The accident repair industry is undergoing a swathe of change both specifically within the UK, and on a global basis. At the very heart of this evolution is consolidation amongst all parties, none more so than accident repairers themselves. Here, we have a further look at the reshaping environment in which the industry operates.
It was Rex Green, previously of BB&T Capital Markets and now of Jefferies LLC, speaking at IBIS 2015 who summed up his own views of the changing face of the US repair industry by stating: ‘In the next five to 10 years ‘stubborn holdouts’ (non-affiliated) bodyshops will be doing something else with their business.’
It may only have been Rex’s opinion but based on the evidence he provided from the continuing evolution of the US market, it was based on quite solid foundations. Rex highlighted how at present in the US, four consolidators – ‘the four horsemen’ – at present share 10% of collision repair revenue. However, in 10 years’ time Rex predicted that figure to be closer to 65% of revenue. In a self-proclaimed bold statement, Rex said, ‘Eventually they will do effectively all of the insurer funded repairs in the US.’
One of the key drivers for this consolidation has been the injection of private equity, or as Rex termed it ‘the jet fuel for consolidation’. Recent months have seen it start to make significant headway within the UK market too, and sources reveal that more of these type of enquiries into the sector have been made in the past 12 months than any other time. The leading example at present is with private equity investor, Carlyle Group’s subsidiary Canaveral Bidco Ltd purchasing the UK’s largest accident repair group Nationwide ARS. The move followed hot on the heels of Nationwide’s acquisition of Seward Accident Repair Centres Ltd’s eight site operation and subsequently led to Nationwide itself acquiring Gladwins’ eight site business and, more recently, second largest accident repair group in the UK, Just Car Clinics and its 28 sites. Forecasts are that many more acquisitions are to follow.
Accident repair franchise operation, Fix Auto World, which operates the Fix Auto UK subsidiary, has also been the recipient of a major private equity investment with La Caisse de depot et placement du Quebec, one of the largest private equity companies in north America putting $8.2m (Canadian) into the business.
Of course, the growing trend towards major consolidation of the sector very much divides the industry and has raised many areas for consideration, not least of which from the ‘risk adverse’ insurance sector. Martin Milliner, head of claims at LV=, said, ‘Further market consolidation is likely as the industry needs a strong proposition to compete against the manufacturer/dealership sector. These changes certainly have positive aspects with regard to the potential for increased capital investment and training for bodyshop employees to drive better customer experience and lower cost outcomes. However, there could be downsides, with possible reductions in choice and potential capacity issues in certain areas of the country. It’s too early to say if recent market moves will change our strategy in any way but we’ll continue to make decisions on our work placement based on overall customer service delivery and satisfaction results.’
Caroline Cooper, Aviva’s supply chain director, commented, ‘Consolidation brings change and that can be a positive for the industry and its customers, forcing repairers to think differently about the service they provide to ensure they have a sustainable business model for the future.
‘Aviva is watching with interest how this industry develops, being in the advantageous position of owning our own repair business, Solus. We will continue to develop and adapt our repair strategy, and in particular Solus, to meet the changing needs of our customers while we monitor the service response of the UK repair industry as a whole.’
In Rex’s opinion, if consolidation of the magnitude that has been seen in the US does not take hold around the rest of the world, it will purely be because of regulatory, legal or cultural constraints that defy economics.