M2 Collision Centers bills itself as Athe largest chain of collision repair facilities in the West.@ With 26 repair centers plus two drop-off locations, consolidator M2 is in fact the largest operator wholly within California, repairing over 45,000 cars last year. Its locations range from the Bay Area to San Diego.  

Customer entrance features efficient, contemporary look.

M2 centers are very large. Rancho Margarita, 25,000 sq. ft.

Large, paved storage lot avoids constant jockeying of vehicles.

M2 customer reception - first impressions count.

“What signals out M2 from other body shops is the sheer size of the facilities,” noted Larry Irvine, vice president of marketing.

It’s been almost two years since M2 last whetted its appetite for acquisition, purchasing Exclusive Auto Body in Van Nuys and Burbank in July 1999.

After opening its doors in October 1996, Santa Monica-based M2 moved quickly to buy up larger shops and small chains around the state. When it got a second round of financing, $90 million in May 1999, the company said it would use the money to acquire five centers and complete two that were already under development.

In fact, it has since completed a huge 35,000 sq ft center in San Diego, replaced its facility in Rancho Santa Margarita (Orange County) with a 25,000 sq ft facility and, just this month replaced its Fremont center with a new 23,000 sq ft building. Since the financing deal, however, M2 has purchased only the Exclusive Auto Body operation in Southern California and one large shop ($5 million/15,000 sq ft) in the Bay area, AutoXcellence of San Ramon. So what=s going on?

Greenfields, brownfields

"We spent the last 15 months focusing and working on operating models,” said CEO Hunt Ramsbottom.

“We’ve been rebuilding, working on consistency between centers,” said Rick Furlong, who at age 37 became vice-president of operations in March of this year. "I think we’ve slowed down on acquisitions because it=s not necessarily the best way for us to grow. If we pay top dollar for a shop that is already producing at capacity, and have no room to grow in it, then what have we bought?” Furlong explained that the company no longer has a need to “buy” customers, and indicated that M2's current direction is to find out where its insurance partners require service for their insureds, and then build a state-of-the art repair center.

Mike Austin, VP of corporate development calls this philosophy “greenfield development.” Said Austin, “We find land somewhere that we want to be (a “Greenfield” and build a special purpose building for a body shop, not just adapt somebody’s existing industrial building. That’s assuming of course, that we can get the necessary permits for spray booths and that the power company agrees to provide us with service, which today is anything but a certainty.” The company just broke ground for one such facility in the Palm Springs market which, when completed in November will be 22,000 square feet.

“If we are going to buy a shop, then we=re looking for what we call >brownfields,’” said Furlong. A brownfield is a repair center with significant under-utilized capacity that will allow for growth.

"The revenue goal for each center is A$20 per square foot per month,@ according to Furlong, who said that can be hard to attain in a small facility.

“We're still looking at some deals for existing shops where we don=t have a presence, and where we could use them as a base upon which to expand,” noted Austin, who also said that in some markets, buying an existing shop is the only way to be assured of getting all necessary operational permits. And like any business, shops all come with “cultural baggage B so it can be a lot easier to grow your own.”

Ready to grow - people needed

Don=t let the slowing of acquisitions fool you. M2 intends to grow from one end of the State to the other. “And that presents opportunities for the right people” said Furlong. “We have General Managers (the GM is the center manager at M2) who earn in the top ten percentile of our industry,” said Karen Wiktorowicz, vice president for human relations.

“We train our GMs to run their center like it’s their own business. And that means we share our numbers with them,” remarked Furlong.

Sharing the numbers is not typical at most shops, said Furlong, and he should now. For a young guy, he=s been around. He started doing body work for free at age 14 when he found a shop that would teach him. “I was a combination man. I could do metal work, frame work and painting,” said Furlong, who worked at Holmes Body Shops in LA for ten years, becoming a shop manager in his mid 20's before he left to go to University of Southern California, where he earned a degree in business. After college he worked with industry leader Ted Hill at ASG developing software for body shops. Hill also owned a body shop which he sold to M2 and was, until recently, a part of the M2 management team.

With a degree in business, it comes as no surprise that Furlong teaches his managers to understand and manage with numbers. “We pay them a salary, which is based on experience plus time with the company, plus a bonus based on what we call controllable profit. It’s made up of all the revenue and expense items on the P&L that they can exercise control over,” he said. M2 managers learn, for instance, that paint/materials sales should be 10% of their total sales, while labor needs to stay at about 45%.

But aside from numbers, with over 700 employees in the company, building a spirit of teamwork and cooperation is crucial, according to Furlong. Furlong said that M2 pays very competitively, but that feeling like they have a strong connection to the company is also key to reducing turnover. “We need to make our people feel like part of a team, and let them know that we value their work.”