Auto Body Consolidation Update: There's a New Buyer in Town

Auto Body Consolidation Update: There’s a New Buyer in Town

The good news for shops that want to sell but do not fit a consolidator’s profile is that there is a fresh pool of new buyers.

At the November 2023 Collision Industry Conference in Las Vegas, I was speaking on a panel with other mergers and acquisitions professionals. During open Q&A, Mike Anderson of Collision Advice made some great points that were the catalyst for this article and a new area of focus for me and my team.  

Anderson brought up how there are a lot of regional multi-shop owners (MSOs) and single shops that are seeking to grow and wondered how we could help them. Further, there was discussion amongst the panelists about many shops that have put themselves up for sale but simply do not fit a consolidator’s profile, and we wondered how we could connect these buyers and sellers.

I’ve written a lot of articles about consolidation in the auto body space, and all have been focused on independent repairers selling to private equity-backed consolidators. But what about shops that are not a fit for consolidator acquisition? There are many shop owners that have great shops that simply do not fit the consolidator’s profile. What options exist for them?

What They’re Looking For

First, it’s important to understand exactly what consolidators are looking for and what turns them away.  

Shops that are a perfect fit for most consolidator acquisition have the following attributes:

  • 10,000 square feet or more of production space 
  • Shop not at capacity
  • Manager in place running operations (owner-operator is okay, manager is preferred)
  • DRP-friendly/centric
  • City population over 15,000 
  • On a main road or can be seen from a main road.

Shops that are not a fit for consolidators have the following attributes:

  • Located in an industrial park (not all shops; in some markets where this is the only place a collision shop can be located per zoning, like Boca Raton, Fla., these shops are still desirable)
  • Less than 10,000 square feet of production space
  • Not DRP-friendly
  • Anti-insurance reputation through commercials, social media, etc.
  • Older or non-heated booths (can be challenging due to expense and time involved with updating)
  • Third-party landlords (can be challenging, since they have limited motivation or interest in negotiating, as industrial space is in short supply)
  • City population less than 15,000
  • Shops with low sales and large square footage (15,000 square feet or more) with low employee count where there is lots of room for growth and improvement (consolidators do not have the bandwidth or time to reestablish a failing shop).

Examining the Options

For shop owners wanting to sell who simply are not a fit for a consolidator, there is a fresh new pool of buyers: independent shop owners with one location and/or regional MSOs. This fresh, new group of buyers is seeking growth and expansion like we have not seen in the past from independents. Who are these buyers, and what do they look like?

Many of these buyers are taking a new approach to how they manage and operate their shops. There seems to be two starkly different operational strategies amongst most of these independent/regional MSO buyers:  

Buyer A
  • Focused on being DRP-centric and efficient  
  • Likely focused on fast growth with the intention of selling to a large consolidator  
  • High-volume shops
Buyer B
  • Provides an extremely high-quality repair and employ the best-of-the-best staff who have been thoroughly trained and follow manufacturer repair guidelines to a T  
  • Does not accept whatever it can get paid by an insurance company; rather, it bills for the actual repair, and the customer pays the difference  
  • Has no intentions of selling  
  • Usually focuses on creating a positive workplace culture, and employee retention is key
  • Its customer is very discerning and educated and has high expectations
  • Very profitable
  • The retail customer seeking collision repair from this type of shop is growing like wildfire.

These different buyers have two different operational strategies; however, the shops they’re seeking to buy all seem to be the same model. They target the shops that are not a fit for a consolidator. Of course, they love opportunities to buy shops that are a consolidator fit, yet many times these buyers simply cannot compete with a consolidator’s quick close cash offerings and other value-adds. Conversely, there are many shop owners who simply do not want to or will not sell to a consolidator. I know of several sellers right now where the shop owner is adamant that he or she will only sell to an independent shop owner. 

Which led me to a thought: I’ve spoken to thousands of sellers, and at least half of them were not a fit for a consolidator acquisition. How did I connect these buyers and sellers? I created a Facebook group called “Selling and Buying Body Shops” that has blown up like an atomic bomb. In fact, it is so active now that I have five administrators to help me herd the group. Further, my team is working on a database to connect buyers and sellers that should be up and running in early 2024.  

I believe you’ll see quite a landscape change among independent collision repairers over the next five years as more and more of the regional MSOs develop. This is quite refreshing for me to know, since, when I sold my shops back in 2015, I honestly felt that I — along with other independents — were being pushed out of the industry. Today’s landscape for an independent collision repairer could not be richer and has more opportunity than it ever has before.

2024 Outlook

Get ready for the soap opera in 2024! This will be the year of “massive change” amongst the consolidators:  

  • You’ll likely see one consolidator go public, several sell/merge/recapitalize, the emergence and growth of boutique and medium consolidators, and continued fast-paced acquisitions amongst all consolidators. 
  • Typically, when a consolidator reaches five years of growth/age, you’ll see some sort of strategy for change. Currently, there are several consolidators at that development point. Consequently, this will be the year for a lot of shake up and change.  
  • You will see Crash Champions blow wide open with new acquisitions and organic growth through greenfield and brownfield acquisitions.  
  • VIVE and its new private equity partner will continue to expand through acquisitions in its core and adjacent markets.  
  • The medium-sized consolidators like Quality Collision Group will be full steam ahead with expansive growth as well.  
  • Depending on how all this plays out, the aggressive deals will likely continue through 2024  

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