This podcast is for informational purposes only and does not constitute an advertisement. Views expressed are those of the individuals and not necessarily the views of Thoma Bravo or its affiliates. Thoma Bravo funds generally hold interest in the companies discussed. This podcast should not be construed as an offer to solicit the purchase of any interest in Thoma Bravo fund.
The conversation then broadens to include what it was like to navigate a merger during a global pandemic and how to put the right people in the right leadership positions. You’ll also hear insights on the latest auto trends, including electric and autonomous vehicles, connected cars, and shifting retail models.
AIR DATE:
November 16, 2023
RUN TIME:
39:50
Transcript
SCOTT CRABILL:
Well, if the auto companies want you to be bigger than you are, you've done them a service because you've got 300 million in revenue when we bought J.D. Power. Today, we're approaching 900 million.
DAVID HABIGER:
Yeah.
SCOTT CRABILL:
How'd you pull that off?
DAVID HABIGER:
Well, you guys were helpful. Thank you for the advice and capital, and a lot of this does become a number-crunching exercise.
DISCLAIMER:
This podcast is for informational purposes only and does not constitute an advertisement. Views expressed are those of the individuals and not necessarily the views of Thoma Bravo or its affiliates. Thoma Bravo funds generally hold interest in the companies discussed. This podcast should not be construed as an offer to solicit the purchase of any interest in any Thoma Bravo fund.
ORLANDO BRAVO:
Welcome to Thoma Bravo's Behind the Deal. I'm Thoma Bravo founder and managing partner, Orlando Bravo. And that was Thoma Bravo managing partner Scott Crabill speaking with David Habiger, President and CEO of J.D. Power. J.D. Power is among the highly recognizable brands Thoma Bravo has acquired. Thanks to their industry awards, the J.D. Power name is well-known, but we believe their secret strength is that they are a data powerhouse for all things automotive. As you'll hear in this episode, the Thoma Bravo J.D. Power partnership has played a significant role in bringing together a fragmented industry. Thoma Bravo's deal with J.D. Power is a case study in leveraging acquisitions to create more value. By acquiring J.D. Power shortly after acquiring Autodata, we were able to consolidate the data silos in the automotive industry. This offered a big value add for customers, allowing J.D. Power to expand both its offerings and its customer base. So today you'll hear everything that went on behind the deal of this investment from Scott Crabill, our deal lead and managing partner at Thoma Bravo, followed by his conversation with J.D. Power President and CEO, David Habiger.
SCOTT CRABILL:
I'm happy to be back for another episode of Thoma Bravo's Behind the Deal. On today's episode, I'll be talking with David Habiger about how Thoma Bravo has worked with J.D. Power to deepen customer insights and expand to more innovative offerings. My name is Scott Rabble. I'm a managing partner at Thoma Bravo. I have been with the firm for 22 years. I joined in mid 2002, and I am based out of our San Francisco office. I'm one of the six managing partners of the firm. I spend most of my time co-leading our application software investing effort, and primarily focused on our flagship largest buyout fund.
J.D. Power is a company that is well-known to most folks. In fact, I think 90% plus of consumers know that brand. It's an incredible brand. So if you see an ad where the Chevy Silverado has been named the highest ranked large heavy duty pickup truck and new vehicle quality by J.D. Power, that is the business that they're most known for. They do syndicated studies, benchmarks, performance rankings, and they give out awards and license those awards to brands mostly in the automotive space. That's where they started. They've been in business for 50 years. They've expanded that awards business and the research business into financial services, insurance, but that's really only about 25% of J.D. Power's business. Most of their business, and it's a little bit less, well-known, the other 75% are data, software, and technology products around the automotive space.
So they have 14 data sets that they sell, both as data sets and as insights that are derived from those data sets, and then they have a number of software products that they build on top of that database and intellectual property, and that they sell into automotive OEMs, so manufacturers, into dealers, into automotive websites, into insurance companies, that really power all of the transactions that happen in the automotive space. It's a really, really important technology provider to the automotive sector.
