Despite early indications that IronPlanet was to eventually go public, the company decided that the Ritchie Bros. plan was more desirable and a better investment for IronPlanet investors.
Ritchie Bros. Auctioneers Incorporated and IronPlanet have jointly announced that they have entered into an agreement under which Ritchie Bros. will acquire IronPlanet for approximately $758.5 million, subject to customary closing adjustments. The deal is expected to be finalized in the first half of 2017.
Following the announcement, Ravi Saligram, CEO of Ritchie Bros., and Gregory J. Owens, chairman and CEO of IronPlanet, spoke to Construction Equipment Guide (CEG) about what the future holds.
A Change in IronPlanet's Plans
Despite early indications that IronPlanet was to eventually go public, the company decided that the Ritchie Bros. plan was more desirable and a better investment for IronPlanet investors.
“After strong consideration of an IPO and combining with Ritchie Bros., our board unanimously agreed that the best outcome for IronPlanet's employees and shareholders was to combine with Ritchie Bros,” Owens said. “This combination recognizes the value of IronPlanet's proven technology platform, our unique IronClad Assurance and the enticing opportunity to combine the IronPlanet and Ritchie Bros. platforms to enable the companies to offer unprecedented choices to customers.”
According to Saligram, the new business is being treated as a merger, rather than an acquisition, and several of IronPlanet's key executives, including Owens, are coming over and joining Ritchie Bros. post closing.
“We highly respect and value the skill sets and expertise that their executives and employees bring. Their agility, innovation and technological prowess are great complements to our strategy to offer customers more sales options,” Saligram said.
“This is an acquisition based on doing the right thing for customers and driving future growth. We expect there may be some duplicate corporate expenses, such as insurance or external supplier costs, which we can also address to operate more efficiently,” he added.
Benefits to Long-Time Customers/Bidders
Until the deal closes, both companies will remain independent, but both Saligram and Owens believe that there will be benefits in the long-term to both of their customer groups.
“As one company, we will have the ability to provide customers around the world with unprecedented choices with respect to how they want to sell, buy and list equipment: when and where they want, onsite or online, reserved or unreserved,” Owens said.
“It's very positive for customers, because we are making the buying and selling experience more convenient and desirable,” Saligram said. “I think the true benefit of putting these brands together in a portfolio is that you extend the reach to customers by offering more choices. We will be offering choices for Ritchie Bros. customers who may not have used the IronPlanet model and likewise for IronPlanet customers who may not have used Ritchie Bros.' auctions model.
“The other side of it relates to technology sharing by both companies,” he added. “We have expertise bringing integrated live auctions online, whereas IronPlanet has a variety of formats to offer. We have a lot of expertise on the whole, over-the-road truck side and IronPlanet has a top-notch inspection system. The strengths of our separate companies will continue to manifest themselves after we merge to truly benefit our customers.”
Cat Auction Services Auctions
According to both Saligram and Owens, Ritchie Bros. will still offer Cat Auction Services sales at Caterpillar dealer locations
“Cat Auction Services live onsite auctions are big draws for our customers, especially good marketing for the Cat dealers,” Owens said. “We have every intention of continuing these live events. In fact, we are planning a western sale next March 13 to 15 in Las Vegas that we hope to build over time to the scale of our Florida Cat Auction Services event to reach customers on the west coast and dealers in the western side of the U.S. Ritchie Bros. has committed to continuing to run CAS Auctions under the Cat Auction Services brand.”
Owens said he doesn't anticipate any significant change in the frequency of Cat Auction Services events.
“I want to see them continue to grow in scale and sales volume. Larger events tend to attract more customers and we want to bring the same excitement and scale to the Las Vegas sale annually that we have in Florida in February,” he said.
To Reserve or Not to Reserve
Ritchie Bros. is known for its commitment to unreserved auctions; IronPlanet offers consigners the option to put a reserve on a piece of equipment. These are not expected to change under the new business model.
“Ritchie Bros. Auctions, which is our integrated live auction onsite, online brand, has been known for unreserved auctions and I do not see any change whatsoever there. We are very proud of that heritage and our buyers love it. It's a fantastic model with a lot of runway,” Saligram said.
The company also offers an online, reserved model, in its EquipmentOne brand, which, according to Saligram, uses a format similar to IronPlanet's bidding marketplace.
“Interestingly, a significant amount of [IronPlanet's] volume goes through the weekly auction that is actually unreserved, so they have different formats, both reserved and unreserved. We also have RBA Auctions, which are unreserved, and EquipmentOne, which has a reserve. All of this comes down to customer choice.
“There are different types of sellers, all with different ideas of what they value in terms of risk profiles at any particular point in time,” he said. “You have customers that might want to sell some pieces reserved and some unreserved. If it's a very specialized, unique piece then they may want to put it on a reserve format, whereas something that has a long track record they may choose to sell on an unreserved platform. It's all about the customer and providing them with even more choices, so they can decide what is best for them.
“In terms of the brand positioning, RBA, our primary model, our core model of live on site integrated with online will absolutely, positively remain unreserved,” Saligram added. “As for EquipmentOne, it is already reserved and when IronPlanet comes in the brand, it will stay as IronPlanet and it will continue to offer its formats.”
Will a Caterpillar Alliance Keep Competitors Away?
Ritchie Bros. has been selling Caterpillar products and equipment for many years and considers its recently announced strategic alliance a step toward taking that relationship to the “next level.”
“We are very proud of this strategic alliance that the combined company will have going forward. Having said that, we were very clear from the onset, and Caterpillar has the utmost respect for our perspective on this, which is we have to continue to have relationships with other OEM manufacturers and dealers,” Saligram said.
“That is based on a neutrality model to be like Switzerland. We have great relationships with other equipment manufacturers, be they Volvo, Komatsu, John Deere, JCB or other partners. I do not see this as any kind of issue. We are very comfortable that we will be able to not only build and grow our Caterpillar relationship, but also continue to build our relationships with other OEMs as well as their dealers.”
Owens agrees.
“What we see is when we have better late-model, lower-hour equipment to sell, we get more interested buyers, which raises demand and supports pricing. So, whether it is Cat, Volvo, John Deere, Komatsu, or any other make, we will continue offering desirable used equipment at competitive prices. We actually find that many customers desire specific brands of different types of equipment, so having different brands and types of equipment at an auction is actually more desirable for all.”
Mascus Acquisition
The acquisition of Mascus was on point with Ritchie Bros.' strategy of becoming a true multi-channel player and catering to the different sectors of the industry in terms of asset management and equipment disposition, according to Saligram.
“As you know, one of the major ways that people sell equipment is through private listings and Mascus is a leader of that in Europe — a strong brand with a lot of unique visitors per month. They not only provide advertising services and listing services for their customers, but also a lot of business-to-business tools.
“Both IronPlanet and Ritchie Bros. are transactional engines and Mascus is a listing service and we see that very much as part of the portfolio,” Saligram said.
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