Focus Advisors, the leading collision M&A advisory, is now seeing a full return to the high level of buying interest experienced in 2019. The perfect storm of a positive outlook for the automotive aftermarket, reengagement of buyers, new interest from a multitude of private equity firms, scarcity of MSO platforms and availability of leaders, techs and smaller distressed operators appears to be fueling the surge.
“Today we are seeing multiple bidders and attractive LOIs, a big change from just a few months ago,” said David Roberts, managing director of Focus Advisors. “Three months ago, both industry revenues and M&A interest were severely depressed. Operators were pausing, not knowing how far down revenues might go and how long they would stay depressed. Buyers were pausing as the tumult caused by the COVID19 virus was creating enormous uncertainty.”
Focus saw financial tools such as PPP loans and additional capital obtained by the leading consolidators as critical to staying afloat while the collision market returned. Then, increased assignments offered glimmers of hope to operators and acquirers alike, paving the way for a return to buying and new interest from value-oriented private equity firms.
“At the beginning of the third quarter of this most extraordinary year, we are seeing a few deals being announced,” said Roberts. “At the same time, we are seeing considerably more interest in finding and engaging with new prospective sellers. From our clients and from our discussions with other operators of all sizes around the U.S., the pause in acquisitions seems to be over.
“We’ve seen enough activity and LOIs to recognize that significant activity has returned for many sellers. For attractive platforms, values are approaching those we saw a year ago. It takes six months or longer to sell a business, to prepare properly for market, run an auction, identify the right partner and close the transaction. Some sellers are asking themselves, ‘Why should I wait a couple years full of uncertainty if I achieve most of value today?’ As we see more transactions announced and complete those for our own clients, we will gain confidence that the market has truly returned. By the end of the third quarter of 2020, we will have more data and stronger convictions, but the trend is clear: The market is back.”