We occasionally share our observations about events and developments in the collision repair industry. We think the recent sale of Collision Works to Gerber is illustrative of how large MSOs are creating value for their owners. - David Roberts
Gerber’s recent acquisition of Collision Works (CW) is the largest acquisition of an independent MSO in the last three years. Combined with the acquisition of John Harris Body Shops in South Carolina, we estimate Gerber has added nearly 10% to its overall revenues with these two large acquisitions. These two acquisitions by Gerber reflects the continued strength of large consolidators in growing their businesses. It takes a lot of revenue to move the dial on a big enterprise like Gerber.
We estimate Collision Works’ revenues in the $100 million range in Oklahoma and Kansas, three fast-growing Midwestern markets (Oklahoma City, Kansas City, and Tulsa, Oklahoma), and a host of smaller adjacent markets. John Harris operated 16 shops with an estimated revenue of $40 million with large and small shops across South Carolina and parts of Georgia.
Growth of Collision Works is a template for other rapidly growing MSOs
Jake Nossaman and his team built a solid foundation, beginning with large well-located operations in and around the Oklahoma City market. They continued to grow with both greenfield and acquisition strategies. CW entered a second large market, Kansas City, with a greenfield development and proceeded to acquire shops in and around that market. With an eight-shop MSO acquisition (Auto Craft), CW expanded its reach into the Wichita market and continued adding single shops to reach the full complement of 36 shops upon its sale to Gerber.
To finance some of its initial growth, CW teamed up with a substantial capital partner, Bank of Oklahoma. In 2019, it refinanced its real estate portfolio to acquire $50 million in additional capital, and used these resources to pay down debt and continue buying and integrating shops across their markets.
Exit Strategies
Along the way, Collision Works also looked at the possibility of joining forces with a very large private equity firm. In the end, because of its scale and infrastructure, Collision Works had multiple exit opportunities – from selling to a consolidator to recapitalizing the company with a large private equity investor, to merging with other strong operators.
With few remaining regional MSOs left in the U.S. approaching the size of Collision Works, we expect the scarcity value will allow those remaining operators with more than $50 million in sales to continue to find enthusiastic buyers – or private equity investors.
For rapidly growing regional and super-regional MSOs – scale, infrastructure, relationships with insurers and access to capital will be the primary elements determining future success.