The story of our participation in the space actually happened before we acquired J.D. Power, when we acquired a business called Autodata. We bought that business in mid 2019, and that was really our initial platform in the sector. We were excited to be in the automotive technology space because it's a large and growing space. We really like vertical market technology providers that power the business of the underlying industry that they're involved with. And in this case, we were investing in a company that sold mostly data products as opposed to only software products, so it's a little bit unique to us, but the auto space is one of the largest users of data in the ecosystem of any vertical. J.D. Power today is about a billion-dollar business, and there are very few verticals that can support a data business of that size, and there are a few of them in the automotive space, so we were really excited about the sector in general.
We liked that it was a very fragmented sector. We could come in, make an acquisition, a platform company, and grow the business both organically through those data sets and new product development, but also through acquisitions in a very fragmented market with lots of different data sets that we could bring together. And Autodata in particular was an attractive company, a company of scale, $150 million of revenue, great diversified customer base. They had 90% of North American OEMs as customers, so most dealerships. Really, really highly recurring revenue stream, high quality of revenue, high retention rates, very sticky customer relationships, 10, 20-year type of relationships. And a company that had been in business for about 30 years had good growth characteristics and very high profit margins as well.
So after we bought Autodata, we began the process of executing on our value creation strategy, and one of the most important parts of that strategy was to consolidate a fragmented industry. So to grow Autodata through their business as usual growth in the market through new product development organically, but also very importantly through acquisitions as well. And we felt that we could double, triple the size of the business over a three, four, five-year period by making acquisitions, using Autodata as a platform. And our number one acquisition candidate was J.D. Power. Now, J.D. Power happened to be twice the size of Autodata, so a bit of a unique acquisition candidate, and we didn't know when or if it would come to market. And as fortune would have it, about two months after we acquired Autodata, the owner of J.D. Power decided to put that business up for sale.
And we were very excited about that. It was great timing for us having just closed on the Autodata acquisition. And we saw a really interesting opportunity to make a really more of a merger or a reverse acquisition, as you might say, of a company twice the size. The J.D. Power team was really excited to work with Thoma Bravo. J.D. Power, when we bought Autodata, was the dream first acquisition, the dream combination. Well, the same was true for the J.D. Power team. Before we bought Autodata, they felt that that was the dream combination, and they had tried to buy Autodata but weren't in a position to execute on that transaction.
So once we bought the business and the company went up for sale, management was really excited about the prospect of working with Thoma Bravo, not only because of the reputation of our firm, the resources that we can bring to bear, our intellectual property, so to speak, and in terms of how to operate and run software and technology companies for maximum growth and profitability, but also the fact that we could bring Autodata to the table and the strategic synergies between those two businesses. So we were in a unique position where management was really excited to work with us and was, I think, rooting for Thoma Bravo to be the victor in the process. And it was a hard fought process, but one that we did eventually pull out.
But once we were successful in doing that and were moving towards closing, we started working on our integration plan and how we were going to bring these two businesses together. It was unique in a few ways. Autodata, again, focused on data and software. J.D. Power also focused on data and software, but had the research and benchmarking and consulting business around the awards and the performance. And so we were bringing Autodata together with the data and software assets of J.D. Power, but then leaving alone the benchmarking and performance business of J.D. Power.
And J.D. Power had been run in three divisions. So they had their auto business that had a GM of that division. They had their automotive research business that had a GM, and then their non-automotive research business that had a GM, and Autodata had a CEO over the entire company. And then J.D. Power had a CEO that those three GMs reported into. So when we brought the business together, we backed the CEO at J.D. Power and we kept their GM structure, and we merged the Autodata business into J.D. Power's data and software business. And the Autodata CEO became the general manager of that 75% of the business that is data and software, while the two GMs of the research and benchmarking-
SCOTT CRABILL:
... software, while the two GMs of the research and benchmarking businesses stayed and continued to run their businesses. So it was a bit of a unique integration for us. Usually when we're integrating businesses, we're doing it on a functional basis, and not necessarily on a division or general management basis, but that's the way this company was set up, and that's the way we've integrated these businesses.
