ADESA, Inc. - Beginnings

Beginnings

ADESA officially traces its roots to 1989, when Mike Hockett formed a company called Auto Dealers Exchange Management, Inc. in Birmingham, Alabama. Hockett had grown up in the car business in Indianapolis, Indiana, where his father had owned a used car lot and a Ford dealership before taking control of an auto auction in 1964. Young Hockett began to manage the latter in 1966, running it for more than a decade. In 1979 he joined with a partner to open a vehicle auction in Indianapolis, and they subsequently bought others in Illinois and in Birmingham, Alabama. In 1989 he split with his partner to manage the Birmingham auction on his own.

Several firms had begun buying up clusters of the nearly 400 U.S. wholesale vehicle auctions in the 1980s, and Hockett now sought to grow his company in a similar manner. Over the next several years he bought other auctions near Cincinnati, Memphis, and Lexington, Kentucky, and in 1992 he and Gary Pedigo, president and co-owner of Indianapolis Auto Auction, formed ADESA (Auto Dealers Exchange Services of America) Corp., basing it in Indianapolis. Hockett, 49, was named president and CEO. The company's auctions had sold 173,000 vehicles, worth close to $1.4 billion, in 1991. The firm employed 925.

Wholesale vehicle auctions fell into two categories: consignment sales, where dealers, banks, fleet operators, and wholesalers sold vehicles, some of them for salvage; and factory sales, at which car manufacturers auctioned cars repurchased from rental companies to their franchised dealers. ADESA's auctions were divided equally between the two types. The company's revenues were derived primarily from fees it collected on each sale.

Each of the firm's sites typically held two auctions per week, at which cars were sold as often as once every five seconds. All buyers at the auctions were licensed dealers, and the general public was not admitted. In addition to auctioning vehicles, the firm also reconditioned cars, transported them, and provided financing to dealers. A total of 43 percent of the company's revenues came from auctions, while 25 percent was derived from reconditioning and 19 percent from transportation.