Term Sheet

The latest on private equity, M&A, deals and movements — from Wall Street to Silicon Valley

Why Austin Ligon really left CarMax

September 5, 2012: 4:26 PM ET

The reason tonight's DNC speaker "resigned" from the company he helped create.

FORTUNE -- CarMax (KMX) co-founder and former CEO Austin Ligon will speak tonight at the Democratic National Convention, just before a video about the American auto industry revival. Perhaps he'll talk about his experiences helping to create a used car chain that today is valued at $7.2 billion. Just don't expect any discussion of why he's no longer there.

Ligon helped create CarMax back in the early 1990s, while serving as VP of corporate planning with Circuit City Stores. He and Circuit City CEO Rick Sharp wanted to apply the big box superstore concept to used cars, and began opening physical locations that purchased their inventory through vehicle auctions. Circuit City provided the seed funding, but its lack of follow-on support prevented CarMax from being able to simultaneously expand and turn a profit. The solution was a 1997 IPO that turned CarMax into a tracking stock, while a subsequent separation from Circuit City in 2002 resulted in Ligon as CarMax CEO.

By the summer of 2005, however, sources tell Fortune that several senior CarMax executives were chafing under Ligon's leadership style.

"There was no question about Austin's understanding of the market or his strategic planning, but he was under a lot of pressure to make CarMax more successful financially and that sometimes got taken out on those below him," says a source close to the situation.

A group of senior managers would eventually take their concerns to the board, threatening to quit en masse if some sort of action wasn't taken. The board sided with the executives, and quietly offered Ligon a chance to step aside. In October 2005,CarMax announced that Ligon had chosen to resign as CEO of CarMax, but that he would stick around until a search process for his successor was completed.

"We thought we had the person in house in Tom Folliard but still wanted to know all of our options," says someone on the CarMax board at the time, referring to the company's young VP of store operations. "Tom was more of a people person first, whereas Austin was more of a profit person first, people person second."

CarMax officially named Folliard CEO in May 2006. Ligon has since sat on numerous boards, made several angel investments and become a major supporter of President Obama.

Fortune attempted to contact Ligon for this story,  but was unable to do so. CarMax declined to comment.

Sign up for Dan's daily email newsletter on deals and deal-makers: GetTermSheet.com

Posted in: ,
Join the Conversation
About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

Email a Tip | @danprimack | RSS
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.