Agero Talks Analytics, Acquisitions After $530M Connected-Car Sale
How sexy is emergency roadside assistance, as a tech sector?
Well, if you break down on a deserted road straight out of a Stephen King novel, you’ll be glad to get your car fixed and be on your way. Or if you’re involved in a serious accident, you’ll want help to arrive on the scene pronto.
Car makers and insurance companies care about these things too, because they want to know about their customers’ behavior—and their safety. That’s how Medford, MA-based Agero built a half-billion-dollar business over the past few decades, selling a variety of services around car safety, security, and insurance claims management. It now has $530 million in extra cash to play with, after selling off its connected-vehicle division to Sirius XM Radio last week.
The connected-vehicle market apparently became too sexy for Agero. With reports of Apple, Google, and other tech giants developing telematics capabilities in-house (think apps and interfaces for cars), and Verizon acquiring Hughes Telematics in June, it’s clear there’s going to be a shakeout in the sector. It sounds like Agero got out while the getting was good, divesting its infotainment and navigation business while holding on to its more traditional units (roadside assistance and analytics).
“When Verizon made the move on Hughes, our phone started ringing off the hook,” says Agero CEO Dave Ferrick. People were asking, “Are you thinking of selling your asset in this space?” he says. The private company’s shareholders “wanted to take a look” at offers, but were “prepared to hang on to the business” if they couldn’t find the right terms, buyer, and price, he says. “Once those stars came into alignment, after some teeth-gnashing, they decided, “Let’s do the deal.’”
Agero’s connected-car business is tied to its acquisition of Texas-based ATX Group in 2008. That unit has grown a lot in the past five years, adding customers like Hyundai, Toyota, Infiniti, and Lexus. The market also has shifted considerably, Ferrick says, from being focused on safety and security to becoming more about infotainment and other kinds of customer experience. “That’s not traditionally Agero’s focus,” he says.
Agero (ah-JER-oh) has been Medford’s best-kept secret for years. The company got started back in 1972, originally called Cross Country Motor Club. It was bootstrapped by its founder, Sidney Wolk, a former insurance agent who built the car-safety business on the backs of key customers like Toyota and Liberty Mutual.
Ferrick joined the company in 1992, when it was 250 people and had just a few big accounts. Since then, Agero has stayed privately held and has grown to 2,800 employees and more than $500 million in annual revenues, leading up to the recent selloff of its connected car division (which will diminish its headcount and annual revenue, of course, but by how much the company isn’t saying).
“We help our customers at the moment of an accident,” Ferrick says. “That’s our moment of truth.” So what does the future hold, now that Agero is out of the connected-vehicles business? And what will it do with its new cash?
For one thing, Ferrick is looking at new potential acquisition targets. He wouldn’t go into specifics yet—“we have an ability to look at a lot of wider options,” he says—but he hinted at different ways to help insurance companies and auto manufacturers understand their customers better.
In principle, Ferrick says, “you want the next step, whether you’re buying an information services company [or something else], you want that company to be additive to your bandwidth and not take it away as you’re trying to integrate it.” But he cautions that “companies make the most mistakes when they’re flush with cash.” Agero needs to make sure that “the one or two plays we make, which can be fairly significant, are the right ones,” he adds.
It sounds like data analytics is where Agero will be investing in the near term. That includes “our ability to interpret where a customer is in their lifecycle based on their experience before a breakdown plus after,” Ferrick says. “We know the behavior of that customer. What they do with that car after a breakdown or accident becomes really important in the dog-eat-dog world” of insurance companies and automakers.
“It’s one thing to have a lot of data,” he says. “It’s another to have the experience to understand what it means.”
But the company now faces a challenge of outside perceptions. Its ATX acquisition five years ago made “people look at Agero differently, as a cutting-edge technological business,” Ferrick says. “Now that you move that business away, the danger is that people will say, ‘We know who they are, this is the box they’re in.’”
“We’re clearly not just that,” he says. “We aspire to be much more.”