Now that Caliber Collision and ABRA have entered into a merger, which was confirmed in a news release Wednesday morning, the question remains as to what lies ahead for the collision repair industry in terms of consolidation.
David Roberts, managing director at FOCUS Investment Banking, a firm that handles many of the industry’s acquisitions, shared with FenderBender what he envisions for the industry in the wake of Wednesday’s sizeable merger.
Roberts said that this merger is a huge deal for the industry and because of the market share that Caliber Collision will now have, it will change the playing field. Now, he says, Caliber and ABRA figure to dominate the market.
ABRA, which in October completed an acquisition of 38-shop Cooks Collision, had 390 facilities in 28 states prior to being purchased by Caliber. Caliber acquired its 600th location in August, earlier this year.
Steve Grimshaw, Caliber's CEO, said in a press release that "with more than 1,000 stores in 37 states and the District of Columbia, we look forward to providing customers and insurance clients with the flexibility and convenience that come with the broadest geographic coverage in the United States and a full suite of services."
Roberts predicted that the two companies, post-merger, will operate at $4 billion by next year.
For independent repair shops, Roberts said he thinks it will be harder for for the shops to meet the same standards required to do business with large insurance companies, and harder for them to get DRP appointments.
Additionally, it could now become more difficult for independent repair shops to move up on the list of referrals. For instance, when insurers are trying to contain the cost of the repair, smaller, independent shops have no advantages to purchasing, Roberts said. The bigger the company, the more leniency the company has to buy cheaper paint and parts, passing those savings onto insurance companies.
“A single shop can’t give [insurers] the same deal that a multi-state and multi-billion dollar consolidator will give them,” Roberts said.
The merger points toward a consolidation trend that appears likely to continue for another 5-10 years. During that time, other regional MSOs will become relatively more important, some may be acquired, and some may never be acquired and continue to grow as important players in their region.
According to Roberts, this is the outlook for MSOs:
Gerber Collision & Glass: The Boyd Group in the U.S. is continuing to grow and will continue to acquire new shops.
Service King: Service King has slowed its growth this year, but Roberts’ expectation is that it will raise its capital and re-energize its growth next year.
ProCare Collision and Joe Hudson Collision Centers: These are regional MSOs that Roberts expects will become more important across the southeast region of the U.S.
“Caliber’s strategy is to continue to grow aggressively,” Robert said, “and if you have 12 to 15 percent of the market share, which I believe they do, that gives them much more power than they had before at about 8 percent of the market share.”