Thoma Bravo's role in the integration plan was really to be a partner with management, to understand the business processes and the business metrics, and to bring our best practices in terms of how a business is most efficiently run, both for growth and for profitability to the Management Teams at J.D. Power and Autodata, who had never really done an integration like this. So we've purchased 100 platform companies, made 300 add-on acquisitions. We have an Operations group of former CEOs and CFOs and functional leaders, and we have a deep set of operational processes and metrics that we leverage to run our businesses, but also to help them most efficiently and effectively integrate two companies of this size and smaller acquisitions as we move along.
So in May of 2019, we acquired Autodata. In December of 2019, we acquired J.D. Power, and as everyone knows, in March of 2020, three months later, the pandemic hit. So once the pandemic hit, we went into a mode that we'd experienced before at Thoma Bravo in the dot-com bubble when the dot-com bubble burst, and the global financial crisis, and other economic shocks or even economic recessions. And we have a very well-worn process of going back, reevaluating our budget for the year, being very conservative, and pulling back a little bit on some investment or cost to continue to operate these businesses at a growing profit level. And so we did that with J.D. Power, and the Management Team was very collaborative in working with us to make sure that the business would continue to progress from a profit and an EBITDA standpoint, even in the face of a slower economy and what impact that might have on the company.
The strategy with the combination of Autodata and J.D. Power was to do two things. One, to continue to make acquisitions in the auto ecosystem of datasets and software technology that would be additive to what Autodata and J.D. Power brought to the table.
So with Autodata and J.D. Power, we had our VIN description data. We had our point of sale data. We had used car valuation data. So we had four or five datasets, and we were looking to go and acquire other important datasets in the market, and then leverage those datasets into new product development and new technologies that we could develop and sell into our customer base and provide more value to all these OEMs that are customers of J.D. Power, and to drive organic growth through that new product development, and then inorganic growth through the acquisitions.
We bought Autodata first, about a billion dollars. We bought J.D. Power for a couple billion dollars, and we have now made eight acquisitions in about three and a half years for another $500 to $700 million in value. And we have one more pending, that's a new acquisition of a company in Europe that's going to be the largest acquisition that we've done since the merger of J.D. Power and Autodata. It's a company about the same size as Autodata was when we bought the business. So we've made substantial acquisitions over the course of our investment hold.
So where we stand today with the businesses that we own, we have 14 data sets between Autodata, J.D. Power, and the eight acquisitions that we've made, focused mostly on the North American market. We are focused on continuing to operate those businesses, grow those businesses, develop new products off the combination of those 14 datasets, and enhance the organic growth of our underlying business and what we can offer to our customers in the North American market.
The second thing we're focused on are some of the exciting trends that are happening in the auto space: the electrification of vehicles, autonomous vehicles, connected car data, smart cars, so to speak, the changing way that cars are being purchased, modern retailing, more direct-to-OEM type of purchases, more direct-to-consumer type of retailing, and developing products to enable those trends.
And then third, now that we've acquired or about to close on a company in Europe that really is the leading provider, does what J.D. Power does in the European market, we're looking to execute on the same strategy in Europe and to go more global with J.D. Power, which will open up organic product development opportunities, and also a new acquisition path in Europe where acquisitions to date have mostly been focused on the North American market to compliment what we have, here we now have a platform in Europe that we can go ahead and execute on an acquisition strategy there in parallel with what we're doing in North America. There still is a huge, untapped fragmented market in North America. We're going to continue with that acquisition, the new product strategy in this market, but then add on the European market as we go forward.
