Good morning. My name is Colin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ritchie Bros. Auctioneers conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question- and- answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. Thank you. I would now like to turn the conference over to Mr. Sameer Rathod, Vice President of Investor Relations and Market Intelligence, to open the conference call. Mr. Rathod, you may begin your conference.
Hello, and good morning, and thank you for joining us on today's call to discuss our announcement to acquire Euro Auctions. Joining me here today are Ann Fandozzi, our Chief Executive Officer, and Sharon Driscoll, our Chief Financial Officer. The following discussion will include forward-looking statements. Comments that are not a statement of fact, including projections of future earnings, revenue, gross transaction value, and other items, our ability to satisfy conditions of Euro Auctions acquisition agreement and the consummation of the transaction on the anticipated timeline or at all, the benefits and synergies of the Euro Auctions transaction, the future opportunities for the combined business of Ritchie Bros. and Euro Auctions are considered forward-looking and involve risks and uncertainties.
The risks and uncertainties that could cause our actual and operating results to differ significantly from our forward-looking statements are detailed in our SEC and Canadian securities filing available on our Investor Relations website at investor.ritchiebros.com. We encourage you to review our Euro Auctions release and Form 10-Q, which are available on our website, as well as EDGAR and SEDAR, and the Euro Auctions investor presentation, which is available on our website. On this call, we will discuss certain non-GAAP financial measures related to Ritchie Bros., including certain forward-looking non-GAAP financial measures. For the identification of non-GAAP financial measures, the most directly comparable GAAP financial measures, and a reconciliation between the two, see our news release and Form 10-Q and investor presentations. We are unable to present a quantitative reconciliation of forward-looking non-GAAP financial measures discussed on this call. I will now turn the call over to Ann Fandozzi.
Thank you, Sameer, and hello. We had so much fun speaking with you on Friday, we decided to have another call today. We cannot be more excited to announce the acquisition of Euro Auctions. This meaningfully accelerates Ritchie Bros.' global journey. Euro Auctions, much like Ritchie Bros., is an omnichannel, customer-centric provider of unreserved auctions in the commercial asset space with a very strong international presence, foremost Europe. Much like Ritchie Bros., Euro Auctions has an at-risk business which they view as a key sourcing mechanism for their auctions, something I will touch on shortly. In 2020, they did approximately GBP 480 million in hammer value. Hammer value is approximately gross transaction value and GBP 220 million in revenue. The purchase price is approximately GBP 775 million, which we plan on financing with a combination of cash and new debt.
The implied EV to EBITDA multiple is approximately 15.3 x, including run- rate synergies. We currently expect to close the transaction by late Q4 of this year or Q1 of next year, subject to regulatory clearance and other closing conditions. We are happily retaining all key employees with the four Keys brothers committing to continue with Ritchie Bros. for a minimum of three years, and Derek and Jonnie Keys playing key leadership roles. We currently expect the transaction to be accretive to GTV immediately and impacting other financial metrics meaningfully in the 18- to 24-month timeframe. At our Investor Day last December, we laid out our strategy of becoming a global marketplace for insights, services, and transaction solutions and crystallized that strategy through five strategic pillars to deliver it. The Euro Auctions acquisition uniquely strengthens each pillar and accelerates our vision.
The customer-first concept is ingrained into the Euro Auctions culture, and this shared DNA is one of the principal reasons we are so energized by this opportunity. Our combined organization will be able to bring unprecedented and diversified global choice to our customers. This will allow for better price discovery for consignors and more equipment selection providers. Next, on the employee pillar. Euro Auctions has an incredibly talented team with expertise in asset sourcing, auction operations, sales, and customer service. When bringing two organizations together, we are eager to facilitate learning best practices from each other and providing a forum to discuss unique geographic perspectives on the equipment market. The combination will create a global platform for career advancement and development longer- term, which we are quite excited about. Next, on modern architecture.
