Like everyone else in this industry, I’ve read about and watched the consolidation movement with great interest. I’ve been a shop owner since December 1973 and, like so many others today, I’m a technician who evolved into an owner through the sometimes-painful process of trial and error. I’ve been frustrated, broke and very close to losing everything on more than one occasion, but I’ve also raised two daughters; bought cars, trucks, a home and toys; and paid for college educations — all from the same business that sometimes frustrates me.

Make no mistake, the collision repair industry has been very, very good to me and my family — which is why when I think of what it would take for me to sell my business, I can’t give a precise answer. In my case, at least for now, my shop isn’t for sale at any price. But if I do ever change my mind, I’d need to know everything possible about making such a decision.

And that’s what this article is about: What to consider before you sell to a consolidator.

I got more involved in learning about consolidation in my preparation for a debate this past March at the Automotive Service Professionals of Illinois (ASPI) convention. Paul Tatman is a long-time friend of mine, and he took the side of consolidation at the debate. Since I was aware that he had just recently sold his shops, I knew he’d be prepared to present the consolidation side from personal experience. I also know that he’s one of the smartest operators in the nation when it comes to business — of any kind. I realized that, unless I did my homework, he would be far better prepared.

Faced with the possibility of losing the debate, I decided to call every one of my friends in the industry who’d sold his or her shop to a consolidator. I admit it: I don’t like to lose at anything. That’s just me.

A Tight-Lipped Bunch
I asked these friends to help me, and I got several big surprises. As soon as I told them what I was researching, every one of them was tentative about talking with me. And, because some of these friends have known me for many years, I was somewhat taken aback. When I asked why the hesitation to talk, one of my closest friends said, "Bobby, let me call you back from home later." This was a friend I’d helped on numerous occasions in past years and, all of a sudden, it was like I was asking for something illegal.

Later that afternoon, my friend did call back. He explained how the consolidation people were in his former shop with him when I called, and that he was under some considerable contract provisions to not talk publicly about things the consolidators didn’t want anyone else to know. He apologized to me over and over, and I finally told him it was OK. Then I asked if he’d talk to me if I promised to never mention his name. It turns out that was my magic solution for all my phone calls: promise total confidentiality, never reveal my sources. All of a sudden, things improved greatly, and I could ask anything and get an answer.

Some of the answers and comments took me by surprise. I also got some information that I never thought to ask for. I learned things about selling your shop, how and what consolidators look for in a shop, terms you need to understand and the possible long-term effects of consolidation on the collision industry.

I ended up with more than 20 pages of notes from friends across the country.

So why did they hesitate to talk to me in the beginning? Simple, non-compete contracts that spell out what you can and can’t do in regard to talking about the deal. Items such as:

• You can’t work for any competition to your former shop within a certain amount of miles, regions or nationwide.

• Any information about your transaction without approval is prohibited.

• Anything released about your former shop now has to be cleared through the new owners.

• All financial details about the transaction are private.

The list goes on and on, but you get the idea.

Each consolidator has its own rules and regulations — as does any other business — and I can understand that. So, if and when you sign a contract, make sure you read it word for word; it will probably severely limit what you can or cannot say in the future.

What They Said
Friend No. 1: "Get a life," says his wife.
One friend and former shop owner visited with me at length, and I could easily tell he wasn’t his usual happy and positive self. He relayed to me that his wife was extremely upset they’d sold the family business. In a matter of weeks, in fact, they had both regretted the decision to sell.

Why? He sold because a consolidator offered him more money for his business than he had ever imagined it was worth. But, because the decision to sell was made in a matter of several weeks, too many little things were never considered. For example, he put the money in the bank and now he’s financially set for many years, but he no longer has a job. After playing golf several days a week and taking a long-needed vacation, his wife made the comment that he can’t just sit in the house and get under her feet all day. He had worked for more than 20 years, and his schedule had always allowed only limited time at home. But now, his wife was getting tired of him at home all the time. He never planned on that, and it has become a major source of irritation for him and his wife. This friend is in his 40s, and I think he and his wife are getting ready to build another, non-related business soon. Like he said, "You can’t just not work. That’s all I’ve ever done. I have to have something to keep me busy and happy, and just having the money isn’t doing that."

