MEMPHIS, TN — On Jan. 14, aftermarketNews.com broke the news of the merger between the Parts Plus and IAPA programmed distribution groups. This major news follows closely on the heels of the merger between Quebec’s Uni-Select and New York-based MAWDI, which seems to confirm the sea change that has been taking place over the past few years — with strong but small groups merging to form even stronger collaborations, in an effort to ensure their future in the automotive aftermarket distribution market.
Mike Kamal, executive director of IAPA and Mike Lambert, president of Parts Plus, will serve as co-presidents of the new group, to be called the Automotive Distribution Network (ADN). Yesterday, Kamal and Lambert spoke at length with aftermarketNews.com about the merger – how it came together, the synergies involved and thoughts on the future of The Network.
Regarding the merger of Parts Plus and IAPA into the Automotive Distribution Network (ADN), was the merge solely dependent upon Uni-Select’s purchase of MAWDI, or were there other factors that pointed to the benefits of merging? Were you two talking prior to the Uni-Select/MAWDI merger?
ML: We had dialogue as long ago as two years. I don’t know if two years ago MAWDI and Uni-Select were talking but we developed a relationship that far back, so, no, this wasn’t solely predicated on their merger. It helped bring people together, but it absolutely was not the sole defining reason for this merger.
Do you think it would have happened if that purchase had not taken place?
ML: A merger was something that we felt was inevitable. We really think IAPA is the right partner. We would see each other at meetings and talk – the whole membership, not just Mike and myself – and things came together. We’d like to think something would have happened, regardless of the Uni-Select/MAWDI merger.
It seems to make sense for groups to be open to the dialogue of merging. It appears as though there are synergies out there and that this would have taken place, in other ways, with other groups, if not specifically with IAPA and Parts Plus…
ML: And, all credit to Uni-Select and MAWDI. They didn’t wrestle us to the ground and dictate or mandate that this happen. They weren’t as involved as people might think. They didn’t pressure anybody. They were great citizens and cheerleaders in this whole thing, quite frankly.
Following up then, what is it specifically that makes Parts Plus and IAPA a good match? Not all groups are interchangeable, with differences in membership, suppliers and geographic footprints.
MK: It’s a couple things. First of all, the membership is a good fit. Together we will do more than $2 billion in business with 51 members. That’s one of the things that everyone was concerned about, especially on the IAPA side. We didn’t want to have a group with 100 smaller members.
The second thing is we buy a lot of the same product lines, so there are no major product line changes that anyone is anticipating. There is quite a good synergy on products.
The third thing is the footprint. The footprint is quite complementary. One of the great things Parts Plus brings is all the national account business. Now, we’re able to service existing national accounts much more effectively. And, our goal is to go out and get more national account business.
The last element, and to me, the most important, is technology. Both groups are very heavily invested in technology. We both see the value in it and both have made quite a bit of financial and emotional commitment to it and the infrastructure and technology matche perfectly.
When you comment on technology, I think it’s pretty easy to assume that WD software is probably common across all members, but what about down at the store level? Is there a lot of commonality across the stores, or at least, do you have as a group the ability to communicate with the stores regardless of what program they’re running?
MK: With regard to communication among the WDs, the national account business almost forces that to happen, which is great. When everybody is connected to that national account, they’ve got to make some effort and investment to get the technology and that helps us. But more specifically, both groups are very, very committed to e-commerce and technology at the store level and more importantly for the shop owners. That’s the key for all of us. Both groups were heading down the same path and we found that very exciting.
What are the specific points of synergy? When you look to start to streamline operations, where do you overlap functions and philosophies, above and beyond what you’ve just outlined?
ML: Again, when you are dealing in an association environment, it’s a little different than a single entity environment, so the synergies are what Mike just mentioned. It is national account ability – being able to drive more business to that single, national account by employing more distribution points. Over time, I think there will probably be some sharing in some of the things we do with some of our programs, but that’s probably not something that will happen in the early stages of our relationship.
The technology side is really a synergy area. IAPA is making commitments to technology that we can participate in immediately.
With regard to the member structure of ADN, how will it be organized? In other words, does the merger create a clean slate for all of the members? Do all members have equal voting rights for example, or will you continue to function as two separate entities with a unique voting structure within each entity?
ML: From a legal perspective, we are going to maintain the IAPA and AAAD corporations. That’s more to house our trademarks. Automotive Distribution Network is a new corporation. All of our members will, in a sense, be equal partners. We have different voting – voting on governance, voting on product – which will be based partially on membership, partially on volume, but it’s a very fair and equitable arrangement that everybody is quite comfortable with.
More specific to your question about separate or equal, everyone will be bound by the same governance. We will have two brands that we will market, which we think will actually give us some advantages in the marketplace. However, from a governance standpoint, we’ll be one company. We’re not going to have two sets of rules.
ML: One of the other things we’ve talked about is that we’ve taken a bit of a lead from what our (collective) member Uni-Select in Canada did in operating with two brands. It gave them much more flexibility. So we’ve kind of taken a page from their playbook, if you will.
Can you clarify the brand strategy for the stores and service outlets, as well as for private label business? What will the brand strategy be for each of the two brands?
MK: It’s real simple. It’s going to continue as it is today. Parts Plus has their Parts Plus branded products and IAPA has the AutoStar branded products. We each have separate but very similar shop marketing support programs, and that is all going to remain the same.
Where the synergy is going to come in is where we can use the same vendors for labels on private products and where we can use the same vendors for components to support our professional installer marketing programs. Frankly, right now, quite a bit of that is already the same type of vendor relationships. So you’re going to see a lot of the same thing underneath two different wrappers.
