Caliber Collision and Abra Auto Body Repair of America announced the merger Wednesday, claiming the deal will better serve their customers and insurance clients.
Terms of the deal were undisclosed. The companies said in a joint statement said the transaction is expected to close in early 2019.
“With more than 1,000 stores in 37 states and the District of Columbia, we look forward to providing customers and insurance clients with the flexibility and convenience that come with the broadest geographic coverage in the United States and a full suite of services,” Caliber CEO Steve Grimshaw said in the statement.
Grimshaw will lead the combined company.
“Both Caliber and Abra are committed to a smooth and thorough integration process, with plans underway to bring together the key elements of success and best practices from both organizations,” the statement said.
Private equity firm Hellman & Freidman, Abra’s majority shareholder since 2014, is to become the majority shareholder of the combined company, the statement said. Abra is headquartered near Minneapolis in Brooklyn Park, Minn.
Brad Mewes, principal of Supplement Advisory, a consulting firm in Irvine, Calif., said the deal is great for Caliber, specifically from a geographic standpoint.
“Geographically, this merger is very synergistic,” said Mewes. “The majority of Abra’s locations were in states in which Caliber previously had no presence. Of the 28 states Abra operated in, Caliber operated in only 10 of those states. Caliber, headquartered near Dallas in Lewisville, Texas, now has beachheads in 18 additional states and now operates in 38 states nationwide.”
Big consolidators such as Abra, Caliber, ServiceKing Collision Repair Centers and Boyd Group, have been aggressively competing with dealership-owned shops as the cost of doing business increases. From a competitive standpoint, Mewes said Caliber now has significant market presence in each of the primary markets of its main competitors, ServiceKing and Boyd Group.
“In each state, with the exception of Michigan and a few less populous states, Caliber now has either the most stores or a comparable number of stores relative to its competitors,” he said.
Mewes said he was not surprised by the merger, calling it “only a matter of time.” The companies merged to take advantage of synergies related to costs, capital and revenue, he said.
“The idea with cost synergies is that when you take a company like Caliber or AutoNation, for example, and they acquire a dealership, they minimize the high costs of hiring a CEO and other corporate positions because they already have them in place at their corporate function. This eliminates some of these high costs without having to add any costs at the same time, which is the idea behind economies of scale.”
Mewes told Fixed Ops Journal in June that the major consolidators will pose a greater threat to dealerships that retain body shops but don’t invest in and cultivate their collision repair operations. He said the four major consolidators have the capital and scale to overcome the headwinds that face the industry, including fixing vehicles packed with advanced driver assistance systems, meeting automakers’ certification standards and regulators’ stiffer environmental rules and dealing with greater legal liability.
“This is an industry whose cost structure is going to continue to increase,” Mewes told Fixed Ops Journal. “It will become more difficult for smaller operators to compete in that environment, because the larger companies are going to have an investment advantage.”
Additionally, he told Automotive News Wednesday that in the long run Caliber will be able to invest aggressively in automaker certification, imaging and branding, leading to increased competition in the traditional area in which dealerships operate.
“As part of the M&A and growth strategy, Caliber has developed a core competency in new location development, leveraging developers and real estate investors to expand,” said Mewes. “While Caliber will continue to grow through acquisitions, expect more greenfield and brownfield site development and expect others to follow suit.”
Caliber Collision declined to comment on the merger beyond the press release
Original article on Automotive News