Up next, my conversation with J.D. Power President and CEO, David Habiger. Thoma Bravo's Behind the Deal will be right back. Welcome back to Thoma Bravo's Behind the Deal. Here's my talk with David Habiger, President and CEO of J.D. Power.
Welcome, Dave Habiger, CEO of J.D. Power, appreciate you being here. You are the guineapig, our first in-studio episode between Thoma Bravo and a CEO. So we're able to have Dave in studio, and Dave's been the CEO of J.D. Power for about six years now. Dave's a three-time CEO prior to J.D. Power, so very experienced executive. A Chicago business school grad, a Chicago resident, and it's been a great, great, great partnership. So, welcome Dave and good to have you.
DAVID HABIGER:
Thank you. Good to be here, trying out the new studio.
SCOTT CRABILL:
Yeah, excellent. You want to give a little bit of an overview of J.D. Power from your perspective, the elevator pitch?
DAVID HABIGER:
The elevator pitch is, the simple way to describe it is, two parts to the business. We've got what we call market research, which most people in the US are familiar with the J.D. Power Award. That's a very small part of the business. We're really just a data collector in this particular part of the business, giving research back to the OEMs on what their customers think. And, the larger part of the business is a data business where anything to do with a car: a vin, how much car is worth when you trade it in, a residual value, the world of data and auto looks a little bit more like 1980 or '90. Most industries have a pretty sophisticated understanding of the product in the business, and we're solving for that problem. So we're basically pulling in datasets and producing insights or specific details on a vehicle.
SCOTT CRABILL:
And I think Thoma Bravo, we've now acquired hundreds of software, data technology businesses, and I think J.D. Power is the most well-known business we've ever purchased because of that awards and benchmarking business, and been in business for 50 years. So I think the stat is 90% of consumers surveyed know the J.D. Power brand.
DAVID HABIGER:
Yeah, it's strange. We have zero marketing budget. We don't buy advertising, we don't advertise the brand. But when you rank the Top 10 well-known companies, McDonald's, Google, there's this weird outlier called J.D. Power. If you go on the street, you've got an 80% chance someone will go, "Yeah, I've heard of that and I know it."
SCOTT CRABILL:
So everybody knows the rewards, but they don't know the data business, which is the hidden gem of J.D. Power.
DAVID HABIGER:
And it's the bulk of the business.
SCOTT CRABILL:
So Dave, maybe we'll talk a little bit about how this all came together and how we started working together. And we were fortunate to get into this auto data space, pardon the pun, by buying a company called Autodata, in May of 2019.
DAVID HABIGER:
Which we really wanted.
SCOTT CRABILL:
Exactly, exactly. So maybe talk a little bit about your experience on the other side, having been interested in auto data and how this all came together for you.
DAVID HABIGER:
And I think it was maybe a year into my role at J.D. Power. But yeah, a great asset, one that fit well we thought, and one that we didn't have the benefit of being able to buy. The upside is, by the time that you bought J.D. Power, you had done a lot of work to save me time and energy too, so thank you, because it was a very easy, natural fit. It's solving for, like I said, a bigger issue in the industry. So if you look at Heinz Ketchup-
DAVID HABIGER:
... like I said, a bigger issue in the industry. So if you look at Heinz ketchup today, Heinz knows exactly how many bottles of ketchup they sold. There's a whole ecosystem of information that flows and the auto industry for being this trillion-dollar industry is siloed with data still is. And being able to put those data sets together is more than a one plus one equals two or three, I mean it's five or six. So all of these little data sets piece together an understanding for the OEM in this case, using the auto manufacturers to build a better product, to get the right product at the right place at the right time. And that doesn't happen with just smart people.
I think we have a lot of smart people at J.D. Power. To really solve that problem, you need an independent third party, a Switzerland, that one they trust and Auto, we're as trusted as they get. And to be able to take that in, solve a problem is important. So Autodata, I think for us was kind of the revelation. The thesis was right. It was a reasonably good-sized deal and in a short amount of time we could integrate. And then we just kind of selectively went around the industry and found ways to basically put the data sets together so our customers can build better products and safer products and that continues to work.
