Private Equity in the Automotive Aftermarket

Private equity firms are very active in the collision repair market, and the automotive aftermarket in general. The rapid growth of the large consolidators has resulted in very attractive investment returns for these groups, further increasing the interest of other private equity investors hoping to invest in the industry. Of the “Big Four” consolidators, ABRA, Caliber, and Service King are all majority owned by global private equity groups. Boyd is publicly traded and not private equity backed, but the President of a Canadian private equity firm sits on Boyd’s board of trustees. CARSTAR also is backed by private equity, as is MAACO. Fix Auto recently received debt funding from a large Canadian investment fund that is active in private company investments. Kadel’s, the Pacific Northwest MSO recently acquired by ABRA, was backed by a smaller private equity group. Joe Hudson’s in the Southeast recently brought on a private equity partner as well. Yet for as active as private equity groups are in the industry, these groups are not well understood. […]

Consolidation in the Paint Distribution (Jobber) Industry

Editor’s Note: Brad is at NACE this week. This is an excerpt of his article originally published in Aftermarket Business World. Next week Brad will return to discuss the role of private equity in the collision industry.

The paint jobber industry is undergoing significant change. Increasing customer concentration in the collision industry is putting pricing pressure on the entire refinish materials supply chain.

A second round of jobber consolidation is now underway adding competitive pressure within the industry. Adding to these pressures, paint manufacturers are placing ever more start up, technical and back office requirements on jobbers in an attempt to drive efficiency and lower costs. Combined, the result is a jobber industry that is undergoing and will continue to undergo significant change.

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The State of the Industry: Understanding Consolidation Risks

In conversations I have with business owners throughout the industry I often notice a negative view expressed toward the large consolidators, specifically that the large consolidators could never produce the same quality of product or service as a smaller privately held business. While there may be some truth to this (studies looking at franchises have shown that owner operated franchises tend to perform at a higher level relative to corporate owned stores[1]), there is much to be learned from the success of these larger organizations.

In the past few years, these large MSOs have grown at a rate that have left even the most well-informed and well-connected individuals shocked at the pace of industry consolidation. […]

Collision Repair Acquisition Pricing and Trends: The Boyd Group

For the past few weeks we have been analyzing the results of the Boyd Group Income Fund (Boyd). Boyd is the largest operator of collision repair facilities in the world by number of locations, and one of the top four in terms of revenues. Boyd is also a serial acquirer of other collision and glass services businesses. Founded in 1990 as a single location in Winnipeg, Canada, Boyd has grown to be the largest provider of collision repair services almost exclusively via acquisition, or buying other collision repair businesses.

Previously I spoke about the importance of developing new core competencies to compete in the new era of collision repair. We also discussed at length how a business owner can leverage the tools of corporate finance to drive systematic growth. Boyd is an example of a company that has effectively done both to become a world leader in collision repair and glass repair services.

The price and terms of acquisitions are always a hotly discussed topic in any industry, collision repair is no exception. […]

Advanced KPIs: The Boyd Group

Over the past few weeks we have taken an in-depth look at the Boyd Group Income Fund (Boyd) income statement, cash flow statement, and balance sheet. The purpose of this was to understand how a large MSO uses corporate finance to drive growth and to also explain how a company that reports a net loss in the millions of dollars actually generates millions of dollars of cash for shareholders (or, in Boyd’s case, the “unitholders”). We also discussed how Boyd is leveraging scale to drive increased profitability and sales growth.

This week, rather than just reviewing the financial statements as they are, we are going to complete a bit of financial analysis to derive certain KPIs that tell us more about how Boyd operates.  I will keep the analysis straightforward – no derivative equations I promise! […]