wanted access to the users’
systems and data (it’s just business), but with no competition, users are less
likely to have options on who they do business with, including where and how
they share data and 3rd party programs with 3rd parties. Competition
assured more access and choices. Urg enjoyed control of their
system due to the collaborative work with ASA on a system built by recyclers
for recyclers, managed by recyclers, as well as desire to compete with Hollander
users in the marketplace. It’s hard to believe that without those dynamics
things will be the same.
Ultimately if URG members do not want to lose control of Pinnacle, they should unite and
stand to demand that Solera do what’s right. There is strength in numbers. In
the last unlawful acquisition by ADP, the Justice Department sued and ADP was
force to divest Auto Info back into the marketplace. Though recyclers can’t
count on that again, they should be ready to take control of Pinnacle if that
opportunity presents itself. And standing together is the only hope of being
prepared for that possibility.
It’s nice to hope Solera will be the same steward as the prior owner of the software in the
absence of any real competition. URG should consider starting a special campaign
to raise a modest amount of capital from its members so that URG is prepared in
case there are legal issues to resolve and to have resources in place in case
the need arises and to be on a sure footing for potential opportunities.
Perhaps $1,200 per member, $100 per month for 12 months. Surely all members
could afford this. Such an effort would raise about a half million dollars and
assure that URG is here to stay, acting for recyclers’ interests, which don’t
always coincide with business entities’ goals. Their voice would be credible,
and they would manage from a position of strength. URG members working together would truly be
capitalism at its best. URG’s management board will certainly want to take this
opportunity to create even more unity and focus
If you feel strongly about supporting an effort to keep Pinnacle at the top, contact
Michelle, the URG manager. And remember, you can only achieve that goal by
working together. What won’t work is sour grapes and moaning. Be pragmatic,
ready, and professional. Solera would surely like to avoid legal or operating
issues with its recently acquired customers. URG needs to respond favorably to
the olive branch Solera will no doubt offer, and give Solera the opportunity to
demonstrate respect for URG’s sovereign status, even though Solera now controls
the software that URG helped create.
By leveraging its members to work with Solera to continue to develop Pinnacle while also continuing to
look out for recyclers’ interests, URG can be ready to make the best of the new
reality, assuming no alternatives. It’s
not going to be easy and it’s going to require preparation, strong support from
a unified membership, deft maneuvering on URG’s part and willingness on the
part of Solera to provide the kind of support Pinnacle deserves. A tall order,
but not impossible.