CarStory a Good Buy for Vroom?

Vroom, an emerging e-commerce player in buying and selling used cars, has announced the acquisition of CarStory, itself another used car platform. CarStory’s AI-powered analytics and digital services are what attracted Vroom, through the purchase of Vast Holdings, Inc., CarStory’s parent company.

With more than 7 million listings a day and 18 million consumer views per month, CarStory adds what Vroom says is the most complete and accurate view of predictive market data to their own national e-commerce and vehicle operations platform. CarStory will carry on with driving retail innovation by aggregating, optimizing, and distributing market data from a myriad of automotive sources, and offering its digital retailing services to dealers, financial services companies, and automotive industry research and retailing firms as a part of Vroom.

“We’ve built a platform made for scale and driven by data. As car buyers and sellers across the country increasingly turn to ecommerce solutions, CarStory will strengthen and extend the reach of our digital retailing platform, and together we will accelerate the transformation of the massive used auto industry,” said Paul Hennessy, Chief Executive Officer at Vroom. “We’ve been continually impressed by the size, breadth and sophistication of CarStory’s operations as we have worked with them for the past two years.”

“Our mission has always been to provide data and services that enable our partners to grow and that won’t change,” said John Price, Chief Executive Officer of CarStory. “We believe joining the Vroom team significantly enhances our ability to transition an industry to digital retailing and will allow our partners to reach their goals even faster.”

Vroom announced it will pay an aggregate purchase price of approximately $120 million, comprised of approximately 60 percent in cash and 40 percent in shares of Vroom common stock. The final cash/stock split is subject to adjustment and will be determined at closing. The transaction is anticipated to close in January 2021. The acquisition of CarStory is expected to be neutral to Vroom’s operating results in 2021.

Is the purchase of CarStory a sign of more contenders in the used car market heading towards consolidation? The plethora of sellers in a crowded field suggests this may be the start of more integrations, as there are no title contenders that have emerged yet. The used car market in the US was estimated at $750 billion in 2019, and the top 10 used vehicle retailers contributed to less than 10 percent of used car sales. CarMax is the market leader with less than 2 percent market share, followed by the Penske Automotive Group.

[Image: Vroom]