Focus Advisors Automotive M&A on the Rewards of Scale and Collision Industry Market Dynamics in 2024

David Roberts, the founder and managing director of Focus Advisors Automotive M&A, presented the collision repair industry’s market update at this year’s MSO Symposium in early November in Las Vegas. Roberts addressed an audience of more than 400 attendees in his presentation titled “Scale and its Rewards: Industry Landscape and Market Dynamics”. He set the tone from the start, stating, “to succeed in an industry where complexity and access to repairable vehicles are ever more challenging, operators with scale will continue to grow and thrive.”

Key Trends in the Collision Repair Industry

While the changes to the collision industry so far in 2024 have been less dramatic than in the last few years, the changes that have happened are that the industry seems to be normalizing more towards pre-COVID conditions. Meanwhile, vehicles have grown in complexity. Scale and specialization play pivotal roles for the operators that want to compete.

•  Revenue Changes: The collision repair industry has seen softened revenues throughout 2024. Revenues are flat or down for many, and up only for a few exceptions. The cohort that has seen their revenues decline most dramatically are the single shops. WIP is down across the board, returning to more normal levels after the exceptional post-COVID period. In a similar trend, labor rate increases are returning to normal, and there are just fewer repairable vehicles, prompting shops to focus more on getting the work. While WIP and labor rate increases are normalizing, the average total cost of repair is still up 3.7% year-over-year, now exceeding $4,600.

• Shop Numbers: The two dynamics of a revenue slowdown as well as consolidation within the collision repair industry have resulted in a decline in single shops. Focus Advisors anticipates there were nearly 800 closures of smaller, independent shops this year. Medium and large MSOs, meanwhile, are better poised to grow; Roberts said, “Independent MSOs with four to six shops—and especially those with seven or more—are not just surviving; they’re thriving,” The consolidators and larger independent MSOs are able to grow their market share by focusing on advanced repair technologies and operational efficiencies, which most often come from scale.

The Consolidation Landscape in his MSO presentation last year, Roberts introduced the “Fish Scale” that classifies the collision repairers in terms of their size. The “Whales” consist of the “Big Five” consolidators: Caliber, Crash Champions, Gerber, Classic Collision, and Joe Hudson’s. As of 2024, their cumulative market share comprises 30%. Throughout 2024 so far, their collective footprint grew 13%, from 3,512 shops to 3,842, through a mix of acquisitions and real estate development.

Caliber Collision stands apart within the “Whales”, as they have over 1,800 shops. Roberts commented on Caliber’s enormous scale, saying, “you take a breath, and Caliber’s added another shop. ” He continued, “they’re opening more brownfields and green fields, while continuing to acquire mostly single shops with impressive speed.”

Figure 1: Collision Repair Shop Holdings by Consolidators (as of 11/1/24)

Two other “Whales”, Classic Collision and Joe Hudson’s, each grew their shop counts by north of 22% throughout 2024, almost exclusively through the acquisitions of single shops or MSOs. This pace of growth in shop count was almost three times that of Caliber, Gerber, and Crash Champions. But arguably a more remarkable trend of 2024 has been the breakneck expansion of the “Sharks” cohort, that Roberts introduced last year as the seven fully- or newly launched MSOs with private equity sponsors. These seven are: Quality Collision Group, CollisionRight, Kaizen Collision, VIVE Collision, OpenRoad Collision, Puget Collision, and BrightPoint Auto Body. Collectively, they have almost 3% of the total market share across376 shops. Collectively, they’ve added close to 100 shops this year, the vast majority through acquisitions. In terms of how they’re financing their rapid growth plans, most of the “Whales” and “Sharks” had liquidity events in the last year. VIVE was acquired by Greenbriar Capital. Crash Champions refinanced their debt with Clearlake Capital. Caliber Collision did a dividend recapitalization with Hellman & Friedman. CollisionRight was sold to Summit Partners. Kaizen was sold to Kinderhook Industries. And Texas Pacific Group acquired Classic Collision. All of this means these consolidators have deep pockets and mandates to grow rapidly.

