If CDK were for sale, who would buy it?

[Zhendrix]

How do you think Tekion investors feel right now post CDK announcement?

 

[Chris Cachor]

I hope they feel it's a smart decision. Brian K came into CDK promising a lot of R&D around Fortellis but not much has really materialized there. Really, he carved up the company and sold the DMS business along with the Roadster acquisition. So rather than becoming something more of a Tekion, they've stuck to the monopoly "monolith" model. I think the Tekion model is better, but only as long as the partner software is really great.

FWIW, Advent is a major investor in Tekion, and they also purchased the Digital business from CDK, now known as Sincro Digital.

 

[Zhendrix]

I hope they feel it's a smart decision. Brian K came into CDK promising a lot of R&D around Fortellis but not much has really materialized there. Really, he carved up the company and sold the DMS business along with the Roadster acquisition. So rather than becoming something more of a Tekion, they've stuck to the monopoly "monolith" model. I think the Tekion model is better, but only as long as the partner software is really great.

FWIW, Advent is a major investor in Tekion, and they also purchased the Digital business from CDK, now known as Sincro Digital.

That's great insight. I did not know Advent was a major investor. Quick assumption made from the $8.3B selling price with thousands of dealers vs. $3.5B recent Tekion valuation with hundreds.

 

[Ebenn]

Wait for the cuts to start happening. If you read the Brookfield website (https://bbu.brookfield.com/ ) you will see in writing
that Brookfields stated objective is a return of 15 to 20 per cent annually on any investment "Brookfield Business Partners' investment objective is to generate long-term returns of 15%-20% on our investments." At 8 billion they need 1.2 to 1.6 bil annual return. CDK earnings have been in the 450 mil range if I am not mistaken. Connect the dots and pressure will be on management to squeeze more out of their current customers and Price increases and layoffs are the only answer. Correct me if the math is incorrect. Solera just did it to Socket/Automate...... Hope its not the case because there are good people there but we've seen this before.

 

[Chris Cachor]

Wait for the cuts to start happening. If you read the Brookfield website (https://bbu.brookfield.com/ ) you will see in writing
that Brookfields stated objective is a return of 15 to 20 per cent annually on any investment "Brookfield Business Partners' investment objective is to generate long-term returns of 15%-20% on our investments." At 8 billion they need 1.2 to 1.6 bil annual return.

I'm seeing 2021 revenue @ $1.67B and '21 net earnings around $250M so they're right around 15% at the moment. I think cuts are inevitable, though, just from the current macro environment. Will be interesting to watch how the Roadster acquisition unfolds and how they respond to Tekion's model.