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US firm set to acquire DCS

Competition for the UK and European DMS market has stepped up a gear with the announcement that US-based Reynolds and Reynolds has reached agreement with the board of DCS Group for a cash acquisition.

The transaction is valued at £21.7m, including net debt of £10.8m as of December 31, 2005. The acquisition is to be implemented by means of a court approved process and requires the approval of DCS shareholders and court sanction. If given the go-ahead, it is expected to become effective July 27. DCS shareholders would receive 31.5p for each DCS share.

Finbar O’Neill, president and CEO of Reynolds and Reynolds, and chairman of Reynolds and Reynolds UK, says: “The combination of the DCS customer base and product offering and Reynolds’ resources, brand and automotive retail experience will bring benefits to both groups’ customers. It will enhance Reynolds’ ability to offer its broad range of product solutions to the DCS customer base, which includes the majority of the top automotive manufacturers in Europe, and will also provide opportunities to market some DCS products to Reynolds’ customer base.”

Reynolds and Reynolds will not transplant its American model wholesale into Europe. Instead it will tailor its offering to meet demand from customers.

Doug Ventura, executive vice president, Reynolds International, tells AM: “We have the best of both worlds: the capital and product base that comes with a company on the scale of Reynolds and Reynolds, combined with the flexibility and relative autonomy to react to the specific needs of local markets.”

The company is looking to gain 30-35% market share across Europe, Middle East and Asia. In America it holds approximately 40% of the market, a similar share to rival ADP, which last year acquired Kerridge. Reynolds and Reynolds bought German DMS provider Incadea in 2003.

Ventura says: “Customer demands go beyond simple DMS provision. Certainly in the States there is now an expectation from both the dealer customer and OEM that their service providers offer what we call a whole dealer services portfolio. I believe the European market is likely to mirror this.”

He adds: “As dealer groups get larger, any acquisitions require consistent processes to be in place across the organization. There is incredible intellectual capital tied up in these businesses, but if that capital is not accessed and efficiently passed on, it just sits there.”

Following the acquisition, Reynolds will provide services to more than 15,000 dealers worldwide.

The AM view

First ADP and Kerridge, now Reynolds and Reynolds with DCS – the American software houses see Europe as easy pickings for growth. Dealers will see investment, but it’s likely to cost them more to upgrade their DMS. Bigger groups will benefit most.

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