The benefits of scale are seen northward in Canada. Some of the largest independent MSOs in Canada are the private equity-backed LIFT Auto Group, Craftsman Collision, and Kirmac Collision, all concentrated in British Columbia. Meanwhile, the Fix Auto, CSN, and ProColor networks have continued to grow throughout the year. The Carstar franchise has grown its footprint in Canada, with about 320 locations. Another franchise, Simplicity Car Care, has grown from 60 locations in 2021 to 101 at the time of Roberts’s presentation, their geography focused mostly on Ontario and Quebec.

Independent MSOs: A Growing Force

Roberts stated in his talk, “we’re really here to talk about the independent MSOs”. Independent MSOs with seven or more shops now number 48, up from 43 last year. If one were to count all independent MSOs that are neither “Whales” nor “Sharks”, there are nearly 800. Collectively, they generate over $8 Billion in revenue, matching the total revenues of Caliber Collision.

Figure 2: Summary of US Independent Regional MSOs in 2024 (as of 11/1/24)

Roberts emphasized the entrepreneurial vision driving their success, stating, “It really comes down to the vision of the entrepreneurs and the opportunities they see in their markets.” Each of the independent MSOs has its unique “playbook” of how it’s able to compete in its market. To name a few playbooks, some focus on OEM certifications, others on EVs or fleet work, while others either acquire distressed single-shops and turn them around, or alternatively, build their own shops from the ground up.

More specifically, Roberts mentioned a few examples:

1. G&C in California grew from 31 shops last year to 43 at the time of the MSO Symposium.
2. Carstar Chilton, the largest Carstar franchise nationally with 19 shops in Northern California.
3. Levander Auto & Body Shop grows in the smaller cities of Nebraska and Kansas.
4. TAG Auto Group out of Indiana grew their shop counts as well as their calibration centers.
5. Texas Collision Centers, which grew from 3 shops to 12 locations in the last year, largely through real estate development.
6. Body by Cochran is a dealership-affiliated body shop that is now one of the largest MSOs in the country outside of the Pittsburgh area.
7. Moody’s is a 14-shop MSO in Maine that is owned through an Employee Stock Ownership Plan (ESOP).

Private Equity’s Playbook

The collision repair industry remains highly attractive to private equity investors due to its strong existing returns and the tailwinds PE firms see in the collision industry. Roberts saidthat Focus Advisors has received inbound interest from over 50 PE firms interested in the space. PE-backed consolidators are using acquisition strategies and operational improvements to achieve the end-goal of significant EBITDA growth and higher EBITDA multiples.

Figure 3: Private Equity Owners and their Collision Repair Platforms (as of 11/1/24)

• PE’s Perspective: Roberts walked the audience through a typical PE strategy playbook to illustrate why there’s been so much interest. In this example, PE firm would start by buying a collision repair platform doing around $6 M of EBITDA. They would pay around eight times EBITDA for this, so would initially deploy $48 M.

• Over the firm would seek to add 30 shops generating around $500K of EBITDA for around five times EBITDA. Why the lower multiple? These would be add-on acquisitions, and would therefore be smaller shops, valued at lower multiples than the initial and larger “platform”. With that acquisition strategy, they’d deploy another $75 M.

• At this point, they have invested a total of $123 M. Using their acquired footprint, they would aim to grow total revenues by 20% in a period of approximately five years, while also improving shop EBITDA margins by around 2%. At the end of five years, they’d aim to have $30 M of EBITDA.

• Now, with their enhanced EBITDA and footprint, they anticipate re-capitalizing at 10X EBITDA, or $300M, generating an absolute gain of $177M and an absolute return of 143%• This return on equity is amplified significantly when the PE firm places a significant amount of debt on the investment; a typical deal would have a leverage ratio of around three-to-one. Roberts emphasized that this playbook is what has driven PE to continue to try to enter this space. While the financial structure is compelling, he also articulated some of the risks of this industry, citing:

