Boyd Acquires Assured and Other Acquisitions in the Automotive Aftermarket

Last week was a busy week for acquisitions in the aftermarket. The Boyd Group acquired the largest collision repairer in Canada, Uni-Select (parent company of FinishMaster) expanded into the UK with the acquisition of The Parts Alliance, and Carl Icahn announced the acquisition of Precision Auto, adding 250 service, lube and carwash locations to his[…]

auto body valuation

Auto Body Shop Selling Multiple – what you need to know to maximize your multiple

One of the most common questions I receive is what is the average auto body shop selling multiple? Multiples are on everyone’s mind. Sellers want a quick an easy way to understand what their business is worth. Buyers want a way to know they are not over paying for a business. Even banks and financing[…]

Collision M&A Consolidation Trends Update

I’m writing this on my way back from Vancouver, Canada. I spent the past few days on site with a client focused on developing administrative SOPs to drive consistency in financial reporting. Then a quick meeting with an investment bank involved in the industry. I even took a sea plane over the harbor and got[…]

consolidation in the automotive aftermarket

I Can’t Buy Fenders by the Trainload – One Reason Consolidation in the Automotive Aftermarket Will Continue

I speak at a fair number of events across the world. It is one of the more enjoyable parts of my job. I speak about the intersection of finance and strategy and how that influences consolidation in the automotive aftermarket. Because both finance and strategy are so future focused, I’m often asked my views of[…]

Nace 2016

I attended NACE 2016 and this is what I learned

I spent last week at NACE in Anaheim California. For those of you unfamiliar with NACE, it is the only US industry trade show dedicated to the collision repair industry. In the past I have done video updates from the floor during the week, but this year I was so busy that I just couldn’t find[…]

What’s up with Canada?

There is a trend I have begun to notice recently.  The Canadians dominate the collision repair world. Dominate may be a bit of an overstretch, but Canadian firms own, operate or control some of the biggest names in the industry. Canadians also have more analysts covering the collision repair sector than any other country. Quick personal[…]

Consolidation Trends Update: Q2 2016 – What Happened?

An interesting thing happened in the North American collision repair market. While the four largest collision repairers have for some time stopped announcing even the largest recent acquisitions, the pace of consolidation has continued at a rabid pace.  Since the beginning of 2012, the four largest operators have more than tripled the number of locations[…]

$6 Billion by 2020. Is that even possible???

I’m back from Barcelona, having presented at IBIS (International Bodyshop Industry Symposium) on consolidation trends. IBIS is one of the marquee organizations, the only I know of that looks at the collision industry globally. It was a true honor to get in front of this group. So many fascinating presentations – email me to discuss[…]

What I discovered when I read Boyd’s 2015 Income Statement

At present, Boyd is the only publicly traded company collision repair company in North America. The other three major consolidators are privately held, owned by various private equity groups. The company trades as a unit trust on the Toronto Stock Exchange and has a market capitalization of well over a $1 billion – $1.33 billion[…]

Collision Industry Consolidation Trends: Q1 2016

Consolidation in the collision industry continues to march forward at an astounding pace. The largest companies in the industry continue to aggressively grow through acquisitions, or by buying existing collision repair operators. And as these companies continue to aggressively expand we see continued consolidation in adjacent segments that sell into the industry, especially in paint[…]

I’m Headed to Spain IBIS 2016

That is right, I am headed to Spain. I’ll be presenting at the IBIS 2016 conference May 23rd to the 25th in Barcelona, Spain. I will be talking about consolidation trends in the industry – not just collision, but the entire automotive aftermarket. Across the entire industry every segment is facing pressure from consolidation. Parts[…]

Will the Fed Raising Interest Rates Stop Industry Consolidation?

It seems to be a forgone conclusion that the Federal Reserve will increase interest rates at their upcoming meeting. For years the Fed has repeatedly stated that they will likely raise rates in 2015. Now that December is upon us it appears the day of reckoning has arrived.