We are on the journey to transform our systems into a modern, scalable architecture to provide a solid bedrock to grow on. Adding Euro Auctions to our platform will enable us to provide similar improvements to a broader set of customers globally. Moving to IMS. Euro Auctions is going to allow us to power our marketplace by accelerating our IMS adoption globally. Recall that IMS is our gateway into our marketplace, and the combined organization will help us further establish a marketplace for equipment and value-added services, allowing customers to track, sell, and buy equipment when, where, and how they want around the globe. Lastly, on accelerating growth. Euro Auctions gives us a platform for growth in Europe and other international markets. It supports our financial evergreen model, and the combination will empower a global platform.
Euro Auctions has deep institutional relationships and knowledge on sourcing equipment and directing that equipment to the location of sale for optimum price realization. We are excited by what we think the combined entities will be able to achieve in this arena by giving customers access to a robust platform globally, regardless of transaction size. What you see here on the slide is the percent of equipment Euro Auctions sells from outside the country of sourcing. For example, 64% of the equipment sold in Germany by Euro Auctions was sourced from outside the country. This approach of separating where equipment is sourced from where it is sold will allow the combined entity to be more agile and provide customers with better and deeper solutions. It will also unlock our ability to enter new markets and regions with equipment sourced from other areas. We are excited what this combination can do.
The Euro Auctions business is much like ours in terms of hybrid channel model with online search, bidding, and buying, supported by regional yards for care, custody, control, and inspections. As you can see from the pie chart, they are primarily in Europe, with a much smaller presence in the U.S. through their Yoder & Frey brand. They have nine permanent location sites, with 71% of the revenue coming through their online channels. 90% of their customers are repeat, and they have 220 employees, which we will warmly welcome to the Ritchie Bros. family across 14 countries. Now over to Sharon.
Thanks, Ann. The numbers that I am about to present are reflective of Euro Auctions records and may not be consistent with U.S. GAAP presentation. All numbers are presented in British pounds, giving you a cleaner view of their historical financials, excluding foreign exchange impacts. I would note that their hammer value has been stable over the past three years, with moderate revenue growth over that same timeframe. This financial performance has been supported by the expansion of their omnichannel offerings and the strong returns driven by their sourcing approach, aided by strong global demand and price realization environment during the latter half of 2020. Euro Auctions results include a higher mix of inventory revenue and GTV compared to Ritchie Bros. historic levels but in line with our international region.
The last chart shown highlights the strong inventory return by dollar and rate delivered by their sourcing structure, presented in a similar format that we show in our quarterly earnings presentations. This slide gives you a quick overview of the combined company on a preliminary pro forma basis. The acquisition would increase our GTV to over $6 billion. Given Euro Auctions' predominantly international footprint, the combined entity in 2020 would have had 22% of GTV sold internationally, compared to 14% sold by our company today. Our mix of revenues between inventory and services revenue will also shift to closer to a 50/50 split. We will fund the transaction through a combination of cash and debt, and we have a fully committed bridge financing agreement in place that is structured to limit market risk over the course of this sign-to-close period.
Prior to the closing of the acquisition, we will seek an amendment to our existing syndicated credit facility and will seek to issue new senior unsecured debt securities. With the raise of incremental financing to support this acquisition, we expect our adjusted net debt- to- adjusted EBITDA ratio on close of this transaction to be just below 4x . That said, we expect, much like after the IronPlanet acquisition, the opportunity for rapid deleveraging, and we will target to get to 2.5 x by 2025. Now let me talk about revenue and cost synergies. First, let me highlight that our approach to this integration will be about bringing the best of Euro and the best of Ritchie Bros. together.
Our first priority will be to streamline customer touchpoints across the combined organization, and we think this will lead to modest synergy opportunities, primarily within our general and administrative areas. We also see auction site efficiencies across end market sectors. For example, we have a much larger presence in transportation assets in the U.K., and currently RBA and Euro Auctions sites are relatively close. We think there are customer experience advantages by dedicating one of the locations to transportation and the other to construction. We will continue to test and learn here and let our customers guide us on how best to serve them, and we will work to reduce rent expenses in the combined organization in the future.