Friend No. 2: Relocated and regretful.
Friend No. 2 decided to stay on with the consolidator, and after a matter of weeks, he was asked to run a shop in another state on a temporary basis. They pay his wages, and they call the shots now, not him. Does he miss his wife and kids? Yes, and by the end of this year, he plans on leaving his position and getting totally out of the business. And, it seems, he’s not alone.

One of his best technicians who had worked for him for more than 20 years quit the consolidator, called him and said, "I worked for you — not some big company that I don’t think cares one little bit about me or my family." My friend also learned, later in the week, that another valuable technician would be leaving the following week because he, too, felt the new owners didn’t care about the employees. And then, to top it all off, on weekends when my friend visits home, several customers in his hometown have told him they’re disappointed he sold his shop — one even asked him to call the new owners to take care of a problem repair.

What seemed like such a good decision at first was now causing second thoughts. To complicate matters, he hadn’t sold his real estate to the consolidator, yet he and his wife still weren’t able to make some decisions about the real estate without going through the contract and lease they negotiated on it. They learned that the legal firm employed by the consolidator did a great job on behalf of the consolidator regarding the real estate, but left a lot to be desired for the former shop owner and his family. (Tip: Get your own lawyer involved, and make sure he knows what he’s doing on deals such as these. You need someone — other than you — who will be looking out for your best interests.)

Friend No. 3: Just an employee now.
Friend No. 3 took some cash and some stock, but he’s still working at the shop because he doesn’t have enough money to quit working and do something else. He took the deal because he was sold on the future value of the stock, but after six months, the stock value is still far into the future. He now thinks he sold his business for far less than what he could get today if he hadn’t made such a hurried decision. And, because he’s employed by the consolidator now, he can no longer perform needed repairs without getting them cleared through the parent company or make any financial decisions without having them approved in advance. He can’t make any decisions on the spot.

Adjusting hasn’t been easy. He was used to being the boss, but it’s clear now that he’s not. In fact, this former owner has less authority now than his manager had when he still owned the shop.

He’s also disappointed with what money — or lack thereof — does to people. He sold his shop to a group of several friends, but he tells me: "Some of my friends aren’t really my friends. They’d put a knife in my back if it came to money, and I’m finding that out the hard way now."

Friend No. 4: Busy paying taxes.
Friend No. 5: Not busy at all.
Friends four and five both sold to the same consolidator, and both told me to tell everyone: "Take cash, not stock, not promises."

A week later, one of these two called to tell me the IRS was hitting him with a huge percentage of what his selling price had been, and he advised that if you sell, "Get a tax attorney involved, not just your regular attorney." Evidently, he was about to pay a rather large percentage of his newly found wealth due to poor planning.

The other friend was happy with the money, but bored in the job given to him by the consolidator. At first, he was traveling and talking with other shop owners about selling; then the consolidator told him they weren’t buying anything for a while, so now he sits in his office doing nothing.

He told me consolidators will probably back off for a while to analyze what they want to buy and where, and then they’ll be back — but they’ll be more selective.

Friend No. 6: A family torn apart.
Friend No. 6 was sick about selling because he and his father had worked for more than 30 years building the business, and now his son and daughter were no longer part of the consolidator’s plans. His son had worked at the shop for more than 10 years after getting his college degree and feels his financial future wasn’t considered when his dad sold the shop. The daughter is married, and she and her husband also aren’t happy with the deal. The sale of his business, my friend says, has driven a wedge between his family.

The son was offered a job and tried it for several months, but the same week my friend talked with me, his son quit the consolidator and went to work as a manger for a former competitor across town. My friend told me if he had it to do over, he would keep the shop and find a way to retire and sell the shop to his kids.

Was he financially secure? Yes. Did he make the right decision to sell? "Evidently not," he says. "All it’s brought me is misery and problems." His wife, mother of his children and former business partner, also feels they made a mistake.

"I screwed up," he says. "Sometimes money isn’t the only consideration you need to take into account before selling your business. Money alone will not buy happiness."

Friend No. 7: Smiling all the way to the bank.
One of my friends who recently sold to a large consolidator is a unique case. I’ve been in his shop, and he ran one of the best operations I’ve ever seen. At a point when he and his children owned three state-of-the-art shops, they all made the decision to sell and received in the neighborhood of $20 million. Now, the father and children have financially secure futures, and they’re all still working in the businesses. Everyone seems happy — for now anyway.

