Imagine that you own or manage a regional MSO that performs well and has an excellent reputation. You are probably contacted regularly by various consolidators, brokers, paint companies, private equity (PE) companies, and more, about your possible interest in selling. When you go to industry events, there are always some of these people who want to be your new friend. At times, you feel like “the prettiest girl at the dance.” (When using this analogy with a consolidator suitor, I was once told that I was “smokin’ hot!.” I assure you that my physical attributes have never caused anyone to describe me that way.) Everyone wants to capture your attention and be close. Perhaps you even get invitations to various sporting events with these suitors. If you are inclined to consider a sale, how does one categorize and consider all the suitors? For this fun, hypothetical exercise, we will just consider the consolidators, not the PE companies or other entities. You care about your business and all its people. Price isn’t the only consideration. You will be aligned, at least to some extent, for a long time. Your legacy is at stake. You are metaphorically putting your baby up for adoption and you want it to go to a good new home. And you want the buyer to succeed for the good of all parties involved, including your staff and customers and vendors. It will likely be a tenant in your buildings. With whom do you wish to go through this experience with and have a (probably) longstanding relationship?
I asked a good industry friend, Madeleine Roberts Rich, of Focus Advisors Automotive M&A, how she would categorize consolidators. She answered as follows:
“Our firm likes to describe the consolidators in three categories:
- Consolidators (“The Big Five). These are the five largest collision repair consolidators in the US (and Canada, in the case of Gerber). They have mature financing from private equity, and the Boyd Group is public. The Big Five are: Caliber, Gerber, Crash Champions, Classic Collision, and Joe Hudson’s.
- Fully Launched. These are the four consolidators that have PE sponsors but are not quite at the level of the Big Five. Each of them has between 50 and around 115 shops at present. These four consolidators are Quality Collision Group, CollisionRight, Kaizen Collision, and VIVE Collision. They have clearer geographic concentrations and defined strategies. Quality Collision Group, for example, focuses on well-regarded and highly OEM-certified shops in strong markets.
- Newly Launched. These are the platforms that were just getting started a few years ago (or even more recently) by getting a Private Equity sponsor. We consider these early-stage platforms that are adding on additional shops and streamlining operations to realize economies of scale. There are a few of them: Puget Collision, OpenRoad Collision, BrightPoint Auto Body, and (as of November), Driving Force Collision, and Authentic Auto Body. There are many private equity firms looking to get into the collision repair industry, so there are likely more of these “newly launched” to come. “
Good answer. It breaks them down by size and (to some extent) by stature.
There are many attributes that could be used to further categorize consolidators. I’ll toss a few out.
There are some that truly have a national presence and some are regional.
There are some that focus more on larger shops versus small- to medium-sized.
While there aren’t many, there are some consolidators that are still family-owned/operated, such as B Street Collision and G&C Auto Body. Some of these represent longstanding second generation family businesses.
There are some, such as Driven Brands, that offer solutions for franchises or acquisitions.
Over the years, there have been some large companies, such as Ford and Allstate, who got into our industry, acquiring and operating a number of shops. Both Ford and Allstate later sold off these shops, in some cases to the previous owners.
Keep in mind that consolidation in our industry is not immune to failures. A couple of examples include CARA and M2. Both collapsed about 2001-2005, probably due to growing too fast for their own abilities and resources.
While most consolidators only purchase businesses, some will also purchase real estate.
Consolidation has been in our industry long enough that there are some current consolidator executive management people who were key people within other consolidators in the past. Many of those learned how to do things, some properly, and some improperly, leading to their desire for better performance in their next venture.
While most consolidators focus strictly on collision repair, there is an increasing segment that embraces non-collision work such as glass, ADAS, PDR, clear guard, or mechanical work. And some are embracing medium- or heavy-duty collision work.
By far, the majority of consolidators have built their businesses around insurance DRPs. Some are embracing original equipment manufacturer (OEM) certification programs. It’s not that the two can’t coexist, but there is often some element of conflict due to the different expectations of insurers and OEMs. Some consolidators will implement OEM certifications in areas based upon demand and demographics. These can be suggested by insurers, again based on their needs. Parts purchasing restrictions can drive some of these, as in some cases shops can’t purchase critical parts without certification.
Personal Experience
This leads into an area I’ve been living in. I’ve worked for LaMettry’s Collision for many years. It’s a regional MSO with many OEM certifications and close dealer relationships. We’ve evolved away from most DRPs and instead prioritized the customers’ safety and satisfaction over the expectations of a DRP (We are not anti-insurer nor anti-DRP. But DRPs came with many requirements and expectations, many evolving around KPIs that are based on keeping costs contained. Too often, a shop is caught between frustrating an insurer or providing a compromised repair.) The LaMettry’s family, after a lot of soul-searching, decided to sell. The new owner is the Quality Collision Group (QCG), which is a great choice because of their similar philosophies.
As far as I know, QCG is the only large consolidator with this model. They focus on buying high performing shops, especially ones with OEM certifications. They are all about putting the consumer first, including an emphasis on OEM parts, OEM repair procedures, safety, and overall doing the right thing. They are not anti-insurer, but they are not focused on growing their business through DRP relationships like other consolidators. They have many close and growing relationships with the OEMs. They typically maintain the brand of the larger MSO in a particular market. For example, in the Minneapolis/St. Paul area, the LaMettry’s brand will continue to be used.
I know that being part of a leadership team experiencing a transition of ownership can be very challenging and stressful. Selecting a buyer that fits into the right niche, with the right characteristics and philosophies, can make all the difference in the world for you and your staff.
I wish to also thank John Walcher of Veritas Advisors, whose input helped me write this article.