In addition, it is very important to note that we will be building this organization to be poised for growth and will focus on investing in technology and operational processes to unlock the full potential of the marketplace platform in this key international region. However, to unlock some of these efficiencies, we will require technology modernization and investments in line with our modern architecture strategic pillar. With that, I will hand the call back over to Ann.
Thank you, Sharon. We are very excited to welcome the Euro Auctions team to the Ritchie Bros. family and to accelerate our journey of becoming a global trusted marketplace for insights, services, and transaction solutions. With that, let me hand the call back over to the operator and open it up for questions.
Thank you. Ladies and gentlemen, we will now begin the question- and- answer session. Should you have a question, please press star followed by one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be polled in the order they are received. Should you wish to decline from the polling process, please press star followed by two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment for your first question. Okay, your first question comes from Craig Kennison from Baird. Craig, please go ahead.
Hey, good morning. Thank you so much. Question on your fee structures. How do they compare to Euro Auctions, and is there any opportunity you see to harmonize that fee structure?
Hi, Craig. Ann Fandozzi here. The fee structures are pretty much set by market, if you will. There may be opportunities, as I discussed on the call that we had, I think several calls ago. Our approach to fees is more of a competitive landscape. It's going to be less about harmonization and more about looking around the competitive landscape, which is a process we're going to engage in on a regular basis, minimum once a year. Basically say in every market where we do business, does an opportunity present itself? We'll be applying that same kind of methodology to Euro Auctions. It's going to be less of an internally focused exercise and much more of a market-focused one.
Great. Thanks. With respect to your synergies, is there a way to quantify the level of synergy you anticipate and then maybe put those savings into various buckets?
Yeah, let me just kick off, and then I'll turn it over to Sharon. I think the synergies, there should have been a pie chart included, and I completely recognize that we're catching you guys live and in person with announcing late last night and then a call first thing this morning. But the synergies we have put forward are $13 million, with SGA being $10 million of it, and then lease about $ 1.5 million, and then $ 1.5 million in other. So I think we've tried to give you a perspective of where that comes from. The timeline really to think about it is obviously the GTV and revenue synergies are immediate, and then the cost synergies come over kind of 18 to 24 months post-close. Sharon, anything to add?
No, I think that's right. It's definitely bringing the best of the best together and poising for growth. So it is somewhat of a kind of a moderate level of synergy reduction we're looking for. We're really looking at building scale. And then, in addition, we did call out that there will be some investments required on both sides to really deliver on our modern architecture pillar to be able to truly unlock the potential that the marketplace provides.
Got it. Well, hey, thank you so much.
Thank you, Craig.
Your next question comes from Gary Prestopino from Barrington Research. Gary, please go ahead.
Hey, good morning, everyone, and congratulations on this. It looks very interesting. Hey, Ann, could you maybe talk about the genesis of this transaction? Was this a deal that was shopped around, or was this more or less that each of you know each other very well and you've been talking for years about the potential of combining both companies?
Hi, Gary. We are so excited about this transaction. The Euro Auctions team is first- rate. Let me just kind of do a backdrop. First, the Keys brothers, specifically Derek Keys, were highly influenced by Dave Ritchie, and who wouldn't be, right? First- rate.
When he was starting his business. Culturally, and this is a very important part, whenever you're integrating businesses that are similar in nature, despite the fact that we operate in a $300 billion marketplace. Coming together, we're still a very small percentage of the market as it exists. The cultural fit of the organizations is very important to ensure proper integration and realizing the vision. That's one part of the backdrop. The second part is when we kicked off our strategy, the one we took you guys through in December of last year about becoming a global marketplace for insight services and transaction solutions, we were clear that the pillars were all about the what, and now we were going to be open to the how.
As you will see in this presentation, Euro is an incredible fit for how to get some of these pieces done, specifically accelerating our global journey and allowing us to really accelerate IMS adoption globally. That's a little bit from our end why it was such a perfect fit. Euro Auctions had kicked off a competitive process. We were included in it. They were kind enough, as strategic and having much mutual respect for each other, to make the management team available. COVID, with the U.K. shutdown and restrictions, Derek, Jonnie, and myself actually met in Iceland, in Reykjavik, because again, when you bring the pieces together, there's the numbers on paper, but then there's the reality of the fit, and do we share the vision, and how is this going to work together?
