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Wednesday, 20 December 2017 18:56

Selling, Buying or Expanding Your Business Is Not DIY Project

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David Roberts is the former Chairman of the Board for Caliber Collision and now owns Automotive Group at FOCUS Investment Banking. David Roberts is the former Chairman of the Board for Caliber Collision and now owns Automotive Group at FOCUS Investment Banking.

Twenty-two years ago, David Roberts was the Chairman of the Board for Caliber Collision Centers, Inc. when he wrote an article in Autobody News

The article, titled "Shop Consolidation, Is It Inevitable?", makes him look like the Nostradamus of the collision repair industry. 


In his column, Roberts accurately predicted that consolidation was indeed unavoidable. He saw two factors driving this process. Insurance companies were already pressuring shops to cut costs, improve efficiency and assume many of the adjusting and administrative functions. Roberts also envisioned a rapid increase in the sophistication of shop technology, which would require more expensive equipment, tools, processes and training. As a result, he predicted many of the 54,000 shops in the industry at that time would be absorbed by consolidators or close their doors because they couldn't afford to make these investments. 


In 1995, he co-founded Caliber Collision, the world’s first collision repair consolidator. As Chairman of Caliber through 2003 and the initial leader of its Corporate Development team, Roberts wrote the book on how to change, grow and thrive in this intensely competitive industry. Helping raise more than $125 million in capital for Caliber, he also led the acquisition of 37 individual shops and Multiple Shop Operators while at Caliber.


In 2003, Roberts stepped away from his role at Caliber and formed the Automotive Group at FOCUS Investment Banking, a team of six professionals with deep experience advising on mergers, acquisitions and capital formation to automotive investors, collision repairers, distributors and dealerships. 

 
Q: How were you able to forecast the future of the industry so precisely more than two decades ago? 


A: Some of it was luck, but much of it came from my experience in the medical industry years before. I saw what was happening there and figured it might go the same way in the collision repair industry. And we were right, in a lot of ways. I thought it was going to happen more quickly, but what has occurred is very close to what we envisioned. I don't know if we organized the consolidation parade, but we were certainly able to get out in front once it started.


Q: What were some of the biggest changes that enabled the consolidators to grow and capture more of the market?


A: When that article was written, there was a very adversarial relationship between the insurers and repairers. They just didn't trust each other. Insurers always held a hammer over the shops. The shops fought back by making sure that they got every single dime out of every transaction, one way or another.  DRPs were just getting started and we recognized their potential to help control costs and reduce friction---and get more cars to repair. It took a long time for providers like Caliber to organize and perform on their promises---and to convince the insurers they could be trusted as partners. Today, as the insurance industry goes through its own consolidation with huge cost pressures, they are much more willing to send more and more transactions to their DRP partners because it allows them to reduce their costs and improve service. And it’s not just the consolidators, but also other MSOs and high performing independents that are benefitting as well. Today, the top 300 consolidators and MSOs fix 40 percent of the repairable vehicles and make 80 percent of the profits in an industry that has shrunk by 20,000 shops over 22 years. 


Q: What do you do now at FOCUS Investment Banking?


A: We represent collision repairers, paint jobbers and car dealerships in raising capital and selling to consolidators, other MSOs and private equity firms. Over the last three years, we've sold nearly 100 shops and paint distributors, including some of the largest transactions in the industry.  We also advise many Twenty Groups, conferences and investment firms, helping them understand what’s going on across the entire automotive ecosystem.  And we currently advise some really fast-growing MSOs that are seeking strategies and capital to “grow and thrive” and compete with the big guys. For other clients who know they are not positioned to grow or have decided to exit the industry, we help them navigate the sale process, find the right partner and maximize their return. When they ask us for advice, we don’t sugarcoat it. It’s a tough industry today and if you don’t have the drive, capital, management and scale to compete, oftentimes the best decision is to sell.


Q: How do you know which shops are prime to be sold and/or acquired by a consolidator?


A: We’ve built a proprietary database that has information on literally every shop in the US. With all this data, we can pretty much slice and dice the entire industry with useful information about the shops' volumes, the paint they spray and their paint distributors, their DRPs and their competitors. We also track every transaction and shop opening, including brownfield and greenfield locations. This allows us to produce a very robust picture of where acquirers are headed, the kinds of shops they are acquiring and information on the values they are offering to sellers. 


We’ve established trusted relationships with key executives in the pool of acquirers---from consolidators to large MSOs to private equity firms. Because we understand the strategies, goals and criteria important to each of these potential acquirers, we know it’s not one size fits all. Sometimes the best fit for a seller may be a regional MSO or market competitor rather than a consolidator.  This unique set of data, knowledge and experience helps our clients get better positioned for selling their businesses.


Q: Why do shop owners decide to sell while others want to build and grow?


A: Some operators have kept up with the dramatic industry changes and built large and still-growing MSOs. Others have found it more difficult and are trying to figure out what's next. Increasingly, owners who are looking to exit their businesses reach out to us with questions about their value, the right time to sell, the right way to go about selling, whether they should sell their real estate along with the business, who is the best acquirer, who will take the best care of their employees. Many growing MSOs want to learn more about their markets, how they can access growth capital and strategic advice on the best ways to do that. 


A lot of the shops that ask us about their next move have already decided to sell their business. Sometimes it’s after a consolidator has approached them, looking to buy, made an offer or asked them to name a price. Most often, they are looking for us to confirm their decision and help them through the process. 


Somebody who has spent their entire life building a business doesn't want to make a mistake when they sell.  They want to take care of their employees and they don’t want to sell for less than they’re worth.  Some have unrealistic ideas of their value, while others undervalue their business.  Some are worried that they can't retire on what they think they will get, but they also realize things aren't going to improve by ignoring reality. So we give them the facts as opposed to wishful thinking. The decision to sell is as much an emotional one as it is financial.  It's never easy to move on to the next stage of life.  But our job is to help our client navigate through all of this, with information and experience they can't find anywhere else.

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