• Acquisitions cost more than expected

• Key management leaves

• Increases in labor costs and parts costs push down margins

• Industry revenues slow down

• Insurance companies apply downward pressures on margins

Case Studies in Scale

Roberts shared four case studies of how independent regional MSOs can scale to drive success. One of the four was about a single-shop operator that has focused on a single brand of vehicle. Roberts introduced this “Single Brand Scaling” case study by saying “this owner spent three years experimenting, and by focusing on fewer brands, he unlocked remarkable efficiencies.” He pointed out that this operator started focusing on identifying one single car brand that was prevalent in his and then finding efficiencies in repairing that vehicle in every possible area. Between 2022 and 2023, the owner continually honed his process, and he was able to grow annual revenue from $5.7 M to $12.5 M. His model achieved an astounding 56% gross profit margin and in 2023, this operator achieved 32% EBITDA margins.

Figure 4: Focus Advisors Case Study on “Single Brand Scaling” Concept (as of 11/1/24)

One of the other case studies was on G&C Auto Body, the largest independent MSO in the nation, run out of Northern California. This family-run MSO scaled to 43 shops without any PE backing, using solely cash flow and strategic acquisitions. Roberts commented, “They find owners looking to exit, bring in DRPs, new managers, and double or triple the value of those shops,” Over time the three Crozat brothers and their team have built out a real estate capability and have used that to develop more shops to their specifications. The business now produces over $175M in annual revenues, largely due to keeping a low-cost basis on their acquisitions and increasing their revenues by layering in DRPs.

Figure 5: Focus Advisors Case Study on G&C Auto Body and its “Arbitrage Scaling” Concept (as of 11/1/24)

Outlook for the Future

Through the specific case studies as well as the statistics on the bigger-picture of independent MSOs, it became clear that there are still many paths for the independent MSOs to compete against the national consolidators or PE-backed “Sharks”. By focusing on a specialized strategic playbook and their economies of scale, these independents can grow their market share and EBITDA margin. And with the increased interest by existing buyers and PE firms hoping to enter the industry, that higher EBITDA commands a higher EBITDA multiple – whether an owner of an independent MSO seeks growth capital or an exit. Roberts concluded his presentation by providing some predictions for the collision repair industry. In the near-term, he foresees:

• Insurance companies will raise rates, deductibles, and squeeze collision repair providers

• Vehicles will grow in complexity

• OEMs will raise certification standards, training, equipment requirements, and they will limit access to parts

• Consolidators will invest more in highly certified repair facilitators

• Competition for highly trained technicians will become more fierce

And over the next decade or so, he anticipates:

• There will continue to be conflict between OEMs and insurers, with more power going to dealers and OEMs

• That will encourage MSOs to focus more on certifications and closer associations with dealerships

• 1,000 or more shops will exit each year over the next five years

• The retrenchment of electric vehicles is temporary and EVs will come back

• Self-driving vehicles will proliferate in urban areas. They could disrupt repair volumes due to lower collision rates.

• The best repairers will become super-efficient while simultaneously becoming super capable

• OEMs will increase their commitment to their own captive insurance companies

• Consolidators will achieve more than 50% market share

• Large regional MSOs will increase as more capital and more M&A will enable growth

• There will be increased responsibility for settling claims at the MSO- and consolidator-level

Roberts concluded with a reflection on the opportunities for collision repairers at scale: “The best repairers will need to be super-efficient. Consolidators and independent regional MSOs with a focus on the most advanced skill sets and certifications will dominate.”

About Focus Advisors:

Focus Advisors (www.focusadvisors.com) is the collision industry’s leading M&A advisory firm, partnering with independent MSOs between $10-100M in annual revenue, helping owners achieve maximum value through strategic growth and exits. Unlike traditional business brokers or large investment banks, Focus Advisors specializes exclusively in collision repair — giving owners unparalleled insight into value, interest, and opportunity timing. With over 25 years in the industry, Managing Director David Roberts has led more than 40 transactions totaling over $500 million in transaction value and more than 325 collision repair shops, including Tripp’s Collision, Pride Auto Body, Painter’s Collision, Mills Body Shops, and Master Collision.

Investment Banking Services and Securities offered through Independent Investment Bankers Corp. a broker-dealer, Member FINRA/SIPC. Focus Advisors is not affiliated with Independent Investment Bankers Corp.