“How do you see the consolidation landscape moving forward, factoring in the aging baby boomer generation, shop owners getting near retirement, the impact of COVID and the rise of corporate-sponsored body shops?” — Tristan Wurzbach, B2 Perfection Auto Body, Sunnyvale, Calif.
Consolidation of collision centers could not have come at a better time for buyers and sellers. The baby boomers own a significant share of existing independent shops, and many do not have family successors, so the timing of consolidation is ripe for them. In fact, most of my clients have been baby boomers. Conversely, there are a lot of young people selling or considering selling at a much higher rate. I think the last few years have brought a lot of added stress and anxiety, and the business just isn’t fun anymore in a lot of owners’ minds, so I think anyone is ripe to sell.
As of right now, it seems as if we have COVID in our rearview mirror. However, there are a lot of shops still financially recovering from COVID’s impact — loss of work/workers, shutdowns, etc. — which is further fueling shop owners’ motivation to sell. Then you add in current events that have been thrown into the mix in the last few months.
Profitability was a challenge for all shops, including consolidators, in 2021. Price increases for paint and supplies plus pay increases have changed by the day, and insurer rate increases are not happening fast enough. Additionally, the concerns of inflation, unease in the financial market and the anxiety with the Ukraine/Russia situation add to a hotbed of existing problems that may create uncertainty for investors and buyers.
If you asked me your question 60 days ago, I would have said we have 24 to 36 more months of heavy consolidation and then predicted a significant slowdown, as consolidators will then have the footprint they’re seeking. As of right now, I think we’ll have that 24 to 36 months for sure; however, that window of time potentially may be put on pause if consolidator investors get spooked like they did when COVID initially hit in 2020. In 2020, most consolidators stopped buying completely, except for Classic Collision, who continued to grow during that time period.
The bottom line is that it is happening now, later or at some point — consolidation is not going away.