SCOTT CRABILL:
And sounds like the strategy made a lot of sense. It made sense from our perspective, it made sense for your perspective. That's one thing. And then another thing is how you bring the companies together and does the operations and the integration make sense. How did you think about it when we were going through this process and it was clear that we were going to back you to run this business? How you bring the two companies together, the management teams, the strategy, the operations?
DAVID HABIGER:
So I've done a lot of integrations and in general, I don't know if there's an exact formula, but for me what's worked and I think for the team has been the second you merge everyone's one team and you got to figure out who's in the right seat, who doesn't have a seat. And in some cases, and my speech usually is get ready. Because I think if you think you're the acquirer, you think, "Well, then I'm always the quarterback." That goes for the CEO too. By the way. Verizon was mostly a startup person and when you're a startup you understand how everything works and you very quickly get to... You become a micromanager. And I was probably the worst of the worst micromanagers.
And then realizing there's only one way to scale. You have to get really good people, put them in the right seat, be able to attract them and keep them right. That's the job. So with Autodata that worked, it really is, it's corny, but it really is the people, when you do an integration, the other stuff comes down... You figure out the IT stuff. You figure out systems and process and regulatory things. That happens naturally, but early on you better get the right people lined up in the right spot. And so far at J.D. Power, we've done a pretty good job of that.
SCOTT CRABILL:
I have a few observations on the integration. I think you did a fantastic job and your whole team did. You brought the folks together from J.D. Power and Autodata. We have senior members of each of those organizations that continue to be senior members of the team now. So you didn't bias one versus the other. Your experience with the J.D. Power folks over the Autodata folks, and I think that did a lot culturally to bring the two businesses together in a pretty seamless way. So four years later, we have the same team that we started with, which is a true testament to the quality of the team and also the culture that you have and the bond that you all have as a group, which is fantastic. The second observation is the way you run the business is a little bit unique in the Thoma Bravo world.
Most of our businesses are run functionally and when we integrate, we're bringing the functions in and integrating them from a functional perspective, sales, marketing and so on and so forth. At J.D. Power you have a divisional structure, where you have GMs across the key divisions of the business and then you have functional leaders that work with those GMs in technology or finance or HR or legal. And so that's made it interesting and maybe a little bit easier to bring in those big acquisitions where you keep the founder or the CEO who's really driving that business and they can kind of plug into the GM structure. And then the smaller acquisitions, you then really do integrate them more functionally underneath.
DAVID HABIGER:
Yeah, it's an interesting trade-off because I never was a fan of that model, generally. It probably doesn't follow a pattern in my prior leadership roles. It works here and there's always a trade-off on these two. So there's not a science or an exact right way. The trade-off in our model is it's easier to scale and you tend to keep really good people. We've been able to, I think, do a great job of keeping key people. In app parallel universe, if the job was to say, "Well, let's just steady [inaudible 00:24:58]. Let's stay a nice same size business and not invent and grow as much." I think that's probably not the right model. But yeah, it's worked in this and it continues to.. It may not in the future, maybe we rethink it, but right now it's meant that I can get hit by a bus and this company does fine.
And you could take out a lot of the leadership team and the business has a really deep bench and a deeper bench than I've seen at a lot of companies. I mean, it's not a hub and spoke. I mean the worst thing you run into in my experience at companies is it's got to get run up the flag pole to the CEO and no one wants to make a decision and you can't grow that way. I wake up every day and go, "How do I flatten this thing? How do I flatten it, flatten it, flatten it?" And I always think if you know who the CEO EO of the company is, you got to a problem. But you got to minimize that role and someone's got to make certain decisions. But to the extent that the CEOs in the background is I think a good thing.
