Last week I was invited the CARSTAR North American Conference. While CARSTAR has been active in both the US and Canada for decades, this is the first time that CARSTAR organized a unified North America conference.
I was invited to the conference to work with some of CARSTAR’s top MSOs to review growth opportunities in a consolidating industry. One of my clients was also awarded CARSTAR’s top honor at the event (along with a full expense paid trip to Bermuda for him and his family – take me with!).
I left quite impressed with the quality and professionalism of the conference. The conference was in Charlotte, home of Driven Brands, CARSTAR’s parent company and owner of MAACO, Meineke, 1-800 Radiator, Take 5, and a host of other automotive franchises. Charlotte is also the home of NASCAR, and the opportunity to have happy hour in the NASCAR Hall of Fame, visit the Charlotte Motor Speedway and listen to Jeff Gordon talk firsthand about what it takes to compete and win at 185 mph was priceless!
But numerous headwinds face the industry. Many wonder what the future holds. The industry has consolidated rapidly at the hands of larger consolidators. ADAS and autonomous driving technology threatens significant industry disruption. Access to capital remains challenging for smaller organizations. Attracting and retaining talent is a scourge facing businesses both large and small. Margins continue to deteriorate for many.
These challenges beg the question – Why invest in the collision repair segment of the automotive aftermarket? Why does private equity continue to invest into collision repair, paint distribution, and parts distribution? Why do investment funds continue to invest in public companies such as Boyd (parent company of Gerber in the U.S.), Uni-Select (parent company of FinishMaster in the U.S.), LKQ, Co-Part and others in the supply chain?
When I was in Charlotte, we talked about what investors see in the industry. We talked about why we should expect additional investment into the industry, but also more consolidation. But more importantly, we talked about where the opportunities are for small and regional MSO businesses.
I recently had dinner with the manager of a small equity portfolio on the east coast. We discussed some of these industry headwinds. He is a shareholder of The Boyd Group Income Fund. I asked him why he continues to invest in Boyd given these headwinds. His answer was simple. “As long as management grows the company at a faster pace than the industry shrinks, it is an attractive value proposition.”
At the CARSTAR North American conference, CEO Michael Macaluso expanded on this strategy. In his presentation to the 1,000 attendees, he said CARSTAR has a responsibility to ensure profitability, to become the biggest collision repair group by number of locations, and drive sustainable growth.
Michael set out aggressive goals for the franchise. CARSTAR will double in size, increasing network revenues to $3 billion and doubling the number of network stores to 1,000. CARSTAR is leveraging its base to drive the success of its franchisees as well as vendors and other stakeholders that partner with the company to drive its growth.
He’s not the only one projecting rapid growth in the industry. Brock Bulbuck, CEO of Boyd announced in early 2016 he intends double the size of the business over 5 years, and he is well on his way to meeting that target. In mid-2016 Caliber announced a $5 billion revenue target.
The race for market share continues. The industry will continue to change. It will continue to become more competitive. The big will continue to get bigger. Margin will likely continue to face pressure for many. But in a consolidating industry, the winners grow at a faster pace than the industry shrinks.
Ultimately, whether you grow by billions of thousands, increasing the value of your business in a consolidating industry is as much about growth as it is profitability.
I want to help you increase the value of your business. Contact me, become a client and together, we will increase the value of your business.
Until next week!