FOCUS Advisors’ David Roberts talks with ABRN about Fix Auto USA/ACAB sale to Driven Brands

The sale of 79411 Inc. dba Fix Auto USA, and its largest MSO franchisee, Auto Center Auto Body Inc., to Driven Brands, a portfolio company of Roark Capital, was announced this week by FOCUS Advisors, which advised the sellers on the transaction.

“Together with CARSTAR and their recent ABRA franchise acquisition, Driven Brands is now positioned as the primary home for operators that want to remain independent in a time of accelerating consolidation,” said David Roberts, managing director of FOCUS Advisors, in a company news release provided to ABRN. “Additionally, the acquisition of ACAB positions Driven to begin building its own consolidation platform.”

Fix Auto USA, the U.S. licensee of the Fix Auto brand, has 152 franchisees. Auto Center Auto Body, a nine-location MSO in Southern California owned by Fix Auto USA founders Erick and Shelly Bickett, was mentioned in the news release as one of Fix USA’s top-performing operations. Driven Brands operates more than 3,100 auto aftermarket locations in seven separate firms, including collision repair franchisors CARSTAR, ABRA, and Maaco.

ABRN talked with Roberts about what the sale might mean for the collision repair industry, and also about the current and near-future business climate of mergers and acquisitions in collision repair, including what effect the coronavirus pandemic may have on those.

“It’s a strategic acquisition by a well-funded, forward-thinking private equity firm that owns some of the biggest aftermarket service firms in the country,” Roberts said. “They are pretty optimistic about the future of the industry. And they now own four different collision repair offerings, which gives lots of folks opportunities to decide where they want to find a home. We think our clients were well positioned and had excellent operations, and that was recognized by the buyer.”

Fix Auto USA CEO Paul Gange said in the release that company personnel have been “impressed with their increasing professionalism and marketing impact.”

He expects that while Fix Auto USA will remain an independent Driven brand, he looks to “gain access to industry-leading franchise expertise, synergies, and capital to accelerate and successfully manage the next phase of Fix USA’s growth.”

How Driven might build a consolidation platform with ACAB purchase
Asked how Driven might use the ACAB purchase to build a consolidation platform, Roberts said it’s a departure from other Driven-owned company operations that may offer additional opportunities to franchisees looking to sell.

“Driven doesn’t yet own many company operations in collision repair,” Roberts said. “But they have a lot of franchisees, and sometimes their franchisees want to leave and sell their businesses. Heretofore, Driven hasn’t said, ‘Well, if you want to sell, I’ll be happy to buy you, and I will run your businesses because I love your business and I know a lot about it as your franchisor.’

“When some of the big CARSTAR franchisees were sold, they were sold to Caliber, or Gerber, or somebody else. Now with Driven starting to run company shops, you have another opportunity. If you’re a franchisee and you’re 68 years old and you’ve got a really nice business but you're ready to leave, your franchisor now has the capital to buy you. And that means it’s probably a very friendly transaction. It may give you just as good a value or maybe it’s a little discount in value, but it’s an opportunity for an exit by franchisees.”

Erick and Shelly Bickett, co-founders of Fix Auto USA, opened their first Auto Center Auto Body shop in 1984. They also co-founded CIECA in 1995, Cyncast in 2000, the CCI training institute in 2015, and will both continue to advise Driven Brands.

“For years, we’ve contemplated how independent operators could continue to do what they do best and still have the opportunity to access capital and exit their businesses when they were ready,” Erick Bickett said in the news release. “We have worked with Dave Roberts over many years to help craft our strategy and ultimately represent us in our own exit event. The current climate made the combination more challenging, but we are pleased to cement this vital partnership with Driven.”

Shelly Bickett was described in the news release as “instrumental in growing ACAB to one of the top-performing collision businesses in the highly competitive Southern California market.”

“Erick and I created Fix Auto USA to provide the kind of scale and professional support for smaller MSOs and individual shops that allowed them to effectively compete against the consolidators,” she said. “With new capital and an expanded team, we expect to continue and expand our competitive position in the California market.”

How the consolidation market differs today
Roberts co-founded Caliber Collision in 1997 and led acquisitions for the company, adding 37 shops before selling the company in 2008. He said consolidators today are more astute in examining potential purchases.

“The difference is better informed buyers, and you know - somewhat somewhat tongue-in-cheek - the sellers are better informed as well, because people like us are representing them. And so sellers are better prepared to have an engagement with the acquirer. Our clients are very well prepared, and they’re very well represented, because it’s their life’s work. I think the difference is much higher skill levels on both sides.”

Increasing challenges for smaller collision repair shop operators and the availability of private equity funds for consolidators mean this trend will likely continue, Roberts said. “There are probably five big regional MSOs that are growing fairly quickly, and they are people, for the most part, who are skilled at making acquisitions and doing really excellent due diligence on their acquisitions. Our long-term belief for the changes in the industry is that there are not going to be just two big consolidators or three big consolidators, but there are going to be some very large regional folks as well.”

For the past 25 years, the number of locations in the industry has been shrinking steadily, Roberts noted. And because of capital requirements, certification requirements, and getting access to repairable vehicles, it’s gotten ever more difficult for single shops and small MSOs to compete.

“It’s getting harder and harder to be small. If you’re small, you want to join together with other people who are getting together to become more effective by having common protocols, by having common information systems, by marketing together, by going out to insurance companies together, and by holding themselves to higher standards.

“We think for the folks who are trying to figure out what the future holds, becoming a franchisee may be just as attractive if you want to stay in the business, or more attractive, than selling out to somebody else. We think the big are going to get bigger, but there are going to be a lot of strong regionals. I don’t know whether there will be 10 of these strong regionals or whether there will be 40 or 50. But for the smaller operators, it means you're going to have to find a place to call home.”

How the current coronavirus pandemic could shape the collision repair landscape
The coronavirus pandemic crisis facing the nation means that sales volume is down an average of about 50 percent in the past 30 days, Roberts said.

“Anytime there's economic disruption, there are positive things for some people and negative things for probably a whole lot more people. There’s a confluence of impacts on the collision repair industry, including autonomous features in vehicles that are reducing collisions. The cost of the repairs is going up fairly dramatically because of the systems and the vehicles.”

In comparison, the 2008 recession caused sales to be down 30 percent for many collision repairers. Some of them learned what it took to endure. That experience will be invaluable in the current crisis, Roberts noted.

“Some people have a playbook from 2008; they know how to get smaller and still be successful. There are other people who have no clue, because they weren’t in the business or they weren’t operating at the same scale in 2008. Now that they’re bigger, they don’t know which way to jump. I think that makes it much more difficult for some people to stay in business.”

At the end of the crisis, many companies will emerge much weaker, Roberts predicted, although the ones that have “figured out the playbook” will be “doing fine.” Those with access to capital will position themselves to buy some of the more attractive, smaller MSOs or merge with some of the more attractive bigger MSOs, he said.

“Sadly, a lot of people who were building their business so they could sell it and retire are going to have to decide whether to stick with it through a long recovery or just pull the trigger and say, ‘Okay, I’m getting out.’ And some will find out the value of their business isn’t what they thought it was going to be.”