It was apparent from the get-go that this was going to be really something spectacular. That is how it came together.
Thank you.
Your next question comes from Bryan Fast from Raymond James. Bryan, please go ahead.
Yeah, thanks. Good morning. Could you talk about how the two companies differ when it comes to technology? Do you see opportunities for Ritchie, I guess, to leverage their technology across the Euro Auctions platform?
Hi, Bryan. The short answer is yes. At the highest level in the auction-only arena, we go to market similarly in the unreserved space, meaning that 70% of their transactions are currently online and 30% live. That's where it kind of stops and where our excitement. In the live, unreserved auction space, we're very excited as well. Our excitement goes to the next level when you think about the broader omnichannel and technology solution that Ritchie Bros. has and the one we're building. When we think about our reserved auction , Marketplace-E, and the fact that that has been growing leaps and bounds, the ability to bring Euro Auctions over time, obviously, onto that platform, and what that could mean for the customer base is really something exciting.
Also, a significant portion of our revenue was services, something that Euro Auctions does not offer on the underlying assets, giving us an opportunity to drive revenue and be accretive as soon as the businesses come together, and we're able to put all of those processes in. Last but not least, you've heard us speak about our excitement about the modern architecture and the IMS, and the ability to do that over a larger scale with a broader customer base is an accelerant that speaks for itself.
Thanks, Ann. Just to follow up, I guess, are there any redundancies in auction location? Just maybe talk about the overlap in the business and how you plan to manage that.
Yes. There are a few. Sharon, in her prepared remarks, spoke a little. The first is no decisions have been made because, as Sharon noted, this is about growth. This is about acceleration. We're going to look at any overlapping sites and say, what is our growth trajectory there? Is there a better use of that footprint? Should one be commercial? Should one be transportation? Or is this a cost synergy? We can take that. Just as a reminder to everybody on the phone, we're testing a lot of things with satellite yards, again, with an eye towards growth. Our fifth pillar is all about accelerating that growth. We're going to look very carefully around any overlaps and understand will they facilitate and accelerate growth, or are they truly overlapping in ability to save some cost?
Okay, that is it for me. Congrats on the acquisition.
Thank you.
Your next question comes from Michael Feniger from Bank of America. Michael, please go ahead.
Yeah, thanks. Hey, guys, and thanks. Good morning, and thanks for taking my questions. I have always thought that Europe was a little bit of a struggle for Ritchie Bros. in terms of when we look at the growth in the U.S. and Canada. Is there just anything you can tell us that is different about the European landscape when it comes to auctions, unreserved, reserved, online versus live. Anything there in comparison to the Canada and the U.S. market?
Yes, Michael. Hello. Ann here again. This is part of why the Euro Auctions acquisition was so fascinating to us. Europe is an important market for Ritchie Bros., for sure, one we've been in, and an ability to take a look at an operation with an incredible legacy like Euro Auctions was fascinating. What's very interesting about Euro Auctions is that their sourcing model is a complement to our own. The way we think about at-risk, and I talked about this a little bit, but let me go a little bit deeper here. The way we think about at-risk, it's really sales specific. We think about if there's an opportunity in arbitrage, if you will, to put our money at work because we see an opportunity in the market, a customer wants liquidity much quicker, we put our money, quote, at-risk.
That is very different than the way Euro Auctions views the market. They view their capital as a sourcing model, and the disposition model is actually the globe. There's a page in the deck that shows that despite the fact that a vast majority of their sourcing comes from Europe, but a big chunk from the U.K., where it's sold is actually all around the globe. It is this capability that, when we talk about bringing the best of the best, this is a capability Ritchie Bros. has been very interested in developing, and Euro Auctions has well established. We're really excited about it on both sides. What it means for us in terms of accelerating Europe and accelerating the growth, but also a new capability, a different capability for us of how to think about sourcing and then a global disposition.
