The Expert Podcast

For those of you in the automotive industry, you're going to find that IAA, which is an Insurance Auto Auction, is something you're probably aware of. Similar to Copart, they process a lot of vehicles that are insurance claim vehicles—vehicles where the insurance company paid out a claim. These could be total loss, salvage, or sometimes parts-only vehicles. IAA is one of the biggest insurance auctions, along with Copart.

Well, what's going on in the news is that Ritchie Brothers, which is famous for doing equipment sales like payloaders, off-road trucks, and maybe even things like tractors, is taking an ownership stake—maybe even buying the whole thing—for IAA.

Look, we do a lot of titles for clients of IAA and even Ritchie Brothers, so we see both of these companies operate on a regular basis. They're both very well-run companies, they're both very efficient, and they have great management. The footprint of IAA is a little bigger, while Ritchie Brothers is more niche-oriented to the construction industry. So, even though their operations and their processes are similar, the assets that they sell are different—one is construction, and one is motor vehicles in the insurance industry.

It's a perfect fit for both companies because their work processes and workflows are very similar. They can probably get a lot of economies of scale by combining some of that and maybe even combining their locations. Imagine a Ritchie Brothers location that sells equipment, and now all of a sudden, you start to be able to use it as a facility for insurance vehicle disposal—it's kind of a hand-in-glove fit.

At the same token, if you have Insurance Auto Auction locations that you can now put some equipment on, that may help bring in a wider variety of buyers. Equipment sales are very difficult to operate because not everybody needs equipment—there are only so many buyers for it. If you can get those out closer to more buyers using the IAA auction footprint, that might be a way to get higher prices for your inventory and have more auction fees.

The other difference between the two is that, in most cases, Ritchie Brothers' type of equipment sale doesn’t have titles. A lot of these are non-titled assets—they’re off-road or construction equipment. On the other hand, IAA deals with vehicle titles because they handle insurance claims. Parts-only titles, salvage titles, certificates of destruction, and rebuilt titles are usually what come with these vehicles. Since they are motor vehicles, they will have a documented title, whereas equipment may not have that.