An Expert in Acquisitions
In March, Car Guys Collision Repair announced the acquisition of its 11th location in Central Florida. Dave Mitchell, owner of the Florida-based MSO, is a seasoned veteran when it comes to acquisitions. Not only has he grown Car Guys to 11 locations in the short span of four years, he also ran the $6-million-per-year Dave Mitchell’s Collision Centers, which he later sold. Mitchell then went to work for another MSO, where he helped out with acquisitions. After a year, he was asked to run the company after the leadership team lost $10 million in investor money. Mitchell ended up buying the company out from the investors and built it up to an eight-location MSO that did almost $30 million per year before he sold to Gerber.
Now, he’s on to the next challenge with Car Guys Collision Repair and has already proved himself with rapid expansion that has resulted in a $20-million-per-year MSO. Don’t expect Mitchell to slow down, either—he says that he expects the company to grow even more in 2017. Mitchell discusses his keys to expansion and acquisition.
You’ve made a career out of buying, selling and acquiring for MSOs. What’s your secret?
Running multiple shops is not easy. There are people out there that are trying to buy buy buy and their plan is to sell to a bigger group, which is OK, but to me, it’s not a good strategy if your end game is to rely on someone else buying what you built. It’s important to make sure that you’re buying good companies that are making a profit that you can manage for a long time. If I’ve got a good company, I can keep it in the family for the next 20 years and then if there’s a merger down the road that makes sense, I’ll look into it. This way, you have options. If you’re buying just to sell, it doesn’t leave you with options. I’m not into short-term thinking. I’m always thinking about the long term.
How do you know when it’s the right time to add another location?
I don’t think there’s a magic answer. It all depends on the strength of the team. I’m not talking about only financial strength, but the strength of your people and how they’re being managed. We did four locations in three months and we’re a small group—about 125 employees. If you had asked any of them before we did that if it was a good idea, they probably all would have said no, because it’s true. Sometimes there is no right time. If you wait for the right time, you’ll wait forever because there’s no such thing. However, there are a few pieces of common sense that will help decide. Do you have the money to fund the acquisition? Are you prepared to put in the work? Can you handle negative cash flow for an extended amount of time? An acquisition may look appealing in the beginning, but very quickly it can start burning $20,000 per month and not only are you having to put extra resources into that shop, but you’re having to make sure that you can financially cover it.
What advice would you give to someone that’s on the fence about expanding?
Do your homework. Think it through. Make a financial model—even if it’s just on the back of a napkin. Another big thing is to trust your gut. I’ve walked away from many deals that looked good but just didn’t feel right. If there’s something inside that says you shouldn’t do it, don’t.
What are things you look for in a shop that you’re looking to acquire?
Location is always important. You need to be in an area where there’s a need. An ideal location can mean a great corner on a busy road or it can be located off of the main street but in an area where there’s no competition. One thing that we always look for is the curb appeal of the building. If it doesn’t have good curb appeal, I ask myself if I can remodel it. Another thing to look for is parking. If you don’t have that, people won’t come. Proper zoning is another important factor. A huge one for us is reputation and good employees. If you buy a great store with terrible people, then it’s not really great. However, if you find a store that’s not ideal but you have good people, that could end up being the better acquisition.
Right now, you’re located in Central Florida. Does the geographical location make a difference for you?
Right now, I’d say the furthest north and south locations that we have are 75 miles apart. With my business—it’s my son, JR, and myself—we need to be able to easily drive to and from any location. We’ve had opportunities further north, but I don’t want to have to drive more than a few hours to get to a location. Central Florida is a big market and we still have a lot of opportunities there. We could probably do another 10, 15 locations easily.
Besides cutting down on travel time, what are other advantages to staying in one area?
You can spread the cost of advertising. You might have four stores that can be covered by one radio spot. Two or three locations can run in the same cable TV spot. By being clustered, you can make your advertising dollars go a lot further. It’s also nice because you can have a GM that can oversee multiple stores and get from one location to another in 30 minutes or less.