NEWS
CONSOLIDATION STILL HOT IN FIRST QUARTER OF 2016 BY JEFF SANFORD
T
he pace of consolidation in the North American collision repair space moved ahead at a rapid pace in the first quarter of 2016, with Winnipeg outfit Boyd Group adding as many companies to its chain in Q1 as it added all of last year. “The consolidation activity has been increasing, that’s for sure,” says Brad Mewes, an industry consultant. His firm, Supplement!, recently released a report on Q1 consolidation rates. The Newport Beach-based consultancy finds the first quarter of 2016 was busy with deals happening at a very healthy clip. The report notes that three other companies appear to be growing at a similar pace to previous years and that in the first three months of 2016 the four largest consolidators added 92 locations. This is as many locations acquired in total in all of 2012, says Mewes. “Consolidation in the collision industry continues to march forward at an astounding pace. The largest companies in the industry continue to aggressively grow through acquisitions, or by buying existing collision repair operators. And as these companies continue to aggressively expand we see continued consolidation in adjacent segments that sell into the industry, especially in paint distribution and parts distribution,” reads the report. In the first quarter of 2016 all four consolidators continued to “grow aggressively ... In the first quarter of 2016 the Boyd Group has already added more locations than they added in all of 2015,” according to the data. The strong growth is just another bit of good news for Boyd Group. The company has been basking in the glow surrounding a string of solid positive developments. This winter the company was added to the TSX S&P 50 as a component company, giving Boyd instant new vision and clarity among big institutional investors like pension and mutual funds. Boyd also recently announced that it had generated more than $1 billion in revenue. Mewes notes in his report that the company’s CEO, Brock Bulbuck, believes his company is well positioned to grow “at an average rate of 15 percent a year, or doubling in size again within five years,” or possibly sooner if the company completes any number of large acquisitions. 28 COLLISION REPAIR COLLISIONREPAIRMAG.COM
North American collision industry consolidation continues at a rapid pace. “Whereas 2013, 2014 and 2015 could be described as raucous a very notable shift has taken place in 2016. While the overall pace of acquisitions has not slowed, the clamour surrounding them certainly has,” says Mewes. “Each of the four largest companies in the industry have realized a five year compound annual growth rate in excess of twenty percent. In other words, each has more than doubled in size over the past five years.” Mewes says the North American industry is now a $36 billion one. “The industry, while consolidating, still remains highly fragmented. But while the industry is fragmented, it is increasingly bifurcated into very large and very small,” says Mewes. He expects consolidation to continue. “It is a near certainty that consolidation will continue in collision repair, as well as the sectors surrounding collision repair. Growth by acquisition will continue to make sense for a number of reasons,” says Mewes. “Organic growth is tepid, and claims frequency is generally flat to declining. Acquiring growth is often faster and more cost effective than growing internally ... although both are important ... Industries also naturally consolidate over time.” The automotive aftermarket, including collision repair, paint and parts, is still highly fragmented. The fragmented nature of the market creates inefficiencies in the supply chain. At the same time a growing group of small business owners are approaching retirement. Wellcapitalized and sophisticated buyers are eager to acquire these businesses. Says Mewes, “Many smaller MSOs and single or dual location businesses find it challenging at best to expand same store sales by any amount in the current economic environment. While 2015 was generally an up year for many in the collision industry, many companies, public and private, are hard pressed to consistently achieve a 5 to 7 percent top line growth rate when excluding acquisitions. This is an ongoing testament to the attractiveness of the multi-store business model, even more so when taking into consideration that Boyd has doubled in size in a few short years.”