Search Funds and the ‘Silver Tsunami’ in Collision Repair (article continued)
A scalable business model.
Search funds typically look for businesses that have a business model that can be easily replicated or scaled up, as this can be a key factor in driving growth. The path to growth lends itself well toward scalability, but make sure processes are in place for a strong foundation to allow for growth.
In short, search funds are looking for businesses that have the potential to grow, generate a return on investment for their investors, and have an attractive market for when the time comes to sell. Collision repair, or at least the strongest businesses out there, seem to check many of the boxes on the searcher wish list.
In closing, the impending silver tsunami will likely only accelerate the trend of an active M&A marketplace for collision repairers. While the market is currently ripe, those owners willing to wait another five or 10 years to exit should be fine, as long as they’re willing to invest in their people and the technology needed for today’s---and tomorrow’s---vehicle repairs.
Keep in mind, however, the next wave of buyers may not view your collision business the same way as today’s consolidators. They’ll view it as a standalone business, requiring strong financial performance and business fundamentals, more than they will view it as a grab for national market penetration, where the business requirements may be less stringent.