CDK Global explained

CDK Global, Inc.
Type:Private
Traded As:NASDAQ:
Industry:Software
Key People:Brian P. MacDonald (president & CEO)[1]
Products:Software for automotive retail
Revenue: (2021)
Operating Income: US$425 million (2021)
Net Income: US$1.03 billion (2021)
Assets: US$2.71 billion (2021)
Equity: US$495 million (2021)
Num Employees:6,500 (2021)
Owner:Brookfield Business Partners
Footnotes:[2]

CDK Global Inc. is an American multinational corporation based in Austin, Texas, providing data and technology to the automotive, heavy truck, recreation, and heavy equipment industries.[3] [4]

The company has 37 locations in 25 countries[5] and its products are sold in over 100 countries,[4] however most of its customers are in the United States.[6] [7] In 2020, the company ranked 911 on the Fortune 1000 list of the largest United States corporations by total revenue.[8]

Products

CDK Global provides integrated information technology and digital marketing to the automotive, heavy truck, recreation, and heavy equipment industries.[9] The company's products help to integrate clients buying processes and include targeted advertising and marketing, as well as products for the sale, financing, insuring, parts supply, repair, and maintenance of vehicles.[10] Competitors include Reynolds and Reynolds, Tekion, and Dealertrack.[11]

History

The company has its origins as the Dealer Services division of Automatic Data Processing (ADP), which was formed in 1973 after ADP acquired National Inventory Control System, Portland OR (NICS) and Computer System Inc., Cincinnati, OH (CSI) providing computerized Accounting, Financial Reporting, Sales Analysis, Lease Accounting, Parts Inventory Control, Customer Relations, Management Systems for both Sales and Service, and Payroll Services for automotive dealerships.[12] [13] As ADP Dealer Services, the division was subsequently built up of more than 30 acquisitions completed over the next 41 years.[14]

On October 1, 2014, ADP Dealer Services division was spun-off to form the independent company CDK Global.[15] [16] The CDK in the company's name was inspired from different acquisitions; C from Cobalt Digital Marketing,[17] D from the original ADP Dealer Services business, and K from Kerridge Computer Company, a UK-based dealer management system (DMS) supplier acquired by ADP in 2005.[18] [19]

Notable acquisitions include BZ Results, winner of AutoSucess magazine's 2005 “Innovative Company of the Year” award,[20] by ADP in 2006.[21]

In May 2017, CDK Global announced its intention to acquire rival DMS supplier Auto/Mate Dealership Systems,[22] but the proposed acquisition was blocked by the Federal Trade Commission in March 2018 on the grounds that it would reduce competition in an already concentrated market.[23] [24]

In 2020, CDK Global announced the sale of its international operations (to be called Keyloop) to Francisco Partners, as an effort to focus more on its North American business.[25] [26]

On April 7, 2022, CDK Global agreed to be acquired by Brookfield Business Partners and institutional partners for a total enterprise value of $8.3 billion. The deal offered CDK investors $54.87 for each share held, representing a 30% premium.[27] [28] Brookfield completed the deal on July 6, 2022.[29] [30]

Antitrust lawsuit

In May 2017, CDK was sued, along with DMS supplier Reynolds and Reynolds, by data integration service provider Authenticom, which alleged that the two companies engaged in anti-competitive conduct and violated antitrust law by conspiring to block third-party access to their data systems in order to create a duopoly.[31] [32] In July 2017, District Judge James Peterson granted a preliminary injunction against CDK and Reynolds and Reynolds, ruling that there was sufficient evidence to find "the existence of a per se illegal horizontal conspiracy" between CDK and Reynolds and Reynolds to divide the data integration market between them and block competitors, and requiring the two companies to "cease blocking Authenticom" from providing "data integration services to dealers who authorize Authenticom to provide this service."[33] In November 2020, CDK settled its lawsuit with Authenticom, agreeing to make a one-time cash payment to Authenticom.[34]

June 2024 ransomware attack

On June 19, 2024, CDK experienced a ransomware attack that took most of its services offline, disrupting thousands of car dealerships across the US and Canada.[35] An Eastern European and Russian hacker group, thought by security researchers to be BlackSuit, claimed responsibility and demanded tens of millions of dollars in ransom.[36] On June 21, CDK paid $25 million in bitcoin to a cryptocurrency account connected with BlackSuit, and on June 23, began the process of restoring services, later advising that the work would not be completed before June 30.[37] [38] By July 4, access for nearly all dealers had been restored.[39]