ML: What the marketplace will be able to experience is two different outlets across the street from each other. From the customer/consumer perspective they will see a difference. Behind the scenes we will try to do some things together that will be invisible to the end-user, but we’re gaining some synergies, as Mike said, from using the same vendor perhaps for two different labeled products, using some support vendors that will produce products that will be labeled separately, but add more volume to those suppliers. I think it will be good for our suppliers. It will be good for the outlets out there, and from the customer standpoint we can differentiate ourselves in the marketplace.
A precedent has been set with groups like NAPA and CARQUEST, each having one significant member that stands out as the biggest player, with major financial wherewithal. Is this merger simply a way to give Uni-Select access to more states or more acquisitions?
ML: Quite frankly, I think Uni-Select would speak for themselves. I know they are on a path to continue in the acquisition mode but I think they will pursue that strategy both within and outside of the group. I don’t think they are limited to just people within this organization. I think they are going to make acquisitions that are the best opportunities for them as a company. We can’t really speak to that, but that has been their public stance.
Then, speaking from the group standpoint, what about expansion of the group and attracting new members? What are the plans for the future of ADN?
ML: Either grow or die, right? Absolutely we are going to do that and we will manage through the brands in the marketplace, but we’re absolutely open to that and you have to be.
It seems as though there is potential for a slight ‘clash of cultures’ between IAPA and Parts Plus based on differences in management philosophies – ranging from the more regimented program at Parts Plus to the more independent structure at IAPA. Could you speak to this and how you would handle any clash? Is there any strategy to create one new group philosophy or will the two entities maintain their own original management styles?
MK: That was part of the discussion that led up to the merger. As Mike had mentioned earlier, because of the wisdom of Mark Bond at Quality on the IAPA side and Stephen Sattinger from Merle’s Automotive in Tucson on the Parts Plus side, we worked through all of that. That was all part of the mating dance, if you will. I would have to say 99 percent of it is resolved and I think all of us are committed to adopting best practices, regardless of which group they come from.
ML: We’ll have some variances in some of the ways we go to market, but as Mike said, we’ve worked out 95 to 99 percent of that and I think everybody – members from both sides of the new organization – is quite comfortable with the arrangement we have. Nobody is going to give up anything. I think everybody will be able to enjoy most of the things that they’ve enjoyed in the past.
Back to the brand strategy for a moment. Mike Lambert, there was a time, when some of the Parts Plus members took to renaming their businesses and incorporating the Parts Plus name into their business names. Do you anticipate any name changes with the new ADN name?
ML: Many of the members retained their legal entity but may have answered the phone “Parts Plus New Mexico” or “Part Plus Binghamton.” They’ve done that really to perpetuate the brand and the Automotive Distribution Network is more of an umbrella name and not a brand.
I still think the Parts Plus members will perpetuate the Parts Plus brand and IAPA members will do the same with the AutoStar brand, because in some cases we’re going to be across the street from each other and we want that differentiation in the marketplace.
Could there be an instance where an IAPA member might want to incorporate the Parts Plus branding or vice versa?
ML: We’ve structured it so that won’t happen initially. It would have to go to the board. Not knowing every marketplace I guess that it could be possible, but if we did that then they wouldn’t necessarily be Parts Plus or IAPA they would become the other entity in that marketplace. They are not going to have an individual store that they could use interchangeably.
What they market will have to be consistent across their company-owned and independent stores?
MK: At least in a distribution area, yes. I think geographical circumstances will play a big part if that develops.
Speaking of the new name, we noticed you referred to ADN as “The Network.” Is this a deliberate brand strategy? Should we expect to come to know ADN as “The Network” similar to the way we refer to Aftermarket Auto Parts Alliance as “The Alliance?”
ML: I would think so because the other way is a bit of a mouthful. It’s easier to blurt out. I’d say yes, we’d like to be referred to as “The Network.”
It seems as though every year we are losing another program group, due to mergers between program groups. Can you give us your thoughts on the future of programmed distribution groups?
ML: It’s going to get smaller, but I think the entities will get stronger. Mike said it earlier. I think we’re quite happy that we’re going to have sales in excess of $2 billion and there are only 51 members. Any future mergers, and you can think of some of the likely candidates if they combine their membership, would be close to 200 members and that would be really tough to manage. I think it’s important that we did it so we’re strong and we are competing on a level playing field with three other traditional entities. I call it the “Big Four,” and whatever group is number five will see a chasm between the Big Four and number five. We saw it as a need to get stronger and it’s going to be tougher for some of those other guys.
MK: I think that Parts Plus and IAPA always had the philosophy of bringing in members to help a particular market place and make the group stronger. Frankly, I’m disappointed to see other groups just taking in members for the sake of padding the roster. I don’t think that does the industry any good, and frankly, I don’t think it helps the vendors. I’m glad we did what we did. We have 51 really good members and $2 billion in sales within a group of folks that is manageable and also shares almost the exact same philosophy on how to go to business.
It is a challenging scenario for a vendor to see stores on an equal playing field and subsequently may help make the decision easier for them…
MK: Again, with Parts Plus and IAPA, if all we wanted to do was grow the membership we could have done that but I think one of the reasons this merger happened was both groups stuck to their guns and waited and worked hard to do it the right way and I think we all feel very good about that.
Can we count on The Network to continue to support the AWDA agenda in the future?
ML: Yes, and AAIA. Mike and I serve on various boards and committees within the organizations and I think these organizations are important to everyone out there.
The Parts Plus bi-annual convention is going to take place in February. What are the plans? Will it be a Network Convention or just Parts Plus?
ML: It’s going to be a Parts Plus convention, because really we’re past the 11th hour. Although, we have invited the other side of The Network – the IAPA members – to attend. We are going to have our first joint membership meeting of The Network on Sunday, Feb. 27 in New Orleans.
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