Driven Brands’ CARSTAR Acquisition Reshapes Industry Consolidation
Driven Brands—an automotive giant that already included organizations such as Maaco, Meineke, 1-800 Radiator and others—announced on Oct. 22 that it had acquired CARSTAR Auto Body Repair Experts from its equity holder, Champlain Capital Partners.
Terms of the deal were not disclosed. Driven Brands reported earlier in 2015 that it did roughly $1 billion in total sales through 1,500 automotive facilities in 50 states and two countries in 2014. The majority of that revenue came on the collision repair and refinish side, mostly through its Maaco and Drive N Style brands.
Now, throw in CARSTAR, its 240-plus U.S. locations, and its recent year-over-year revenue growth (the company is on pace to set new sales records in 2015), and the newly formed Paint & Collision division of Driven Brands is a $1.2 billion vertical, says Jose Costa, former president of Maaco Franchising Inc., who has been promoted to head the division.
The acquisition will have substantial impact on the industry, Costa told FenderBender, but the “three brands will work completely autonomous and independently of each other.”
CARSTAR’s leadership team will remain in place and its franchisee agreements will remain unchanged, CARSTAR CEO David Byers says. And the future of the Driven Brands segment appears bright.
“I’ve said very often that we believe that the collision repair space is going to continue to accelerate its consolidation,” Byers told FenderBender. “I think, in many ways, that can be good for everyone. You’re ending up with a small handful of national brands that are able to compete extremely effectively and be very efficient.
“And with this new ownership structure for us, we have access to all these new resources that can aid our growth in a way that we haven’t been able to do historically.”
The acquisition had been in the works for several months, Byers says, and should come as little surprise to those following the industry.
“We had been owned by Champlain Capital for several years now, which is a private equity firm, and as private equity firms do, they buy and sell businesses over time,” he says. “There’s nothing unusual about it.”
While the three Paint & Collision brands intend to share “best practices where it makes sense,” Costa says the power of the move comes as a “purchasing play.” Prior to the acquisition, Maaco purchased nearly $45 million in paint and associated products per year. Now, that number will be close to $100 million for the division.
“When you get down to it with our [vendor] partners … the conversation becomes a lot more interesting,” Costa says. “That translates into a higher profitability for our franchisees, and at the end of the day, we become a stronger company as a whole.”
The combined resources, experiences and expertise of management will also play a large role in CARSTAR’s continued rapid growth, Byers says.
“I think the big opportunity for us is that this gives us as CARSTAR—and we’re already North America’s largest collision repair network by unit count—but this gives us access to additional resources both at Roark at the private equity level and at the Driven [Brands] level. These [are] resources we’ve never had access to before. And our belief is that that will help facilitate and accelerate future growth.”
Driven (but Different) Brands
Currently, 98 percent of Maaco’s work mix comes from retail and fleet work, Costa says. Barely 2 percent of sales come through direct repair programs.
“That’s virtually the opposite of CARSTAR,” he says. “They might have 90–95 percent DRP work, and very, very little retail. The plan is to continue the business models for each, while adding resources for both to develop and grow.”
The franchisee response, both Byers and Costa say, has been supportive.
CARSTAR franchisees were notified via email a day prior to the acquisition becoming public. Kerry Woodson, a FenderBender advisory board member and co-owner of CARSTAR Jungerman in St. Peters, Mo., says the news came as a surprise, but he doesn’t expect much to change in the near future.
“Over the years, we’ve had a few different financial owners and backers of CARSTAR, and each time it’s been positive and it’s allowed us to be the MSO partner that we are becoming today,” Woodson says.
Woodson, who along with his sister, Toni Donius, was named the network’s 2015 Franchisee of the Year, says that CARSTAR has scheduled an online “town hall meeting” for franchisees on Nov. 10 in which Byers will provide additional information.
Maaco franchisee Brian Greenley, whose Littleton, Colo., Maaco facility is the chain’s top-performing shop, told FenderBender that he and his fellow franchisees learned of the deal while at the company’s annual conference. The response, Greenley says, was positive.
“If we leverage our footprint, our buying capabilities that we have, it’s got to drive costs down for our vendors and they’ve got to use us,” he says.
Between Maaco and CARSTAR, Driven Brands has nearly 600 franchisees, and the goal, Costa says, is to support them all as they grow.
“The main focus here is to drive franchisee profitability, so they can in turn become MSOs themselves and grow and buy more locations,” he says. “This is a move that should benefit everyone involved.”