Cross Country acquires ATX
Cross Country Automotive Services, a market leader in roadside assistance services, has acquired telematics service provider ATX Group. Both firms are privately held, and terms of the deal were not disclosed. The combined entity is expected to generate revenues of more than $400 million.
Michael Saxton, chief executive officer of Cross Country Automotive Services, is the CEO of the combined organization (the deal closed on Sep. 15) and Steve Millstein, CEO and president of ATX Group, is now president of Cross Country Automotive Services and general manager, telematics. Millstein said Cross Country and ATX will continue to operate as separate entities while leveraging each other‘s technology and customer relationships.
Cross Country said the acquisition expands Cross Country‘s client base and infrastructure into Europe and complements its presence in China. The combined company employs more than 2,300 people to serve some 76 million customers of automotive, insurance and other companies. It operates four data centers and seven call centers and handles 16 million-plus calls per year.
ATX‘s services include location-specific emergency and roadside assistance, automatic collision notification, stolen vehicle recovery, remote diagnostics and real-time traffic and navigation assistance. ATX also offers services to help OEMs and dealerships manage customer relationships. ATX currently serves approximately one million owners of vehicles from BMW, PSA Peugeot Citroën, Mercedes-Benz, Maybach, and Rolls-Royce in North America and Western Europe.
“Prior to the acquisition, Cross Country was well on its way to developing a telematics solution that is consistent with where we see the technology headed,” said Phil Magney, who heads iSuppli‘s automotive research practice.
Earlier this year Cross Country introduced a telematics system called MERJ, featuring technology from Continental AG, Macrovision‘s All Media Guide Services (AMG), and TeleCommunication Systems (TCS). MERJ combined navigation, infotainment, and vehicle monitoring and diagnostics, and promised to transform a mobile phone into a personalized, connected navigation device.
Magney said the ATX acquisition enables Cross Country to jump-start its telematics strategy. “ATXI has a lot of know-how and back-end support, as well as clients. The combination seems to be logical.”
Gartner vice president Thilo Koslowski said the acquisition is a positive development in the telematics and vehicle ICT (information and communication technologies) that comes at a critical time for both companies.
Cross Country has been working on telematics technology for the past three years but has not yet signed an OEM customer, though Koslowski said it‘s close to doing so. ATX, meanwhile, has recently faced increasing competition and lost one of its long-term automaker clients (Mercedes-Benz USA) to Hughes Telematics. Koslowski said the combined company will help ATX protect its current customer base, create additional reasons to attract new customers, and expedite Cross Country’s efforts to start working with automakers.
Gartner predicts that by the end of 2008 virtually all vehicle manufacturers will at least have finalized a Vehicle ICT strategy that they will begin to execute in their next generation vehicles.
Millstein described the deal as “a win, win, win, win,” for employees, the market, OEM customers, and share owners in both companies. He said that ATX has gained business recently and he expects at least one OEM to make an announcement relatively soon. “We‘re launching a number of programs over the next two or three years and expect to grow from one million subscribers (since the company‘s formation in 1996) to 2.5 million over the next three to four years.”
The combined company has “more resources, girth, depth, capital, experience, and capabilities” and is well-positioned “in areas that OEMs need to play in,” including roadside safety and security, VRM (vendor relationship management) services, remote interaction with customers (e.g., vehicle diagnostics and ATX‘s .car web domain initiative), according to Millstein.
He said the acquisition anticipates product/service development and infrastructure synergies but “not one penny of economic synergy - we intend to create new revenue streams.” The firms began discussions in April, and Millstein said he has “rarely if ever seen an acquisition in which both organizations share common visions and cultures (as do ATX and Cross Country). “Normally, something appears that‘s problematic, but this has been going quite smoothly.”
