Service King CEO Chris Abraham deemed the purchase a “merger” and said from a day-to-day operations perspective, it will be business as usual. “It is exciting to be recognized by the financial community, but it really doesn’t change anything that we are doing from management to operations to our growth plans and strategy. It really is a great opportunity for all of us to continue to build a great company and help our business partners, insurance partners and customers have the choice that they are looking for and provide the performance, operational excellence and great customer experience that we think we deliver,” he says.
Blackstone, the largest private equity group (PEG) in the US with $66 billion in assets, purchased the stake from The Carlyle Group, who will continue to maintain a minority ownership position, Abraham said. Financial sources have reported that Service King was valued at $650 million in the deal. Abraham would not specifically comment on the financial details of the deal, but did says this figure “is probably a little off.”
In mid-2012, Carlyle acquired a majority ownership stake in Service King. At the time, Service King operated 47 collision repair shops in Texas. Now spanning 177 locations in 20 states, Carlyle is anticipated to recoup four times its initial investment, according to The Wall Street Journal.
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“They have been everything they said they would be to us from the standpoint of support, general resources and providing the capital for growth,” Abraham said of Carlyle. “They are the financial guys and we are the operators of the business, and they will act accordingly in terms of their involvement in our day-to-day operations. They have been very supportive, but they really let management run the business.”
Abraham will remain on the board and as company CEO, and Service King internal shareholders will also stay in place in a minority ownership position.
“Shareholders will have the opportunity to stay invested in the company. For us, it is part of our heritage and history; Founder Eddie Lennox developed a shareholder program for us 14 years ago,” Abraham says. “Carlyle has recognized the value of ownership for our management team, and Blackstone is recognizing it as well. It is a very powerful thing. A lot of effort has gone into not only maintaining this, but enhancing it.”
Blackstone owns companies including SeaWorld, Pinnacle Foods and Michaels craft stores and has invested in companies like Crocs. Abraham says their and other PEG involvement shows the strength of the collision repair market. “Our industry is finally being recognized after 20 years of talking about consolidation, to it actually coming to fruition. It has taken a long while for our industry to really move into this consolidation mode. It is finally getting its due as a noteworthy industry to be in,” he says.
Service King plans to continue the explosive growth it has seen over the past two years, and Abraham says company success hinges on the strength of the team. “It comes down to a talented and tenured leadership team that has been with the company for many years. We continue to surround ourselves with good people as we grow. It is about having the right financial partners. Carlyle has been spectacular; Blackstone will be no different. It is about knowing what you don’t know and surrounding yourself with people who do know,” he says. “It really comes down to a bunch of hardworking individuals we’ve had. Going back to Eddie Lennox, our founder, and his work ethic. He instilled in all of us hard work and dedication. If you have both of those, generally the end result will pay off. “
For the near future, Abraham said the company’s growth plans will focus on their recent acquisition of 62 Sterling Collision Centers locations in 16 states. “We made a significant investment with Sterling Collision Centers; it would make sense for us to focus our growth on the markets we have just entered in that acquisition.”
In related PEG involvement in collision repair, ABRA Auto Body & Glass, another major MSO, is up for auction by Palladium Equity Partners. ABRA operates more than 200 stores in 17 states. Sources familiar to the matter say Palladium coud get more than $500 million in the sale, according to the Wall Street Journal.