The consolidator has sent the father far out of state to help run and put systems into another acquisition with great potential, and he’s doing just that as I write this article. He’s exactly the kind of expert the consolidator needs to teach others proven methods and systems — and I mean systems right down to how every daily item is done from one end of the shop to the other. He’s not guessing or using theory; he’s done it several times over. What he knows is the greatest asset the consolidator received from the deal. As for my friend’s children, they’re still working the same jobs for more money and aren’t complaining about anything.

What makes this friend and former shop owner different? He waited, got all his ducks into a neat row, learned everything he and his family needed to consider, and then acted when the price was right and everyone was happy with it. His family businesses are an asset to the consolidator because they’re profitable and as good as any in the nation. I’ll keep in touch with him and his family in the future, but from what I know now, knowledge and information are very valuable assets. (And he used more of both than anyone else I’ve spoken with so far.)

What Do Consolidators Want?
When examining potential acquisitions, here are some things consolidators consider:

• Where you’re located;

• Your market share;

• Your direct repair deals;

• If your business can run itself without you there all the time; if you have systems in place for everything;

• How well your technicians are trained and if they’re open to consolidation and a new owner;

• Your business’ potential for growth and expansion; if the population and demographics in your area provide room for growth;

• Your business’ reputation in the community and if acquiring your business will benefit the consolidator.

Every consolidator wants profit, long-term growth and future stock value. And from what I know so far, buying shops is business to a consolidator, nothing more. Consolidators are in business to make money, and if they can buy enough shops in a given market and control a large part of the collision repair market in that area, then they can make money through:

1. Economy of scale on purchases.

2. Hiring and retaining people with the knowledge to put into place proven processes and procedures.

3. Selling stock that’s bought by investors who see this industry as a good investment.

The Technician Dilemma
Where does the consolidation movement leave the highly skilled technicians? In my opinion, this area is the biggest potential problem for consolidators. You can’t train collision repair technicians like minimum-wage assembly workers no matter how good your methods work in other industries. You can, however, get helpers up to speed quickly if you have good systems and training.

I predict the day when one highly skilled technician spends his day moving all over the shop, advising and assisting other workers regarding repairs. And he’ll be paid for what he knows, not what he does, like today.

But, until consolidators find a way to find and keep loyal, long-term employees, they’ll have problems. Why? Because, as far as I’m concerned, the heart of this industry is the technician, not the shop owner.

Sell or Don’t Sell?
I’m not qualified to tell people to sell or not to sell their shops, but I can tell people that I know more about consolidation now than I did last year. And I can tell people how I feel about my business:

I built my shop to provide me and my family a good income and to allow us to have some control over our lives. I intended to someday give my business to my youngest daughter, Amanda, since my oldest daughter, Shannon, chose to pursue another career. Like all good plans, mine are not to be because Amanda was killed on April 1, 1997, at the tender age of 20.

Still, my wife, Judi, and I work daily at our business and are currently re-training and trying to perfect systems for everything we do. The business pays for my hobby of working in drug enforcement as a police officer, and it provides me the freedom to take off each afternoon to walk two miles and to enjoy some of each day. My technicians aren’t just employees; they’re an extended part of my family. I pay for their training, celebrate when they enjoy successes and will never make a decision about this business without considering them in the process. I want them all to be highly paid, own homes and property, and enjoy health and success just like I want for my family.

I’ve had money, I’ve lost it all and I’ve earned it back again. Still, I worry about bills every week, and I’m probably just like a thousand other shop owners in this country on any given day. But one thing makes it all worthwhile: I work for me, not some large company.

If someone keeps offering more and more money for your business, at some point, they’ll get your attention and you’ll have to consider it. And I’m not telling you not to sell. What I am telling you is to make an enlightened and wise decision based on fact. Do your homework. Make sure you and your family are financially secure and all those involved are fully aware of everything you plan to do. And don’t base your decision on what someone else tells you is good for you. You decide!

Selling your business isn’t something to take lightly. After all, you spent your life building it — and deciding to sell it will change your life. Only you, however, can determine if it will change it for the better.

Writer Bobby Johnson and his wife, Judi, own B&J Collision, Inc. in Jefferson, Texas. Bobby has been involved in many areas of this industry for more than 26 years and was Bodyshop Business’ 1989 Collision Repair Shop Executive of the Year