SCOTT CRABILL:
And another best practice that we can kind of put into our toolkit. We appreciate you showing us the way there. And so we had the deal done I think in December of 2019. We bought Autodata in May of that year. December, we buy J.D. Power. You execute on this integration pretty quickly. We've got all these grand plans. We've put together a four five year financial plan and a strategic plan and this new product development that we're going to do, bringing these data sets together.
DAVID HABIGER:
And the pandemic.
SCOTT CRABILL:
And the acquisitions that we're going to do and we're going to double the size of the business. And then two months later, three months later, we're in a global pandemic. So the best laid plans, tell us a little bit about what that was like for you.
DAVID HABIGER:
That's a good test of a business. There's some ways that help the integration. I think it was a unifying thing early on. We, in the early days, thought we're going to see 20% hit 30, who knows what's going to happen. I mean, you can recall everyone, banking and finance, what's going to happen in the world. So we went into hunker down mode, probably overly aggressively. So we thought, "Okay, we're going to prepare for the worst." And at the time our message was, "Look, no one's going to get laid off. Everyone's going to get 10% pay cut. Management team's going to get more than that." I went down to a dollar. It was like we're in it. At least you can go and tuck your kids in at night and know you have a job, but we're going to stick a bunch of cash on the sidelines until we figure out what we're dealing with. And I'd say 95% of the company was very happy with that. Because they were worried about, "I'm going to lose my job" and all the other things that come along with this stuff, insurance.
And after six months of that, I think we kind of came out the other end and said, "Okay, we gave everyone their whatever we held back and your 10%." I think that was the right... And hindsight, it'll be interesting to ask everyone when the dust settles. I mean when I asked the team now and employees who are someone at the reception desk, they still think, "Yeah, no, that was good. It was worth me... Knowing that you looked me in the eye and said, you have a job." So I think from a integration standpoint, I don't know, I'm sure it helped and hurt in some ways. Where I think impacted us the most was I would've been a lot more aggressive with growth ideas that had a two to three to five year horizon or four year horizon. We certainly weren't swinging for the fences. I mean, we did well. Our numbers were good and the business did fine, but I think the cost was maybe I would've planted some seeds and been more risk averse in taking some more chances. But we figured it out.
SCOTT CRABILL:
We did manage to do a few acquisitions that year.
DAVID HABIGER:
We did.
SCOTT CRABILL:
So we got the acquisition program rolling.
DAVID HABIGER:
That was a low risk... I mean, I think you could look at it and it became clear to me, I'm always used to, there's some big company that is impacting how you succeed or fail in business. The auto industry doesn't have that. And so there is this real data problem that doesn't exist in most industries and it still exists. So for us, the simple thing was you could take a data set, buy a company, where you get what I would call data exhaust, where we put our data set, combine the data sets, and the customer has this great value and they are buying more things or paying more and everyone's happy. And usually it's a little more risky. I suspect it'll be that way for another three to five years as we're becoming the person to pull these things together to build better products, safer products, and solve for their data problem.
SCOTT CRABILL:
Well, if the auto companies want you to be bigger than you are, you've done them a service because you've bought 300 million of revenue. When we bought J.D. Power today, we're approaching 900 million. How'd you pull that off?
DAVID HABIGER:
Well, you guys were helpful. Thank you for advice and capital, and a lot of this does become a number of crunching exercise. Part of the value add from a Thoma Bravo perspective is you guys look at companies, assess and buy them. It's not what I do for a living. I mean, it's a discipline I have, but I'm not an expert at it. So it is good to have, one, the knowledge that you guys have around how to do some of these things.
DAVID HABIGER:
... knowledge that you guys have around how to do some of these things, there's some clever ways to approach it and finance it and look at the acquisitions.