There is always a lot of consternation around rate changes, and this time around is no different. Effectively the Fed controls the price of money (interest rates) in an attempt to influence economic activity. The Fed lowers rates to spur economic activity and raises rates to slow it down. So a rate increase should be perceived as a generally positive event, an indication that economic activity is increasing. […]

2015 Acquisition Trends Update: The Floodgates Open

The last four full weeks of the year are upon us. Only 33 days full working days left this year (or less depending on your holiday schedule). I hate to be the bearer of bad news, but if you have not already started to set your business plans in place for 2016 you are behind[…]

SEMA AAPEX 2015 Show

SEMA AAPEX 2015 [VIDEO]

I’m at SEMA AAPEX this week. I have had the fantastic opportunity to meet with a huge diversity of businesses, ranging from the single location operator to multi billion dollar international organizations. Throughout the course of the entire week a common question I receive is “Brad, how can you you help increase the value of[…]

Stuck behind the consolidation curve? Discover why industry consolidation impacts the price of your business.

Consolidation has been going on in the industry in the U.S. since the 90s. There have been some major successes as well as some spectacular failures. The collision industry, and the entire automotive industry in general, is not the first industry to ever undergo consolidation. And it certainly will not be the last.

Consolidation has taken place for nearly two decades now. Nearly every current business owner in the collision industry “lived through” the first round of consolidation. Because of this “survivor bias” some feel that the current round of consolidation is destined to fail the way they believe the prior round did. […]

Consolidation in the Collision Industry

The Consolidation Curve

The industry is consolidating. That statement probably comes as little surprise. The entire automotive aftermarket is consolidating. Dealers, tire vendors, parts distributors, paint distributors, software providers are all consolidating. But were you aware that industries tend to follow a predictable path of consolidation, referred to as the consolidation curve?

Big companies are acquiring smaller companies using affordable capital to grow. This growth creates economies of scale. And economies of scale allow larger companies to provide goods and services relatively more efficiently and at a lower cost than their smaller competitors.

Consolidation will continue because it is a virtuous cycle where success attracts additional investment that generates further business advantage. A growing consolidator will continue to acquire for two main reasons. […]

Collision Industry Consolidation Trends 2015

According to some, 2015 has been a slow year for collision industry consolidation. Of course, 2014 was a landmark year for consolidation. So far in 2015 consolidation has continued, but at a slightly slower pace. With only 12 full weeks left until the end of the year, […]

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.

[…]

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! […]

The Boyd Group: Understanding the Balance Sheet

For the past few weeks we have been talking about The Boyd Group (“Boyd”), one of the largest collision and glass repair business in the world. Headquartered in Winnipeg, Canada, Boyd operates under three main trademarks; Boyd Auto Body and Glass in Canada, Gerber Collision and Glass in the U.S. and Gerber National Glass Services, a network of over 3,000 independently owned glass repair and replacement businesses across the U.S.  Boyd is the largest pure-play collision repair business in the world by number of locations, and one of the largest in terms of sales.

This week we are going to look at Boyd’s fiscal year 2014 Balance Sheet, or more formally the Consolidated Statement of Financial Position. The balance sheet, unfortunately, is one of the more overlooked financial statements in the industry. For many, it is a statement relegated to year-end tax planning and rarely, if ever, analyzed throughout the year. But understanding and managing a balance sheet is one of the core tenets of corporate finance.

Regardless if your goal is to grow, sell, or stand pat, balance sheet management is critical to your business. […]

The Boyd Group: Understanding the Cash Flow Statement

Last week we discussed the Boyd Group Income Fund (“Boyd”), specifically the Fiscal Year 2014 Income Statement, and how it is both similar and different to the income statements of other operators in the industry. In 2014 Boyd generated an impressive $844 million in sales but reported a net loss of over $15 million. Many in the industry mistakenly assume that because the company operates at a net loss it is only able to remain in business through the benevolence of Wall Street banks. The reality is that Boyd, while operating at a net loss, generates substantial cash for shareholders. And when adjusting for certain accounting idiosyncrasies unique to the legal structure and location of the firm, the company generates a respectable profit. To understand how this is possible is to understand the difference between cash and accrual accounting*, and more generally, how to use corporate finance to drive systemic growth.

