The December announcement that IronPlanet and Cat Auction Services are merging was the fruit of more than a year of discussions initiated by IronPlanet Chairman and CEO Gregory J. Owens. The union of the two heavy equipment auction houses is expected to be completed by early summer. The deal comes 15 years after the launching of IronPlanet and seven years after Owens took the company helm.
In a January interview with CEG, Owens pointed to a three-day auction sale in Florida in February where Cat dealers will have access to IronPlanet’s 1.2 million registrants in its buy base as an example of what the two companies can do together. The Feb. 11 to 13 event is billed as a joint auction by Cat Auction Services and IronPlanet and among the companies consigning equipment to the sale are 19 Caterpillar dealers.
IronPlanet has grown through acquisitions, partnerships and evolution of its online auction lineup of services. IronPlanet is the main company platform but also orbiting the equipment marketplace are TruckPlanet and GovPlanet. The former moves over-the-road trucks. The latter was created after IronPlanet bid successfully for an exclusive multi-year contract to sell U.S. Department of Defense surplus equipment.
Among the moves by Owens were the acquisition of Asset Appraisal Services to help with truck inspections, and the start-up of allEquip, which is an online “buy now” option for buyers wanting to add to their equipment fleets between auctions. Kruse Energy and Equipment Auctioneers was acquired in November. Finally, IronPlanet partnered last year with VeriTread transportation services to help customers move equipment to and from auctions.
“We are very pleased with all that we did in the last year,” Owens said, declining to say if other transactions are in the wings. “We always are looking at other deals out there.”
At live auctions, sellers and buyers amble through acres of machinery together or discuss the merits of Tier IV emission systems over lunch. Owens isn’t concerned that this social appeal of live auctions will ultimately limit the growth of virtual auctions, though he acknowledges that some sociability is sacrificed where moving cursors and clicking mice rule.
“But that is like those who said ebay wasn’t really going to grow, and now it is a $50 billion company. Or that Amazon wasn’t going to grow, now an $85 billion company. We will be holding some physical auctions in different cities, which will be chances to bring our buy base and seller base together. But the internet will be our primary growth vehicle.”
Owens describes live auction houses as “lifestyle businesses.”
“One of the things such businesses will continue to struggle with is bringing the global reach of the buy base to their auctions. The global market plays in favor of larger auction houses such as ours. Larger businesses are more attracted to larger auctions where they can sell their equipment at higher prices.”
On the other hand, global online auctioneers operating in a virtual realm are more challenged to deliver what feels like personal service. Voices at the other end of a telephone line or words in a text message are not quite the same as a slap on the back and face-to-face conversation.
The IronPlanet CEO said the impersonal nature of the internet is offset by efficiency: IronPlanet detailed inspection reports are thorough; its IronClad Assurance that purchased equipment will live up to its billing is at least as good as a buyer kicking the tires himself. In the end, such bottom-line virtues have persuaded many buyers that they can do their socializing in places other than auctions, according to Owens.
The numbers show that the IronPlanet online business model is effective. Gross merchandise value in 2007, when Owens took over, was $231 million. It is projected to be $1 billion this year. Registered users have jumped to more than one million from half that in 2009. The company holds North American auctions weekly and EU auctions monthly. At the North American sales events, half the bidding typically is from overseas and a third of bought items are shipped abroad.
Owens sees continued growth.
“Proliferation of business activity is the usual metric in measuring success and, as you see in our February auction lineup, we are already starting to see that. It will become very apparent that our position in the marketplace is much greater. You will continue to see us grow.”
He attributes growth projections to the willingness of IronPlanet executive leadership to try new things. Owens believes some competitors became complacent or relied too much on traditional business models.
“The market changes,” he said, “and you have to change with it. We are willing to look at things differently and to do things differently. There are many ways to sell equipment out there so we use a multitude of formats — the daily marketplace format, the live auction, the online format. We are always looking for ways to do things better.”
Where will IronPlanet be in another 15 years? The CEO said the company will be “substantially” larger.
“I have been fortunate to lead the company the last seven years and we are 8 to 10 times larger than we were when I got here. I would like to continue to grow at that level or even accelerate it. I am willing to put all my waking hours into making that happen.”
IronPlanet is young as auction services companies go. Sustaining its steep trajectory of growth is the challenge, which Owens believes can be met.
“We are making more moves in the marketplace and I think we are building tremendous momentum. I think it will continue to manifest itself in the market that we are the up-and-comer.”
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