I’ve been increasingly taken aback by the significant wave of consolidation that seems to be overtaking our industry. It seems like every week a trade publication announces at least one acquisition. As of the end of 2014 the big four (ABRA, Boyd, Caliber and Service King) total number of shops exceeded 1,000.
Within recent months, we’ve seen acquisitions of high profile, large MSOs such as Craftsmen Auto Body, Pohanka Collision, Collex Collision and Keenan Auto Body. While most in the industry have predicted continued consolidator growth, many didn’t see the acquisition of some of these MSOs coming. There are rumors of some very high prices being paid. The acceleration of the movement is staggering. In years past, other significant industry trends and changes occurred over a period of months and years. This one is measurable on a weekly basis.
While it’s admittedly unsettling to many of us in many ways, I’m reminded of the words of the Serenity Prayer, “ give me the serenity to accept the things I cannot change; courage to change the things I can; and wisdom to know the difference.”
To me, wisdom in this case means understanding that this whirlwind of change is something based on economic trends and opportunities that no one can change, even if we wished to. Frankly, it’s hard to blame any shop operator for selling their business, especially when the opportunity may never be better. It’s their chance to reap the benefits of their investment, hard work and risk taking.
To me wisdom is gaining understanding of current trends, and ultimately looking for opportunities.
One can look at other industry consolidation waves for comparison purposes. Examples are all around us, including grocery stores, banking, drug stores, media companies, building material centers, food processors and distributors, department stores, gas stations, auto parts stores, and even auto manufacturers when you look back far enough.
As in other industries, will any consolidators merge or acquire one another?
I am wondering what this trend will do when it comes to power and influence in our industry. While the influence of the consolidators is increasing, at the same time their business models are very DRP reliant, thus making them dependent upon insurers. Will a time come when consolidators use their size and influence to take a more firm position in negotiating with insurers on pricing or other aspects of their relationship? Will insurers become concerned over being reliant on too few repair businesses? At this same time, original equipment manufacturers (OEMs) are gaining influence on our industry through shop certification programs and our increasing reliance on OEM-specific repair methodology information. How will consolidators react? Will insurers accept the increased OEM influence or push back? How about the capital investors? Can they receive adequate returns? If not, how will they react?
How about the large groups like CARSTAR and Fix Auto? Will they continue to be a viable alternative? At the same time there are other networks appearing.
For those of us repairers who are not yet part of the consolidators, what is our best path forward? Grow through acquisition on our own? Seek a niche market model? Compete through superior customer service? Focus on manufacturer-specific work based on OE certifications and dealer relationships? Sell to a consolidator?
While there are countless questions about our industry’s future there are a few things we can be sure of:
1. We are in a whirlwind of change and it is accelerating like never before.
2. Change brings challenges and opportunities.
3. There will be losers and winners.
4. For those of us who study the industry, there has never been a time with more to watch and analyze!