*See the footnote at the end of this article for a further explanation of cash vs. accrual accounting.

While Boyd generated a significant net loss on an annual basis, it also generated substantial cash from collision and glass operations. […]

The Boyd Group: Understanding the Income Statement

Over the next few weeks we will be discussing the Boyd Group Income Fund (“Boyd”), one of the world’s largest collision repair operators. As of the date I’m writing this, Boyd owns and operates 340 collision repair facilities in North America under the names Boyd Autobody & Glass in Canada and Gerber Collision & Glass in the U.S. (amongst other co-branded names such as Champ’s Collision Centers and Craftmaster Auto Body). Boyd also has a significant retail auto glass operation in the U.S.  The company trades as a unit trust on the Toronto Stock Exchange and has an enterprise value of over a $1 billion (all values are in Canadian dollars unless otherwise indicated). Enterprise value is the total value of the company, including net debt (total debt – cash) and equity.

Because Boyd is publicly traded, it is required to file quarterly and annual reports outlining the financial performance of the company. Every three months the company files a report that includes an income statement (also called a Statement of Profit/Loss or a profit and loss statement), a balance sheet (also called a Statement of Financial Position), and a statement of cash flows. It also includes a rather lengthy section of Notes to Consolidated Financial Statements where management discusses the results along with numerous footnotes further explaining the results from operations. You can access Boyd’s recent financial reports on their investor relations website.

This week we are going to review the first of the three key three financial statements from the 2014 annual report and compare the results to some industry averages. […]

The Boyd Group: How does your business compare?

Recently we discussed the importance of developing a strategy and the implications consolidation has on your business. A big part of developing a strategy, whether it is stand pat, buy or sell is understanding what your competitors are up to in the marketplace. I am often asked about the goings on of other large players in the industry.  It is good business to be aware of the goings on of key competitors in your marketplace. But many owners do not realize that much of this competitive intelligence they seek out is at their fingertips if they know where to look. For the next few weeks I will share one of my favorite sources of publicly available competitive intelligence with you.

Acquisitions, who acquired whom and the price paid for such acquisitions is always a topic of much speculation.  […]

The Golden Age of Collision

I am going to start off with a bold statement: There has never been a better time to own a collision repair business.

I’ll follow that up with another statement that may catch many readers off guard: There has never been a more profitable time to own a collision repair business.

The industry is changing rapidly due to the influx of massive amounts of Wall Street investment in the industry. There is no doubt that consolidation in the industry has put substantial pressures on margins, increased the administrative workload repair facilities are expected to administer, and generally increased competition across the board.

Now I’m not one to get up here and blithely parrot the oft repeated phrase “competition is good”. Competition is painful and difficult. It creates some winners and often many losers and is not always fair. For the unprepared increased competition can be disastrous.

Yet the result of this increasing level of competition is that there has never been a more profitable time to be in the collision repair industry. […]

That’s WACC! Understanding how interest rates and the cost of capital impact the value of your business.

Recently I discussed the financial themes that I believe are driving consolidation in the industry. Specifically I discussed why a low cost of capital combined with multiple arbitrage is driving investment and consolidation in the collision industry. (Editor’s note: It is not only the collision industry undergoing profound transformation. Keep an eye out for upcoming articles discussing other adjacent industries that are undergoing rapid consolidation as well).

This week I thought it was important to spend some time explaining the financial mechanics of the cost of capital, and how a low rate environment impacts the entire financial ecosystem. Be warned, this delves into the realm of financial geekdom but has significant implications for your business which we will discuss later in the article. […]

What is Driving the Consolidation Wave

Writing about finance in the collision repair industry, naturally we speak quite a lot about business valuation and maximizing the value of your business. Buying or selling businesses are currently very prevalent activities in the industry. In financial terms, buying is often called an “acquisition” while selling your business may be referred to as a “liquidity event”.

There is a lot of industry chatter around these events. It seems that every week there is a new breaking story where one of the large consolidators acquires another group of repair facilities. By the end of 2015 it is a near certainty that at least one if not two companies will reach $1 billion in revenues with even more growth coming.

