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The CEO of U.S. Auto Parts says connections and competitive knowledge are key for acquisitions.
Web retailers need to know the competition before they enter into acquisition talks, U.S. Auto Parts Network Inc. CEO Shane Evangelist told financing workshop attendees today at the Internet Retailer Conference & Exhibition 2011 in San Diego.
The two most important things retailers should ask themselves when scouting potential acquisition opportunities, he said, are:
- Can you pay more than anybody else?
- What’s the second guy going to pay?
“This is the heart of whether or not you should engage,” Evangelist said. “You better make sure before you go into it that you can pay more than anybody else.” Being well-connected in your industry and knowing what, if any, strategic advantages your company has over competitors that are also looking to acquire are both keys to answering those questions, he said.
U.S. Auto Parts, No. 59 in Internet Retailer’s Top 500 Guide, operates several online auto parts retail web sites including PartsTrain.com and AutoPartsWarehouse.com. The retailer has developed its business model with a key goal in mind of achieving growth through acquisitions, Evangelist says. With at least five acquisitions of online auto parts dealers in the last five years, the retailer is now able to negotiate a deal, close a deal and fully integrate another retailer’s web site, inventory and technology into the U.S. Auto Parts network in only eight weeks.
Evangelist credits much of this ability to the company’s efficient supply chain, which allows the retailer to have access to more than 2 million SKUs through drop shipments, a distribution network and sourcing product abroad. “We can essentially acquire any type of automotive e-commerce company and improve margins by making the supply chain more efficient.”
Also, in-house staffers have developed a flexible and scalable e-commerce platform that makes integrating companies into to the U.S. Auto Parts network relatively straightforward. Following an acquisition by U.S. Auto Parts, a retailer will have the same front-end appearance and search engine rankings on its web site, for example, but the back-end will be fully connected to the same network.
“We go in and we move the entire technology platform to ours,” he says. “Drop shipping, technology transactions, their catalog, everything.”
U.S. Auto Parts is at the tail end of working through integrating Whitney Automotive, which U.S. Auto parts purchased last summer for about $38.5 million. The deal included a $10 million warehouse and $15 million in inventory. “We got it for very cheap,” Evangelist says. “We could move quick because we knew how to digest the supply chain.”