Shares in CDK's parent company lost over 5.7% value in the wake of the attack,[40] while share prices of large auto dealers Sonic, Group 1 and AutoNation dropped up to 4.4%.[41] JD Power estimated that due to the outage, U.S. retail unit sales in June 2024 would decrease by up to 7.2% from June 2023.[42] At least eight lawsuits alleging negligence were filed against CDK by dealerships whose operations were affected by the outage.[43]

Notes and References

  1. Web site: Our Leadership | CDK Global. www.cdkglobal.com.
  2. Web site: CDK Global Inc. 2021 Annual Report (Form 10-K) . August 18, 2021 . U.S. Securities and Exchange Commission.
  3. Web site: About | CDK Global. www.cdkglobal.com.
  4. Web site: June 27, 2024 . CDK Global Inc . dead . https://web.archive.org/web/20220430122344/https://www.reuters.com/markets/companies/CDK.O/ . April 30, 2022 . June 27, 2024 . Reuters.
  5. Web site: Locations . craft.co. 2021-04-24.
  6. Web site: Do Traders Think CDK Global Inc (CDK) Can Keep Climbing Tuesday?. www.investorsobserver.com.
  7. Web site: CDK Global commands 9.79% market share in Automotive. enlyft.com.
  8. Web site: CDK Global | 2020 Fortune 500. Fortune.
  9. Web site: CDK | CDK Global Inc. Company Profile & Executives - WSJ. www.wsj.com.
  10. Web site: CDK Global Reports Strong Revenue Growth and Margin Expansion for the First Quarter of Fiscal 2017 and Increases Full Year Earnings Outlook | CDK Global Inc.. investors.cdkglobal.com.
  11. Web site: Gardner. Greg. Tekion Sees The Cloud As Key To Streamlining Auto Retailing. Forbes.
  12. Book: Cars and Trucks January-December 1973: Vol 45 Index. 1974-01-01. National Automobile Dealers Association . 5. English.
  13. Book: Vendor Profile: A Publication from INPUT's Vendor Analysis Program. Input Reports and Research Archive Project. 1976 . 611.
  14. Web site: October 18, 2014. CDK Global: A Spin-Off Worth Avoiding. 2021-04-24. seekingalpha.com.
  15. Web site: CDK Global Inc - Company Profile and News. Bloomberg.com.
  16. Web site: EX-99.1. 2021-09-01. www.sec.gov.
  17. Web site: Staff. PE Hub. 2010-07-12. ADP Buying Cobalt Group for $400 Million. 2021-09-01. PE Hub. en-US.
  18. Web site: 2014-08-19. ADP Reveals Post-Spin Name of Dealer Services Business. 2021-09-01. Auto Remarketing. en.
  19. Web site: ADP Dealer Services under new name - CDK Global. www.am-online.com.
  20. News: Luck . Patrick . December 2005 . AutoSuccess' Innovative Companies of the Year . dead . https://web.archive.org/web/20071130235113/http://www.autosuccess.biz/mag/Dec05.pdf . 2007-11-30 . 2024-06-29 . AutoSuccess . Systems Marketing, Inc. . 8–10.
  21. Web site: Banks . Cliff . 2006-03-17 . ADP Acquires BZ Results . live . https://web.archive.org/web/20220727142013/https://www.wardsauto.com/news-analysis/adp-acquires-bz-results . 2022-07-27 . 2024-06-29 . Ward's.
  22. Web site: Finlay . Steve . 2017-05-24 . Automotive Info Tech Giant CDK to Acquire Auto/Mate . https://web.archive.org/web/20240627202612/https://www.wardsauto.com/dealers/automotive-info-tech-giant-cdk-to-acquire-auto-mate . 2024-06-27 . 2024-06-27 . . en.
  23. Web site: 2018-03-20 . FTC Blocks CDK Global's Acquisition of Auto/Mate . live . https://web.archive.org/web/20230329162550/https://www.fi-magazine.com/323799/ftc-blocks-cdk-globals-acquisition-of-auto-mate . 2023-03-29 . 2024-06-27 . F&I and Showroom . en-US.
  24. Web site: 2018-03-20 . FTC Challenges CDK Global, Inc.'s Proposed Acquisition of Competitor Auto/Mate, Inc. . live . https://web.archive.org/web/20230922012105/https://www.ftc.gov/news-events/news/press-releases/2018/03/ftc-challenges-cdk-global-incs-proposed-acquisition-competitor-automate-inc . 2023-09-22 . 2024-06-27 . Federal Trade Commission . en.