I think the other thing I didn't appreciate, I'll give you guys a pat on the back, is given that you're credible enough, so you quickly have credibility with the bankers, credibility with the buyer, you can have an honest quick discussion, the other piece that I haven't seen in the past where it's been helpful with your model is service providers, software platforms, I actually push back a little bit, I'm like, okay, well we got our own accounting systems or Salesforce, but you guys have done enough deals that we get to piggyback on whatever you've negotiated with a vendor. I wasn't excited at first, but very quickly, within a week or two, I get it, so thank you.
SCOTT CRABILL:
Yeah.
DAVID HABIGER:
That's helpful. You probably should sell that a little more in your pitch, because I don't think I heard that going into the deal, we could have done it at a faster pace.
SCOTT CRABILL:
Yep, we have a good procurement department. So part of that going from 300 to 900 has been acquisitions. So we've done, I think, eight acquisitions that we've closed-
DAVID HABIGER:
Yeah.
SCOTT CRABILL:
... and we have one that's pending.
DAVID HABIGER:
Right.
SCOTT CRABILL:
The acquisitions that we've closed, talk about just what was the strategy, what were we looking for? Is this market scale, is this new products, new data sets that we can bring together? How did you think about the strategy of the tuck-in acquisitions that we've made?
DAVID HABIGER:
They're all a little bit different. The common thread would be a good business with good people, data exhaust, so the business on its own had to make sense and be an additive, and then we had to have a belief that when we actually took that dataset and combined it, that we would get some new business that wasn't really part of either.
The second, for us, the big litmus test is the people. We look at a lot of deals, and the ones we haven't done, I'm sure it's the same in private equity, you just don't get comfortable that the person at the top is... They're spending more time worrying about how you're structuring the deal, and how it's going to benefit them, than you never heard about their employees, you didn't hear about the customer. Usually, we walk from those. Again, our business is based on trust, so J.D. Power, not only the data business, but market research, we can't have bad actors. We have a lot of employees, so you do your best to try and have the right culture and weed that out. So we look at that probably more so than, I think, a lot of companies do, we're more sensitive to that.
The other thing we were looking for is, at least on half of those, the founder, so you'd have a founder who'd done two or three companies, really knew a vertical well, and you really want that person on your team and they have a discipline you don't have. And frankly at J.D. Power, a 50-year-old company that was once owned by S&P and then spun out, you don't have as much entrepreneurial DNA. And so, some of those, you're acquiring that DNA, and then you go, how do I keep these people? How do we empower them? How do you let them feel like they still can unleash their entrepreneurial spirit and build big things? And heck, it gets tricky. Usually, the processes that we put in place, if you're a 200 person company, and suddenly, you're J.D. Power, 2,500 or 3000, we have certainly different regulatory requirements and process that takes sometimes a while to get used to. But so far, it's worked, they're all staying and producing new products. So yeah, probably those are the differences we look at from, at least historically, the types of deals I would've done.
SCOTT CRABILL:
Dave, let's talk about two things. First of all, maybe a little bit about where we're going, and we can chat a little bit about this pending acquisition, because that's taken us in a bit of a new direction. And then also, talk about where the auto industry is going, some of the exciting trends that we're all reading about in the newspaper, electric vehicles, connected cars, autonomous vehicles, more modern different types of retailing, and how we are changing with the times and developing products to continue to push those trends forward.
DAVID HABIGER:
So J.D. Power, over the next five to 10 years, one, we're going to stay focused in our auto vertical. I think there's areas we probably will expand relative to insurance, and using our data to ensure better outcomes on residual values, helping our customers with using the data in a more sophisticated way. The acquisition in Europe highly focused on customer outcomes and a pain point with our auto OEMs, and that is they understand the ecosystem to some degree in the US, but these platforms are very similar, and different name on the car, but for the most part, it's a similar vehicle, and they don't have those data sets, so they're sitting there trying to stitch the stuff together.
It's not good for the consumer, it's not good for them. So the consumer's paying more to have an ecosystem that can somehow try and solve for a residual value on a vehicle that is in a crash, and how you determine the VIN on that relative to what the cost to fix it is, and a residual value on should I get rid of it. And a lot of that could be faster, better, more accurate if we use the same data from the US. And so, that'll prove to be a good acquisition for both the car manufacturers and consumers.
