Deciding When To Sell

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In 1999, Peter Kelly was at Stanford business school when he and two partners spotted an opportunity to remake an industry – used cars.

Used cars from leasing and rental companies were being sold at physical auctions. Kelly realized the wholesale side of selling used cars was ripe for transformation and started OPENLANE, a digital auction for fleet owners to sell their old cars.

Kelly raised money from some Silicon Valley venture capitalists and went on to grow the company to more than $100 million in sales. Despite having to give up the majority of the business to investors, Kelly and his partners still had a sizable chunk of the company.

Having started his business while still in school, a big chunk of Kelly’s wealth was tied up in OPENLANE and he wanted some liquidity. That’s when he decided to accept an acquisition offer of almost $250 million for OPENLANE.

In this episode, you’ll learn:

• How to raise venture capital
• The difference between a “seed” vs. “A” round
• A controlled auction and when to use one to sell
• How acquirers use the build vs. buy calculation
• The secret to deciding when to sell

At the time of the acquisition by KAR Auction Services, OPENLANE had the majority of its revenue coming from five customers – the largest of which was generating around a third of OPENLANE’s revenue. Ultimately the fear of losing one of those big customers became one of the driving reasons Kelly decided to sell. How dependent are you on one or two big customers? Find out, by completing The Switzerland Structure tool, part of Module 8 of The Value Builder System™.

Get start free by completing Module 1 now.

 

Check out our full M&A Glossary

About Our Guest

Peter Kelly joined KAR in 2011 through the acquisition of OPENLANE. As co-founder, president and chief executive officer of OPENLANE, Kelly led the company’s strategic direction from the startup to the scaleup of what is now the leading online wholesale auction platform in North America. Over the past several years, he led the re-architecture of OPENLANE’s core technology and has grown transaction volumes to more than one million per year.
Most recently, Kelly served as chief technology officer of KAR and president of KAR digital services group.