I often focus on the tactical, i.e. how to best position yourself to buy, sell or hold. But it is also important to take a step back from time to time to look at the overall picture. What is driving this change in the industry? Often we hear that the increasing technological complexity of repairing a vehicle drives consolidation. We also hear a lot about the benefits of scale, or how having a large nationwide footprint results in a competitive advantage in the result of increased revenue opportunities, a decreased cost structure, or perhaps improved operations. These are all valid reasons for growth but not necessarily the primary drivers of consolidation. […]

The State of the Industry: How Consolidation Impacts Your Business

Recently I decided to take a closer look at consolidation in the industry since late 2012. It goes without saying that consolidation is a hot topic in the industry. We talk about it almost every week here. It also seems that every week a new mega deal is announced where one company buys another company.

Whenever rapid change hits an industry it often causes an emotional reaction. Some argue passionately against consolidation. Others strongly believe consolidation brings much needed improvement. Still others shrug it off with ambivalence.

My opinion of the consolidation trend is agnostic. […]

Grow Like a Consolidator

For the past few weeks we have been speaking about the options that are available to a collision repair operator: stand pat, grow, or sell.

I spoke at some length about the risks involved in each strategy. Standing pat is a risky strategy due to the concentration of risk into a single business in a single city / region.

Growing is risky because it involves developing a new set of core competencies built around high level financial management as well as acquisition and integration competencies. Most collision repair businesses have not developed these competencies; and those that have developed those competencies now compete for deals against other large MSO’s with extensive experience sourcing, closing and integrating acquisitions. (Editor’s Note: Keep an eye out for an upcoming article about how the franchise model plays a role in growth.)

Selling is similarly risky as there is almost a certainty that a buyer will have vastly more experience in a business transaction, leaving you and your business vulnerable. Buyers will pay a premium for a well-documented, well-run business but most collision repair businesses have little experience presenting financial information in a usable format to a multi-million dollar institution.

Those are the risks. But I promised an article about opportunities!   […]

Buy, Sell, or Hold: The Risks

Last week we spoke about the conundrum that collision repair operators currently face. Because of the influx of Wall Street money and rapid consolidation, owners have essentially three choices when looking towards the future. They can:

  • Stay small and continue to compete on a standalone basis, or with the help of a franchise (more on the franchise approach in future articles);
  • Build scale, acquire competitors, open brownfields and compete with large MSO’s by becoming a small MSO;
  • Sell to a regional or Big 4 consolidator.

Each of these three strategies carries inherent risk, as well as potential rewards. This article will break down each of these three key strategies to help better explain the specific risks and rewards implicit in each. […]

Buy, Sell, or Hold: The State of the Industry Part II

Long time readers of my posts notice two main themes running through my writings. The first is a focus on corporate finance and how to apply those topics to a collision repair business to better manage a business. The second is a focus on M&A (Mergers and Acquisitions) and how to be prepared to buy or sell a business.

Many readers inherently see the logic of the first topic. Understanding the tools mid to large sized business use to manage their business allows the reader to better manage their business, and be more successful as a result.

The second topic is sometimes met with less clarity. It often begs the question: why so much talk about buying and selling a business? […]

You won’t believe how much money Caliber made last year.

Previously we spoke a bit about maximizing enterprise value vs. maximizing profit margins.

Many people in business fail to realize the distinction between the two concepts. If you maximize profitability, you maximize the value of your business, right?

Not always. In business everything is always a trade off. […]

The State of the Industry (And why we’re all in trouble!).

In case you’ve been living under a rock for the past two years here’s a news flash – the industry is rapidly consolidating. Wall Street has arrived and they’re taking no prisoners. But what does that mean?

First it means that there are the “Big 4” – Caliber, ABRA, Service King, and Boyd/Gerber. You’ve probably heard of at least one of these guys, if not all of them.

They have hundreds of locations. They do hundreds of millions of dollars in sales a year. They are tied in with major insurance companies in a way you or I never will be. They’re financially backed by some of the largest most powerful financial institutions in the U.S. and Canada. […]