From 2004 to 2008, the number of vehicles sold at auctions in the U.S. ranged from 9.4 million to 9.7 million per year. And there are no signs that this will change.
It's certainly great news for Kar Holdings, which is the number two auction operator in the space. Now, the company has filed to go public (here's a profile on the deal).
Kar has 214 physical auction locations as well as a variety of websites (which allow for real-time auctions). Through this system, the company facilitated the sale of more than 3.2 million cars last year.
In fact, Kar gets fees from both buyers and sellers. Then again, the company provides services like inspecttions, storage, titling, floorplan financing, and so on.
For the year ended June 30, 2009, revenues came to $1.722 billion and adjusted EBITDA was $371.8 million. Yes, this is a nice cash flow margin. Keep in mind that Kar has fairly low maintenance capital expenditures and working capital requirements (for example, the company does not take title to cars, which is a big cost savings).
The lead underwriter on the deal is Goldman Sachs (NYSE: GS). Also, Kar has a variety of private equity investors, which include Kelso & Company, GS Capital Partners, ValueAct Capital and Parthenon Capital.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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