Toronto, Ontario — Founder and Managing Director of Focus Advisors Automotive M&A David Roberts presented a collision industry market update at the MSO Symposium in November, emphasizing the growth of U.S. and Canadian collision consolidators in 2024.
The presentation, titled “Scale and its Rewards: Industry Landscape and Market Dynamics,” was delivered to more than 400 MSO Symposium attendees, where Roberts emphasized that, “to succeed in an industry where complexity and access to repairable vehicles are ever more challenging, operators with scale will continue to grow and thrive.”
Roberts said that, while 2024 brought “less dramatic” changes than previous years, the changes witnessed indicate that the industry is normalizing to its pre-COVID conditions. At the same time, vehicles have grown in complexity.
“Scale and specialization play pivotal roles for the operators that want to compete,” said Roberts.
Revenue changes are among the top shifts in 2024. Roberts noted that the North American collision industry has seen softened revenues through 2024. Revenues were flat or down for many companies, and “up only for a few exceptions.”
“The cohort that has seen their revenues decline most dramatically are the single shops,” notes Roberts’ Focus Advisors report. “WIP is down across the board, returning to more normal levels after the exceptional post-COVID period. In a similar trend, labour rate increases are returning to normal, and there are just fewer repairable vehicles, prompting shops to focus more on getting the work. While WIP and labour rate increases are normalizing, the average total cost of repair is still up 3.7 percent year-over-year, now exceeding $4,600.”
Revenue slowdown and the continued consolidation trend have resulted in a decline in single shops. Focus Advisors estimates that there were nearly 800 closures of smaller, independent collision centres in 2024. Meanwhile, medium and large MSOs are poised to grow.
“Independent MSOs with four to six shops—and especially those with seven or more—are not just surviving; they’re thriving,” said Roberts during his MSO Symposium presentation.
Roberts also introduced the “Fish Scale” which classifies collision repairers by size. The “Whales” consist of the “Big Five” consolidators—most of which are U.S.-based. These include Caliber, Crash Champions, Gerber, Classic Collision and Joe Hudson’s. As of 2024, these companies have a cumulative market share of approximately 30 percent. In 2024, their collective footprint grew 13 percent, from 3,512 shops to 3,842 shops through a mix of acquisitions and real estate development.
Roberts also noted that Classic Collision and Joe Hudson’s each grew their shop counts by more than 22 percent in 2024, almost exclusively through the acquisition of single shops or MSOs.
“This pace of growth in shop count was almost three times that of Caliber, Gerber and Crash Champions,” notes Focus Advisors.
“A more remarkable trend of 2024 has been the breakneck expansion of the ‘Sharks’ cohort, that Roberts introduced last year as the seven fully–or newly launched MSOs with private equity sponsors,” notes a Focus Advisors report. “These seven are: Quality Collision Group, CollisionRight, Kaizen Collision, VIVE Collision, OpenRoad Collision, Puget Collision, and BrightPoint Auto Body. Collectively, they have almost three percent of the total market share across 376 shops. They’ve collectively added close to 100 shops this year, the vast majority through acquisitions.”
When it comes to financing these rapid growth plans, Focus Advisors notes that most of the ‘Whales’ and ‘Sharks’ had liquidity events in the past year.
“All of this means that these consolidators have deep pockets and mandates to grow rapidly,” wrote Focus Advisors.
Of course, the benefits of scale are also seen here in Canada. According to Focus Advisors, some of the largest independent MSOs in Canada are the private-equity-backed LIFT Auto Group, Craftsman Collision and Kirmac Collision, all based in British Columbia.
At the same time, Fix Auto, ProColor and CSN all saw continued growth in 2024. CARSTAR has also grown its footprint in Canada, with about 320 locations, notes Focus Advisors. Simplicity Car Care also grew from 60 locations in 2021 to 101 at the time of Roberts’ MSO Symposium presentation, with geography focused mostly in Ontario and Quebec.
In terms of independent MSOs, Roberts’ noted during his presentation that these independent multi-shop owners are a “growing force.” While he did not classify these entities as either ‘Whales’ or ‘Sharks,’ he did say more than 800 independent MSOs are generating a collective US$8 billion in revenue, matching the total revenues of Caliber Collision.
“It really comes down to the vision of the entrepreneurs and the opportunities they see in their markets,” said Roberts, adding that each independent MSO has a unique “playbook” of how it’s able to compete in its respective market.
Focus Advisors defines some common playbooks as: a focus on OEM certifications; electric vehicle or fleet work; the acquisition of “distressed” single-shops or creating entirely new facilities from the ground up.
Finally, Roberts noted that the collision repair industry remains highly attractive to private equity investors due to its strong existing returns and tailwinds private equity firms see in the industry. He noted that Focus Advisors has received inbound interest from more than 50 private equity firms interested in the space. These private equity-backed consolidators are using acquisition strategies and operational improvements to achieve the end goal of significant EBITDA growth and higher EBITDA multiples, noted Focus Advisors.
As for an outlook for the future, Roberts anticipates insurance companies to raise their rates, deductibles and “squeeze” collision providers. He also noted that vehicles will continue to grow in complexity—as will their repairs—while OEMs will raise certification standards, training and equipment requirements while also limiting access to parts.
Roberts and Focus Advisors also expect consolidators to invest more in highly certified repair centres, while competition for highly trained technicians will become more fierce.
As for anticipations for the next decade, Roberts expects continued conflict between OEMs and insurers, with more power going to dealers and OEMs. He also said these trends will encourage more MSOs to focus on certifications and closer associations with dealerships.
Finally, Roberts anticipates 1,000 or more shops will exit the market each year, over the next five years.
