Consolidation has been going on in the industry in the U.S. since the 90s. There have been some major successes as well as some spectacular failures. The collision industry, and the entire automotive industry in general, is not the first industry to ever undergo consolidation. And it certainly will not be the last.
Consolidation has taken place in fits and starts for nearly two decades now. Nearly every current business owner in the collision industry “lived through” the first round of consolidation. Because of this “survivor bias” some feel that the current round of consolidation is destined to fail the way they believe the prior round did.
But as we discussed in the consolidation curve last week, the first round of consolidation in an industry is marked by fits and starts. It is rare for a $30 billion industry to transform from a highly fragmented industry to a fully consolidated industry overnight.
Consolidation will continue. The current round of consolidation is driven by a number of factors. There are financial forces driving consolidation as well as more strategic industry shifts. As the industry matures, this round of consolidation is creating a major impact in a way that the first round of consolidation in the 90s and early 2000s did not.
Where are we now?
The industry as a whole is well into Stage 2 Acquisitions and headed to Stage 3 Expansion. But depending on where you are located in the country, your specific area may be in the early stages of Stage 2, already beginning Stage 3 or perhaps still in Stage 1 Fragmentation (Subscribers feel free to email me directly to discuss your individual market).
The four largest consolidators continue to grow market share, primarily through acquisitions and to a lesser extend brownfields and greenfields. These companies are consistently growing at annual rates in excess of 25% annually. The Boyd Group doubled in size in two short years, increasing sales by nearly $400 million from 2012 to 2014. It is likely that the Group will reach $1 billion (Canadian) in sales by the end of 2015, as will ABRA, Service King and Caliber. The large consolidators are clearly focused on building scale.
The large consolidators continue to pursue platform acquisitions as well as individual acquisitions. Platform acquisitions give the large consolidators the ability to rapidly grow revenues. They also present cost saving opportunities. Consolidators can manage costs by utilizing existing regional management and eliminating redundant overhead (i.e accounting, HR, marketing, etc.) when purchasing a larger platform.
