CDK Global outage impact on car dealerships - Erin Kerrigan

Written by:
CBT News
June 25, 2024

In light of the ongoing CDK Global outage, we sat down with Erin Kerrigan, founder and managing director of Kerrigan Advisors, to discuss the ramifications of this disruption for car dealerships nationwide. Kerrigan, whose company advises hundreds of dealers primarily on buy-sell transactions, shared her initial reactions, industry concerns, and the potential long-term impacts on the market.

Takeaways

  • Kerrigan emphasized the integral role of Dealer Management Systems (DMS) in facilitating buy-sell transactions. With CDK’s outage, the complexity and dependency on DMS become apparent, highlighting the operational difficulties faced when these systems go down. She shared, “In a buy-sell, you have lots of moving pieces and parts, and you’re trying to tabulate all the numbers; you rely on the DMS on every level.”
  • The disruption has spotlighted the risks associated with CDK and Reynolds’s dominance in the DMS market. Kerrigan noted that the incident underscores the need for more competition in the industry to mitigate such risks. She pointed out, “It shines a bright light on the risk factor of having a duopoly… most industries have a little more competition.”
  • Kerrigan discussed the potential long-term damage to CDK’s reputation, exacerbated by prior complaints about service quality following its acquisition by a private equity firm. This incident could accelerate the shift of some dealers towards alternative DMS providers like Reynolds. She observed, “I have heard complaints from dealers about CDK… I don’t think this is really good for CDK.”
"I think that we have bad actors coming from states that are not friendly to our country, that have created an industry in effectively hacking U.S. businesses with these terrorist-like attacks on our data." – Erin Kerrigan

About Kerrigan Advisors

Kerrigan Advisors is the premier sell-side advisor and thought partner to auto dealers nationwide. The firm advises the industry's leading dealership groups, enhancing value through the lifecycle of growing, operating and, when the time is right, selling their businesses. Kerrigan Advisors has represented some of auto retail's largest transactions and advised more of the largest dealership groups in the US than any other buy/sell firm in the industry. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, accounting, finance and real estate, the firm does not take listings, rather they develop a customized approach for each client to achieve their personal and financial goals. In addition to Kerrigan Advisors' sell-side advisory and capital raising services, the firm also provides a suite of consulting services including growth strategy, market valuation assessments, capital allocation, transactional due diligence, open point proposals, operational improvement and real estate due diligence.

Kerrigan Advisors monitors conditions in the buy/sell market and publishes an in-depth analysis each quarter in The Blue Sky Report®, which includes Kerrigan Advisors' signature blue sky charts, multiples, and analysis for each franchise in the luxury and non-luxury segments.—To download a preview of the report, click here.—The firm also releases monthly The Kerrigan Index™ composed of the seven publicly traded auto retail companies with operations focused on the US market. The Kerrigan Auto Retail Index is designed to track dealership valuation trends, while also providing key insights into factors influencing auto retail.—To access The Kerrigan Index™, click here.—To read the—2023 Kerrigan OEM Survey, click here.—Kerrigan Advisors also is the co-author of NADA's Guide to Buying and Selling a Dealership.

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