M&A Memos with Focus Advisors' David Roberts

Aug. 22, 2022

A sale of your shop may seem like a long way off, but it doesn't hurt to start thinking about what the process looks like, says Focus Advisors Managing Director David Roberts.

David Roberts

Amid all the hustle and bustle of the last three years of COVID, PPP loans, parts shortages, technician shortages and consolidation, there has been a lack of straight talk about the increasing transition of owners looking to sell their businesses. In the next five years, as many as 5,000 shops may sell or close their doors. And their owners should be fully informed about what it really takes to successfully exit the business.

It's understandable that frank discussions in print about this trend have been largely avoided. But talking and writing out loud about what many are saying in private is one of the best ways to prepare for the future. So this column will be all about information on the process, the risks and rewards, stories of success and failure along the way.

“Someday” will be here before you know it.

Someday I’m going to quit this business and ride my Harley to Yellowstone.

Someday our family is going to spend the whole winter in a warm place.

Someday I’ll build my lakehouse and go fishing with my grandkids.

Someday I’m going to spend a lot more time at the beach without worrying about how the shops are running.

Someday I’ll think about selling my shops.

Well “someday” has gotten a lot closer. In fact, “someday” is here for thousands of shop operators. And when “someday” arrives for you, what do you do?

It all starts with preparation. Sometimes years in advance but for most folks who’ve decided to sell, it’s more like 6-9 months before you pull the trigger on a decision to sell.

What kind of preparation exactly?

Understand what it takes to sell a business and the M&A process.

Selling your business is a once-in-a-lifetime event for most sellers, unlike any other transaction you’ve ever done. It’s not like negotiating a paint loan or a dealer referral agreement or getting on a new DRP program. It takes preparation, good advice, time and patience. There is a process to selling a business successfully. It’s not unlike the protocols that you follow in making complex repairs to sophisticated vehicles.

And it's emotional. Never underestimate how saying goodbye to your employees after decades of working together as family will impact you—and them.

Finances

Are your books and records in good shape? Are you recording all your revenues, especially cash transactions?
Are you using standardized accounting software with the right account codes?
Does someone in your organization really understand CCC One and Quickbooks so you can produce accurate reports and answer financial questions?
Do you have a good CPA who does more than just your taxes?

Certifications and Equipment and Premises

Have you finally gotten I-CAR Gold certified?
Do you have OE certifications that are more than just a piece of paper?
Do you have the right equipment and people trained to use it properly?
Do your shops look good, clean, well organized?

Succession Planning

Have you trained a key employee to step up to managing the entire operation? Does he or she understand the P&L and how it's put together?
Is that employee interested and/or committed to remaining with the business after it's sold?

Franchise Agreements and Paint Loans

Do you understand your termination fees and requirements?
Do you know the balance and terms of any paint loans?

Real Estate

Do you own your real estate or do you lease from a third party or parties?
Do you have a long-term lease—even if it’s with yourself?
Do you have the right to assign your lease?

Advisors

Do you have trusted advisors?
An intermediary to help you prepare and take you to market?
An attorney that has experience in M&A transactions?
A bookkeeper or CPA who understands how to interact with sophisticated buyers?

Understanding the Market in your Region

Do you know the potential buyers in your market?
Do you know their criteria for identifying and qualifying prospective acquisitions?

These are just some of the preparations for getting ready to sell your business. In future columns, we will dive more deeply into these and other questions that will help you consider your alternatives.

David Roberts is managing director of Focus Advisors. An original co-founder of Caliber Collision, he has been advising body shop owners for more than twenty years on how to grow and sell their businesses.

About the Author

David Roberts | Managing Director, FOCUS Investment Banking LLC

David Roberts is the founder and managing director of M&A advisor Focus Advisors. He is best known for co-founding Caliber Collision Centers with his partner Matthew Ohrnstein in 1997, envisioning a more collaborative repair process across insurance companies, insureds, and repairers. After raising the first private equity capital in the industry, David and his partner began buying, rationalizing, and systematizing collision repair shops into the nation’s first consolidated, performance-based MSO. By the time of its sale in 2008, Caliber was the world’s largest collision repair consolidator, a position it continues to hold today with more than $8 billion in sales.

After leading dozens of acquisitions for Caliber, David saw an opportunity to help other MSO owners achieve superior results in growing and selling their businesses. He founded Focus Advisors Automotive M&A with a proven method to help them grow, thrive, and prepare for a strategic exit. Over the past ten years, David has led $500 million in 35 separate automotive transactions. Today, Focus Advisors, a FINRA-registered investment bank, has grown to include a team of eight professionals, all committed to the same mission of helping MSO owners realize the full value of what they’ve worked so hard to build.

Focus Advisors has invested in creating a comprehensive and proprietary database of the entire collision repair industry including the largest consolidators, private equity investors, more than 800 MSOs and 25,000 single shops, including dealers. The firm also tracks transaction values from large MSOs to single shops and everything in between which allows them to provide the best informed valuation advice to its many clients.

David received his B.A. from Duke University and his MBA and J.D. from University of California, Berkeley. He is married to Gail Simpson. Together, they have two daughters and a new grandson!