Article - October 6, 2022
Founded in 1999, Crash Champions is one of the fastest-growing collision repair operators in the United States. Harris Williams recently advised Crash Champions, a portfolio company of A&M Capital Opportunities, on its growth investment from Clearlake Capital Group, L.P., and simultaneous merger with Service King Collision.
Here, we share our thoughts on why the collision repair sector is appealing to buyers and investors, how Crash Champions exemplifies the investment opportunity within the sector, and what investors should look for in potential assets.
Why is collision repair appealing to buyers and investors?
Conner: The collision repair sector within automotive services is growing steadily. The non-discretionary nature of collision repair creates very stable demand and strong tailwinds for organic growth. There are more vehicles on the road, and the number of car accidents in the U.S. has continued to increase for more than a decade. The severity of accidents, or price per repair, is also trending upward as the scope of repair often now includes cameras, sensors, and other technologies, all of which must be calibrated to work properly post-repair.
Jones: Within the sector, there are a few large platforms, a handful of regional operators, and a vast pool of small and single-site operators. Despite the existence of national platforms, the market is still highly fragmented, offering consolidation opportunities. Attractive geographic markets include those with growth in population, vehicles on the road, and miles traveled within the geography.
What makes Crash Champions an exemplary asset in this space?
Conner: Matt Ebert, the CEO of Crash Champions, has been very growth-focused since founding the company. He’s developed an extremely scalable approach to operating in the market. In 2018, there were seven Crash Champions locations, and by mid-2022, there were more than 175. As an even bigger boost to growth, Crash Champions merged with Service King as part of its investment from Clearlake, elevating the company from being the fifth-largest multisite operator in the U.S. to the third largest with a nationwide footprint.
Yousefian: Crash Champions invested ahead of its growth to build an executive team that had experience running larger organizations, with the intention of scaling to be a much larger player. Crash Champions has also invested in technology and infrastructure designed to support a scaled platform, such as in-house calibration capabilities for sensors and other automotive technologies that newer cars have. It prides itself on providing the best customer experience from start to finish and invests in best-in-class facilities from both a functionality and aesthetics perspective.
Jones: Crash Champions’ rapid expansion is proof that the company excels at identifying, onboarding, and integrating acquisitions. It finds the most attractive targets with the best strategic fit and has built a dedicated M&A team with a proven integration playbook and an ability to drive operational excellence post-close. The company closes an acquisition on a Friday, and by Monday the newly acquired locations have converted work-in-process, transitioned their systems, onboarded employees, and are operating as a Crash Champions shop.
Conner: Insurance carrier referrals can be a tremendous source of repair volume. Repair shops must qualify to be part of a carrier’s direct repair program (DRP) by meeting certain quality, efficiency, customer service, and turnaround time metrics. Crash Champions values its insurance carrier relationships and is very good at executing on their behalf. It has a strong pipeline of referrals from these programs that keep its shops productive—so much so that it is constantly expanding the footprint of its facilities to process more volume.
Jones: Crash Champions’ scale offers several cost and margin advantages. It can spend less on sales and marketing due to its DRP volume. It can spread fixed costs such as facilities and overhead labor across a higher volume of repairs. As new acquisitions are onboarded, these entities can take advantage of paint and parts purchasing synergies, while benefiting from Crash Champions’ repeatable operating model that drives volume growth across its shops. All of this translates to higher margins and EBITDA growth.
What should investors interested in the collision repair sector consider?
Conner: Crash Champions represents a landmark transaction in a sector that has received a lot of attention from investors for some time now. However, its growth also shows that there is plenty of space left for consolidation and continued investment. Despite the size of the larger platforms, there is still a massive tail of fragmentation in the market, and it’s ripe for the next wave of consolidation. To start, investors might need to look at companies smaller than they would typically invest in, but the opportunity to rapidly scale is there.
Jones: This industry offers the opportunity to take advantage of what becomes a virtuous cycle: Build a professionalized platform, gain economies of scale, improve margins, and use profits to invest in facilities, talent retention, and continued M&A. That generates better results for customers and insurance carriers, which spurs more referral business, better margins, and more reinvestment opportunity, and the growth cycle continues.
In addition to collision repair, our Transportation & Logistics Group has deep expertise across a broad range of sectors. To learn more, please contact our senior bankers.
