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, I thought it would be good to take stock of what has transpired in North America this year.
Recent Collision Industry Consolidation
A few months back I took a deeper look at how consolidation in the collision industry impacts your business. I also later discussed what is currently driving the consolidation wave. While 2014 was a hallmark year, 2015 has continued to be an active year for acquisitions in the collision industry. Of the Big Four, ABRA has taken a clear lead in terms of the number of locations acquired. In May ABRA announced the acquisition of Keenan Auto Body with 12 locations in Pennsylvania and Delaware. In June ABRA announced the acquisition of Kadel’s Auto Body with 23 locations in the Pacific Northwest. Then just weeks ago in September ABRA announced yet another acquisition of Lehman’s Garage with six locations in Minnesota. In total, ABRA acquired 41 locations in three major transactions.
Service King has been active as well. At the beginning of the year they acquired Grand Sport Auto Body with eight locations in the Philadelphia area. In late February Service King acquired Central Collision Centers with six locations in Chicago. In March Service King acquired Autobody USA with four locations in Southern California. In August, after a number of one-off acquisitions nationwide, Service King acquired Riverdale Body Shop with eight locations in Chicago. In total, Service King acquired 26 locations in four transactions.
Caliber and Boyd / Gerber have made fewer acquisitions in 2015. In the beginning of the year Caliber announced the acquisition of Craftsman Auto Body and Pohanka Collision Centers. These two companies operated 25 locations in Virginia and Maryland. But since the beginning of the year, the only major announcement by the company was the acquisition of Platinum/Apex/Alpine Collision Centers in Southern California.
Boyd / Gerber only made one sizable acquisition in 2015. In June the company acquired four locations in Utah. But the company also made a number of one-off acquisitions across both the US and Canada during the year.
Will Consolidation Continue in Collision Repair?
The industry will continue to consolidate. That is a certainty for a number of reasons.
The financial environment supports further consolidation. Worldwide private and public companies continue to successfully consolidate the industry. Capital is both affordable and accessible. These companies continue to generate attractive financial returns, attracting more investment and capital, allowing the company to continue to reinvest in itself, creating a larger, better-capitalized company. In case you missed it, I discussed this cycle in more length in this article on consolidation risks.
The Competitive Environment
Consolidation will continue because the industry is still very fragmented. There are approximately 30,000 repair shops in the U.S., and about 14,000 repair shops that participate in some sort of DRP program according to a recent presentation by I-CAR. But the number of large regional MSOs is shrinking as many of them have been acquired by the large consolidators. The number of smaller independent operators is shrinking as well due to increasing vehicle complexity and the costs associated with equipment and training. Consolidation will continue but it will look different than it has in past years. More on how consolidation will evolve next week.
The insurance industry in the U.S. is relatively consolidated, and globally it is heavily consolidated often with only a handful of insurers nationally. Insurance companies are taking advantage of acquisitions to create economies of scale and drive down costs throughout the organization. In the U.S. many regional insurers were acquired by larger companies over the past decade. When consolidation began many insurers were skeptical of the benefits consolidation provided to their businesses. But the large consolidators have generally proven their business model to national insurers. Many insurers now have “MSO first” policies when considering DRP partners in a given market.
Suppliers to the industry are becoming consolidated as well. LKQ is an active acquirer, buying used, aftermarket and paint distribution companies worldwide. The paint jobber market is very consolidated, as is the glass industry. Finishmaster, Single Source, and NCS are all distributors that are active acquirers with a national footprint. These suppliers are using economies of scale to drive down costs and increase efficiencies nationwide. Consolidation in the collision industry will continue to drive consolidation in supplier industries.
What Lies Ahead?
There are many risks that consolidation poses to the average business owner in the collision repair industry. Industry consolidation is also a trend that will continue to impact the collision repair industry. But how consolidation looks will begin to change. Next week we will talk about the stages of industry consolidation and the industry lifecycle. We will also discover what stage we are currently in. We will also discuss how the stages determine the price of your business, always a popular topic for many readers.
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Until next week!