Understood. And you were saying how this is about growth, and I might have missed this, but the slide shows that [degree revenue], I think, was 3% in 2019 and 4% in 2020. Do we know how they've performed in the first half of this year so far? And I understand that it's a sourcing model, so curious if Europe is seeing any of the constraints that you guys highlighted last week in the U.S. market.
Yeah. Let me broach that. Both 2020, because of COVID restrictions. Europe is actually hit on two sides of this. Which we anticipate both opening up. The first is the cross-border transportation has been very difficult, and 2020 was actually a suppressed year because of it, both for our European business as well as for Euro Auctions. And then the tightness in the supply environment we're seeing, they're seeing as well. I don't believe we're speaking specifically to their 2021 growth numbers. Suffice it to say that much like in our world, we know two things for sure. Supply will catch up. Equipment is aging, two, and I guess three, when COVID is a thing of the past, although Delta variant is giving us a run for our money, borders will reopen, and there'll be a much freer, stronger movement of product around the globe.
Sharon, anything to add to that?
Yeah. I think the piece I'd add, Michael, is just remember, this business is first and foremost a relationship business. And we have certainly experienced difficulty moving into new markets because establishing those relationships is difficult. And I think the piece that we were so impressed with the Keys brothers and Euro Auctions is just the strong relationships that they hold with a lot of the strategic accounts primarily and customer base that is in the European market. So again, I think the growth potential that we see is how to leverage those relationships with the buildup of our total marketplace views so that we can bring additional services to that customer base, to provide even more value going forward. And I think that vision is equally shared by ourselves and the Keys brothers, which is what makes this transaction just so exciting.
Thank you.
Your next question comes from Maxim Sytchev from National Bank Financial. Please go ahead.
Hi, Ann and Sharon. Good morning.
Hi, Max.
Hi, Max.
Maybe the first question for Ann or Sharon, I guess whoever wants to address it. In terms of when we look at the rate spike to 12.8% in 2020, how should we think about this on a going-forward basis? Do you expect this to kind of stay at that level, or should it normalize it back to the historical run- rate that Euro Auctions was producing?
Yeah. Let me start, and then I will turn it over to Sharon. They, in fact, Euro Auctions, did a similar exercise to what Ritchie Bros. had done, which was take a look at the competitive landscape and adjust fees and rates because of it. That is part of what is in the 12.8% number. That is number one. Number two, the price performance of the market and the underlying, what they call sourcing business, we call at-risk, has just been stellar, which has driven that as well. There are kind of two elements there. One, here to stay, the other will normalize somewhat as we move forward. Sharon, anything to add to that?
Yeah. I think clearly very similar to our results. The supply pressure has affected everyone globally because technically supply chains have been affected everywhere for new equipment. That will be a piece of what is the most part of some of the most recent uplift, but also it is the stellar purchasing capability that that team has to be able to find where equipment basically has the most value. I think it is not a good idea for us to comment on where we see future going. I think where I take comfort is looking at their numbers. I see very similar consistency between how our business has performed over this last period with theirs as well. So gives me tremendous comfort in what we are looking at. I think, again, it is a very strong business from a rate standpoint.
Okay. That is super helpful. Do you mind maybe commenting on the free cash flow profile of this business? Structurally, is it similar to RBA, or how should we think about it?
Yeah. Max, it is Sharon. That one, I would say because of their sourcing model, very similar to our international business, where they end up taking title to equipment. I think kind of similar to what we are experiencing today from a cash flow, probably a slightly extended timeline of acquiring assets to sell, depending on the jurisdictions that it has to travel. I think it is really just taking a little bit more pressure on the cash. Again, as you can see, we have got a very effective cash model across the entire organization, and unlocking the marketplace, again, is just going to add to that cash flow. I would say the way I am looking at it is just kind of very similar to expansion of our international market on its current trajectory.
Okay. Makes sense. And then, Ann, if I may, when you talk about the sourcing capability, is it really tech-driven or is it relationship-driven? How should we think about that?
