If you own an independent auto body shop, you have likely been approached by a large MSO about possibly selling your business.
Maybe you’re approaching retirement and want to fish and play golf in your golden years. Maybe you have kids who aren’t interested in working in the collision repair industry.
Laura Gay, owner of the Consolidation Coach, began her business after selling her shop to a large MSO.
Her story began when she landed a job at a car dealership that eventually led to an opportunity to work in the company’s collision center. Gay excelled in the collision center, and within just a year, she was managing the shop, doubling its revenues.
Subsequently, she was recruited to work for Maryland Auto Insurance Fund, Progressive Insurance and USAA in estimating, bodily injury, salvage, arbitration and management.
In 2006, a shop owner approached Gay and her former husband about buying a shop in financial trouble. Gay negotiated the transaction by purchasing the shop’s account assets and real estate. In her first 18 months, she tripled its annual sales from $1 million to $3 million. The shop’s revenues grew to $5.5 million in sales in less than three years.
Five years later, Gay purchased a second failing collision center to duplicate its success, taking it from $750,000 to $3 million in the first year.
In 2015, she sold both of the shops to Caliber Collision, after learning as much as she could about consolidators.
Subsequently, she started helping some of her friends and associates with the sale of their shops, and in 2017, she founded the Consolidation Coach. She saw a definite need for a company that can help smaller and independent shops when that phone call from an MSO arrives.
Today, the Consolidation Coach specializes in assisting body shop owners in sales to MSOs all over the country. With a mantra of “been there, done that,” Gay has received countless accolades from clients for her negotiation skills, knowledge and experience.
She also now owns Collision Consulting of Florida, a separate consulting business that provides shop evaluations, marketing and operational advice.
Laura now lives in Georgetown, SC, with her high school sweetheart and her three dogs. She is an avid golfer, loves anything to do with any type of racing, and is a member of several car clubs and ladies’ golf leagues.
Who normally benefits more when an MSO acquires an independent?
It’s never that easy. Consolidation is changing the landscape for the industry and in many ways, it mirrors changes in society. If you own a body shop, you know that this is simply a part of life. It’s not easy to say that one company or another company will benefit more through consolidation.
I think it's just another evolution in this industry and something that we're going to have to adjust to. It’s our new reality and many other industries are experiencing the same, so we’re not alone, for sure.
Do owners of independent shops normally overvalue their businesses when it comes time to selling?
I think it’s more about sellers selling too cheaply. You know, they're just like the way I was---you put the blood, sweat and tears into your business and it starts to impact other parts of your life. You end up missing the ballet recitals, the tee-ball games and things like that, and it adds up.
Then a lot of times they get a large sum of money thrown at them and they're like, oh, wow, that's awesome. And then when it all shakes out, they really could have gotten more money. So, I would say short change is the short answer on that.
And then another area that I see where shops struggle with are understanding the legal mumbo jumbo and what it really means at the end of the day. I would say probably the real estate would be another piece, and understanding what's the best way to go in that regard. Should I sell it or should I lease it? Some owners make decisions without being properly informed, and consequently they short change themselves.
Tell us how the deal played out when you sold to Caliber Collision in 2015?
They threw a number out and I put my poker face on and told them I would think about it. Then I called my father and he told me that there was more money where that came from.
I took some steps back and learned as much as I could about mergers and acquisitions and understand how it all works. I also had some great mentors from the industry, which helped tremendously.
So, I came back to the table about four months later, and successfully negotiated a deal that was almost double from what the original offer was.
Shortly after that, some of my friends who owned shops were calling me and seeking advice, and one of them said I can't even imagine trying to do this without your help. You really need to have a business that does this, they told me. That's how the business was born.
The business has grown and I couldn’t be happier. We’re able to repeat the process again and again and help so many people as they navigate through this process.
Do most consolidators change the business when they buy it, or do they tweak what they’re currently doing? Do they try to retain most employees?
They usually say they're going to keep everything the same. But, I mean, let's be real. That's not possible. The way that you would run a business and the way that I would run a business is two different things. It doesn't mean that you're right or wrong. It's just the way it is.
There is no way that an old company and a new company are going to run the same. There are two different mindsets with the leadership. I think they’re setting themselves up for failure when they say that they’re not going to make any changes or retain every employee.
What they should say is, we want to keep each and every one of our employees, because we really appreciate and value every single one of you. There are going to be some changes but we don't know what that's going to look like yet. But know that we want you to be part of this change.
Instead, they often say that there will be no changes and then there is change and everybody freaks out. That's the biggest challenge for a lot of these consolidators. I think some of them do a pretty good job with the integration, but they fumble the transparency piece in many instances.
It's all about the delivery because people have feelings and they're sensitive, and people inherently are very intuitive. So, when they feel that things aren't right and if transitions aren't being handled well, that's where the horse falls off the train.
I think that the collision trade has always struggled with culture, and the successful shops make their employees part of all decision-making processes.
When a smaller shop sells its business to a larger entity, what are their major concerns?
First, they are worried about what’s going to happen to their employees. Typically, most of them want something built in their agreements about it. Their employees become like family over the years. They really do genuinely try to look out for them and try to make sure that they're taking care of them after the sale. But, once the deal is done and the ink is dry, they really don’t have any control over the situation.
Deciding to sell is a big concern too because it involves a whole new way of thinking. These owners have dedicated everything to their shops and used to playing the role as the owner.
Some of them just want to cash out, like your younger second- or third-generation owners, who are normally in their 40s. I would say a lot of them are suffering from burnout after years of fighting with the insurance companies. Many of them don’t possess the mental strength they’ll need to reinvent themselves. I mean, being an independent repairer in today's market is not easy.
And can you survive? Absolutely. Are you going to have to change your mentality? Maybe. Is it going to be easy to navigate? Probably not.
I try to get them to think about the next three years, and what the landscape of the collision repair space is going to look like? Sometimes that helps them to make the big decision---should I stay or should I go?
What types of shops are consolidators looking to acquire?
I intimately know all of the consolidators very well because I do deals with all of them. That background knowledge gives us a distinct advantage and helps us to make better decisions as a result.
They’re usually looking for a minimum size of 10,000 square feet, but in some markets, they'll look at smaller shops that are typically doing $2 million in sales or more. They prefer DRP-friendly shops that have some OEM and I-CAR Gold certifications.
That would be my cookie cutter answer, but it’s different with each market.
Ed Attanasio