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[…]
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[…]
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. […]
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, […]
Recently I was at NACE in Detroit. NACE brings together leaders in collision repair, automotive service, and the multitude of stakeholders in insurance, parts, paint, and technology industries. It was a fantastic event full of great networking and educational seminars.
I had the opportunity to sit down with a lot of business owners in the industry who were incredibly optimistic about their future. They clearly recognize the challenges facing their business but are actively engaging in strategies to mitigate their risk while growing and thriving.
Consistent throughout many of my discussions, however, was the concern of managing the financial risks that often accompany growth. The lessons of M2 and other failed bids at rapid growth are still fresh in the minds of many in the industry. While these business owners are excited about the growth opportunities available to them they recognize that growth will bring additional financial pressures and challenges. In light of these concerns, our conversations naturally shifted to the role of the Chief Financial Officer (CFO) and how a company manages the financial risks growth entails. […]
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), 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. […]
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. […]
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! […]
[Editor’s Note: Sign up link follows at the end of this article.] I want to take a brief break from discussing the finances of The Boyd Group to ask all of you a serious question. Are you attending NACE this year? If you are not, you should be. The success of your business and investments[…]
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. […]
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.
I’m excited to present a slightly different style of article this week that I present at the end of this post. I’ll be doing more of these articles in the future and hope they prove to be a useful way to exchange information.
There has never been a greater need to develop a business strategy to determine the best path forward than now in the collision repair industry. The entrance of Wall Street money in the industry is causing rapid structural change. No longer is the collision industry just about fixing cars and minding your KPI’s.
The industry is maturing. As a result, business models are changing too. […]
Previously I spoke about how collision repair operators will have to develop new core competencies in order to compete against the increasing competitive pressures as a result of industry consolidation. As we saw last week, consolidation is a trend that is not going away, and most likely will continue in frequency and intensity. Collision repair is no longer just about fixing cars and minding KPI’s.
In business school we talked a lot about core competencies. The most basic definition of a core competency is something a business is really good at. In collision repair, most operators would have a core competency in vehicle repair and customer service.
In fact, we may actually be too good at those things. […]
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! […]
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. […]
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? […]
Working Capital is something that is scrutinized by almost every company but rarely talked about in the collision industry.
But I guarantee every large MSO in your marketplace is actively managing Working Capital.
It is also something that major vendors will consider if you are negotiating for a pre-bate or other consideration for purchasing their product.
Banks look at it too. If you want to borrow money to grow, they will scrutinize Working Capital to ensure that you can afford the loan.
If you ever sell your business, it will be a hotly negotiated topic as well.
Most business owners do not look at working capital until one of the above situations forces a working capital negotiation. But that is the wrong time to start managing working capital. It is like going on a diet the week before your annual doctor checkup. […]
About Brad Mewes Who I am I am a business geek. I find corporate finance and strategy riveting (I watch Bloomberg for fun and relax by reading 10-Ks of companies I find interesting). I have nearly two decades of experience in the collision industry. I have an Masters in Business Administration (MBA) in Finance. I[…]