Focus Advisors anticipates a continuation of significant consolidation in the collision repair industry this year.

Senior Associate Madeleine Roberts Rich wrote in a report released last week that the “sheer amount” of private equity capital that entered the industry within the last 15 months strongly supports the trend.

“What was clear in 2024 is that the COVID and post-COVID days of double-digit labor rate increases, large amounts of WIP, and 75% margins on ADAS sublet are no more,” she wrote. “There is a return to normalcy, and a specialized strategy will be necessary to compete.”

Looking back at last year, Rich noted that both MSOs and single shops were forced to adapt to cost challenges including the total cost of repair (TCOR) rising by 3.7% to $4,667, according to CCC, and an increase in miles driven of only 0.6% compared to 2019.

The industry also faced a sharp drop in claims counts and an increase in totaled vehicles, according to the report.

“Despite the sales slowdown, consolidators and MSOs have continued to expand their footprints — primarily through acquisitions but some through real estate development as well,” Rich wrote. “Our research indicates that more than 450 locations — spanning MSOs and single shops — were acquired by larger operators throughout the year. We hope these transactions provided satisfying exits for their former owners. Regrettably, our firm also estimates that hundreds of single shops closed their doors this past year without an exit to a buyer.”

Beginning in November 2023, more than $9 billion of capital entered the industry, primarily through debt refinancings or recapitalizations by some of the largest operators, according to the report.

Rich says private equity continues to be attracted to the collision repair industry because of:

• • The increased complexity of the car parc and a rising TCOR
  • Significant economies of scale
  • Specialization opportunities
  • Resilience in times of economic hardship
  • EBITDA multiple expansion

And it’s no longer just owners with at least five locations and more than $20 million in revenue that PE investors are interested in, she added.

“They realized that such transactions were few and far between and faced intense competition,” Rich wrote.

As a result, Rich added that investors began approaching entrepreneurs of much more recently formed platforms.

“This shift became evident in November when TRP Capital acquired a three-shop MSO in Long Island to launch a new platform called Driving Force. That same month, Envest Capital Partners acquired a one-shop operator, Authentic Auto Body, to launch a platform.”

“All of the consolidators listed above that have been backed by private equity capital now have deep pockets and mandates to grow their footprints at a rapid pace.”

Focus Advisors also found that the “Big Five” — Caliber, Gerber, Crash Champions, Classic Collision, and Joe Hudson’s — now have 3,836 shops comprising more than $15.6 billion in annual revenue, and making up around 30% of the collision repair industry’s market share.

In 2024, the Big Five added 319 shops, representing a 9.1% increase, according to the report.

The “Accelerators,” seven firms with private equity backing that have continued to grow, hold north of 3% market share. Those operators are Quality Collision Group, CollisionRight, Kaizen Collision, VIVE Collision, OpenRoad, Puget Collision, and Brightpoint. The last three are newly launched.

Cumulatively, the companies comprise more than $1.5 billion in annual revenue and added 80 shops last year, totaling 27% footprint growth.

The nation’s 10 largest independent MSOs increased their collective footprint by 20 shops, according to the report. Focus Advisors estimates their revenue grew by 33%.

“Some have focused on high barrier-to-entry markets and exclusive OEM certifications; others focus on load-leveling in rural markets and courting DRPs,” Rich wrote. “Some are franchisees. Some offer complementary services such as ADAS, towing, heavy-duty truck or mechanical services. The big picture is that this industry is demanding more specialization and more capital; regional independents that adapt accordingly can grow.”

The report also notes that throughout 2024, Tesla’s share of American car sales was 4% and that so far, the automaker has built 51 company-owned repair shops nationally.

During the 2024 IDEAS Collide Showcase at the SEMA Show Cole Strandberg, managing director at FOCUS Investment Banking, also shared perspectives on market disruptions.

Strandberg shared how disruptions present a massive opportunity for those with financial resources, skills, and strategic vision — specifically for operators eyeing specialization, scalability, or sale.

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Featured image credit: Prae_Studio/iStock

Charts provided by Focus Advisors