Yeah. Today it's knowledge-driven. Tomorrow, we're going to make it technology-driven. It's a very interesting structure Euro Auctions has. Basically, they have bifurcated the organization. It's fascinating for us. Where the sales organization is really a sourcing function, be it consignment or again, what Ritchie Bros. calls at-risk, where they put their own capital to work. But then the disposition of that equipment is largely separate. They don't " fill the sale". They are very knowledgeable about equipment pricing around the globe, where to sell, how to sell, how to move equipment very quickly. And this is where COVID has hit a little bit. Around the globe in order to gain the very best outcome for the sellers, even when they are the sellers. It is this capability.
Today it's really a knowledge base, which we plan to codify using the artificial intelligence and machine learning capabilities that Ritchie Bros. has. We're very excited about this.
Okay. No, that's great. And just last question. Apologies for all the questions. In terms of when we talk about the modern architecture, just given the fact that I don't know how much time you had to due diligence all these things. In terms of how should we think about the milestones in terms of timing around the rollout of some of these initiatives? Maybe any color there? Thank you.
Yeah. It comes at an interesting time, where we ourselves are engaging in our transition for modern architecture. The way that I'm going to put it is they just fit right into our journey. Will there be some additional investments that need to be made? Of course. For example, if we want to attach service offerings to their underlying assets, something that they do very little of today, which we understand is very accretive to the revenue side. Since that capability already exists at Ritchie Bros., that has to be built at Euro Auctions. But in general, as we move to modern architecture, the way we've talked about it before, every new capability we build is in this cloud-based, API-based, and we would bring Euro Auctions onto that platform over time.
Which is why we're calling the timeline of obviously revenue and GTV synergies as soon as the transaction closes and kind of the broader ones 18 to 24 months, aligning with putting some of these capabilities in place and then bringing them onto the modern architecture with the broader Ritchie Bros.
Okay. Wonderful. That's it for me. Thank you so much.
Thank you.
Your next question comes from Larry De Maria from William Blair. Please go ahead, Larry.
Thanks. Good morning, everybody. Congratulations. First question, do you view Euro Auctions, have you viewed them in the past, let's say 18 to 24 months as a competitive threat? Considering their sourcing efforts within the U.S., did you go up against them, win, lose, or just curious about how the competitive environment was against them, and if this is part of the reason why, obviously, you are acquiring them.
Hi, Larry, it's Ann. They are for sure a competitor. But I do remind us that we are in a $300 billion industry, somewhat suppressed because of COVID, and the supply chain issues that we talked about on our last call on Friday. But it's a very large market, of which we are still, even combined, a very small percentage. That's number one. Number two, they have a very small presence in the U.S., so candidly, there has been very little U.S. presence or even knowledge. Where we have experienced Euro Auctions is, on our last call, Sharon stated that as we go after our "at-risk business," that business is more competitive in nature just because of the tight supply environment. Which is not just Euro Auctions, in general. When we say tight supply, it's the broader $300 billion that is not moving because the supply chain is locked up.
Any competitor, including companies just holding on to the equipment, waiting for the new stuff to come, becomes kind of a competitive headwind, if you will.
Okay. Thank you. Secondly, as you said earlier, this is a relationship business in a lot of ways. Which is, I would imagine, obviously, I know they have their sourcing efforts that are meaningful, but relationships and sales force are also important. What's the plan on keeping, retaining employees? Obviously, that must be fairly important in this business.
Absolutely. We are coming together as much for who Euro Auctions is and who their employee base is. It's a similar conversation we had when we talked about Rouse and that acquisition. That it was acquired as much for the capabilities as it was for the underlying people. That's the case here. So we are very excited that starting with the four Keys brothers, primarily Derek and Jonnie taking a key leadership role moving forward, Trevor and Lynden, all the way through the organization, our plan is to bring the teams together, retain. The brothers have each committed at least three years. They are very excited about this next phase and bringing the combined companies together. Euro Auctions, Derek was highly influenced by Dave Ritchie. In fact, they've spoken several times through this process.
The ability to bring these two really exceptional teams together is something that is of paramount importance to us. The leadership of the Keys brothers to remain in place, equally as important.