The industry is going to go through a lot of chaos. I think, I think most people would agree. We do well in chaos, that's the big gasoline to our fire. I always describe our business as being driven by change, so if there's not change in the industry, you don't really need insights, because last five years are going to look like the next five years. And a lot of our business is driven by, we don't know what to build, we don't know where to build it, we don't know what's on the car. Change drives it.
Electrification, big one. We provide a lot of data to utility companies, where you should put infrastructure charging, what cars you should build for which market. The big ones, I think, that are even bigger than electrification are connected cars, and I wouldn't say full autonomy in the next two years, but level three, we're seeing Mercedes was given level three certification in California two months ago, so you can $70,000 $80,000 car off-the-shelf, right out of the dealer, drive, text, watch a movie, and take your eyes off the road, as long as you're sitting in the seat, and when it nudges, you take over.
SCOTT CRABILL:
Not good advice for my 16-year-old daughter.
DAVID HABIGER:
No, it isn't. So you have a regulatory issue. The amount of computing power in those cars right now is extraordinary, so there's a bunch of data that sits on the car that is somewhat in dispute. Does the dealer own it, does the auto manufacturer, do you as a consumer own it? And so, that's one of the reasons why you have the stasis, where there's a tremendous amount of data, but not necessarily a natural way to use it. We sit in the middle of that and go, okay, what's allowed? What does the consumer, the OEM, and the dealer all agree on so we can actually solve a problem? How do you make the car safer, better, cheaper, more reliable, more efficient? All those things can't happen if you don't have data and you can't share it. So huge problem, massive problem that we'll spend five, 10 years on, but great opportunity.
The other one that gets much more contentious is autonomous, full autonomous, a real autonomous vehicle that doesn't have steering wheel and pedals, and so that's probably bigger than electrification. What it comes down to though is a computing problem, a data problem, regulatory problem, in an industry where you need a trusted partner and a third party to help manage these things, and that's a lot of what we do, and then the regulatory side. So yeah, that's one that I'm really excited by.
SCOTT CRABILL:
Yeah. That's an incredible amount of technological change in one industry in a short period of time, and good that it benefits J.D. Power.
DAVID HABIGER:
Yeah, I think it will.
SCOTT CRABILL:
Well, that was awesome, Dave. Thanks for being here. I think we're all a little bit smarter on the auto industry and J.D. Power, and exciting times ahead for the company. So thanks for being here and sharing with us.
DAVID HABIGER:
Thanks for being a good partner.
SCOTT CRABILL:
My thanks to David Habiger at J.D. Power. You can learn more about J.D. Power by visiting JDPower.com. And for more stories Behind the Deal, check out all of our episodes from season one, wherever you get your podcasts, and be sure to subscribe to Behind the Deal for our new episodes from season two. And if you liked this episode, check out our new miniseries, Beyond the Deal, with bonus content from me and David Habiger that we didn't have time to share with you today. It will be dropping on this feed soon, with full video of the interview available on YouTube. I'm Scott Crabill. Thanks for listening.
ORLANDO BRAVO:
Thoma Bravos Behind the Deal is produced by Thoma Bravo, in partnership with Pod People. Stay tuned for more stories Behind the Deal. I'm Orlando Bravo. Thanks for listening.
DISCLAIMER:
Certain statements about Thoma Bravo made by portfolio company executives are intended to illustrate Thoma Bravo's business relationship with such persons, rather than Thoma Bravo's capabilities or expertise with respect to investment advisory services. Portfolio company executives were not compensated in connection with their podcast participation, although they generally receive compensation and investment opportunities in connection with their portfolio company roles, and in certain cases, are also owners of portfolio company securities and/or investors in Thoma Bravo funds. Such compensation and investments subject podcast participants to potential conflicts of interest.