  25. Web site: CDK Global completes $1.45 billion sale of international unit. March 1, 2021. Crain's Chicago Business.
  26. Web site: CDK Global to Sell International Business to Francisco Partners for $1.45 Billion. finance.yahoo.com. 30 November 2020 .
  27. Web site: Brookfield to buy automotive software maker CDK Global for $6.41 bln . April 7, 2022 . . Balu . Nivedita . Mathews . Eva.
  28. Web site: 2022-04-07 . CDK Global to Be Acquired by Brookfield for $54.87 Per Share in Cash . 2022-04-07 . www.businesswire.com . en.
  29. Web site: 2022-07-06 . CDK Completes $8.3 Billion Sale to Brookfield . 2022-08-07 . www.paulweiss.com/ . en.
  30. Web site: 2022-07-22 . CDK Global completes sale to Brookfield—what does this mean for dealer partners? . 2022-08-07 . www.cbtnews.com/ . en.
  31. News: Lutz . Hannah . 2017-05-02 . Reynolds, CDK hit by another antitrust lawsuit . live . https://web.archive.org/web/20220814002840/https://www.autonews.com/article/20170502/OEM06/170509940/reynolds-cdk-hit-by-another-antitrust-lawsuit . 2022-08-14 . 2024-06-27 . Automotive News.
  32. Web site: Gnau . Thomas . 2017-07-18 . Federal judge rules against Reynolds and Reynolds . live . https://web.archive.org/web/20221129111548/https://www.daytondailynews.com/business/federal-judge-rules-against-reynolds-and-reynolds/hNuylUEtuV4bbjhd1fFDtK/ . 2022-11-29 . 2024-06-27 . . English.
  33. Web site: Kamal . Tariq . 2017-07-18 . Authenticom Granted Preliminary Injunction in CDK, Reynolds Lawsuit . live . https://web.archive.org/web/20220517141711/https://www.fi-magazine.com/323304/authenticom-granted-preliminary-injunction-in-cdk-reynolds-lawsuit . 2022-05-17 . 2024-06-27 . F&I and Showroom . en-US.
  34. News: VanHulle . Lindsay . 2020-11-09 . CDK settles antitrust lawsuit over data access . live . https://web.archive.org/web/20201109050811/https://www.autonews.com/retail/cdk-settles-antitrust-lawsuit-over-data-access . 2020-11-09 . 2024-06-27 . Automotive News.
  35. Web site: Robledo . Anthony . Schulz . Bailey . Lin-Fisher . Betty . Auto dealer system updates to take 'several days' following CDK hack, ransom demand . 2024-06-23 . USA TODAY . en-US.
  36. Web site: Visconti . Zachary . 2024-06-24 . Dealership system hackers seemingly identified as restorations begin . 2024-06-25 . TESLARATI . en-US.
  37. News: June 23, 2024 . CDK Global begins to restore systems after cyber hack hits thousands of retailers . June 23, 2024 . Reuters.
  38. Web site: 2024-06-25 . CDK Global says outages to continue through June 30 after supplier hack . 2024-06-26 . Yahoo News . en-AU.
  39. Web site: Maruf . Ramishah . 2024-07-02 . CDK Global says 'substantially all' dealers back online after crippling hack CNN Business . 2024-07-04 . CNN . en.
  40. Web site: Software company plans to pay tens of millions in ransom to hackers who crippled car dealerships across North America . 2024-06-25 . Fortune . en.
  41. Web site: Car Sellers Warn Investors of Possible Financial Hit From Cyberattack . 2024-06-25 . www.bloomberg.com.
  42. News: Lareau . Jamie . June 27, 2024 . June new vehicle sales expected to take hit from cyberattack on dealer software . June 27, 2024 . Detroit Free Press.
  43. Web site: 2024-07-03 . CDK Global faces multiple lawsuits from dealerships crippled by cyberattack - CBS News . 2024-07-04 . www.cbsnews.com . en-US.

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