Okay. Thank you.
Ladies and gentlemen, as a reminder, should you have a question, please press star followed by one. Your next question comes from Cherilyn Radbourne from TD. Please go ahead.
Thanks very much, and good morning. Was hoping you could talk a little bit more about the inventory sourcing strategy at Euro Auctions. How far away do they source used equipment from? How is that accomplished? And how long do they typically hold the inventory on the balance sheet?
Yeah, let me start, and then I will turn it over to Sharon. The majority of their sourcing is Europe. But they're not limited to that. So they also look to the Middle East. They look at North America, obviously. But the vast majority of the sourcing is Europe and the U.K. in particular. So that's as they source equipment. When we say relationship based, I would say their repeat customer base is very high. And they use Euro Auctions as a key part of their disposition cycle in Europe, which was very important to us. On the other side of that, however, when they take a look at disposing of that equipment, and getting kind of the best outcome for the sellers, they really look at the globe as their footprint for that, and think of disposition as where they can get the best outcome.
Again, that's a critical capability that Ritchie Bros. doesn't have. The next piece is that, again, they don't have the same go-to-market model as Ritchie Bros. in that the services side, which again, is only going to grow, and get enhanced by the marketplace and the modern architecture with IMS. They don't have that as their go-to-market at all. And, that's obviously accretive with Ritchie Bros. coming on the scene. In terms of cash, and answer to that question, I will turn that over to Sharon.
Sure. Thanks, and good question, Cherilyn. I think again, their experience would be that the time to hold is somewhat dependent on the jurisdiction that it was sourced from and the market dynamics that they think will generate the best return. The way I would frame it is again, as Ann had said, that they look at the globe as their best options for distribution, and they look at that piece of equipment and figure out where that market is that will get and generate the best return. That will kind of depend on that decision that will determine the length of time that they do the hold. But again, what I've seen through our diligence would say that they're consistent with kind of what we would experience with international. So it's a slightly longer hold period than what we would have in North America.
But certainly nothing that would cause me concern that you're now carrying a significant inventory level for a period of time. It doesn't put you into kind of dealer status, if I would frame it that way. It's still very much a fluid purchasing inventory with intent to resell.
Should I assume that the holding period is then less than a quarter typically?
What we've said in the past about our international business is, if North America is usually held from as little as, say, three weeks to a quarter, international would probably be double that. Again, when we were doing our deal where we were moving equipment from Türkiye, that would be one of the longer deals that we were involved with, where that inventory would've taken up to eight months to kind of flow through the system. I would say not every deal will act like that. I think it'll just be slightly longer than what our normal North America trends would look like.
Does that not create increased risk in periods where the used equipment market is inflecting?
Well, certainly there is risk on a couple of fronts with that we deal with as well, and again, kudos to the Euro team. This is one of their areas of expertise. It is managing what is the arbitrage possibility on the equipment value as well as how do you mitigate any foreign exchange exposure that you may have if you are purchasing in one region and selling in another. So I would not say our at-risk business is at risk just by nature of that transaction. What, again, I think we are quite impressed by is the savviness of this team to be able to navigate those risk elements appropriately.
How has the inventory strategy historically performed in periods of tight used equipment supply like we are in right now?
I would point you to the chart in the deck. You would see that their rate of performance has been exceptional.
And in terms of the current tight freight market what is the impact there?
We are only showing the charts that we have shown. If you look at our business, rate is not our issue, it is volume. So the rate performance is quite strong. Supply in all of these markets, everyone right now is looking for quality used equipment. It is the supply of used equipment to sell, so pricing still remains robust. So being able to purchase and resell can be a profitable business at this moment.
That is all for me. Thank you.
There are no further questions at this time. I will turn it back to Ann for closing remarks.
Thank you so much. First, a heartfelt thank you for joining us this morning. We have now taken your Friday morning, your Monday morning. We are very grateful for the time. As you can hear from the tone of our remarks, as well as the backdrop, we are very excited about this acquisition, and Euro Auctions joining the Ritchie Bros. family, and we hope you are as well. Thank you for taking the time.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.