Why two giants in the collision repair business have agreed to merge

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The merger between Caliber Collision and ABRA Auto Body Repair of America consists of more than 1,000 stores in 37 states and the District of Columbia.

Two of the four largest North American web shop consolidators agreed to close a deal that could have a major impact on the $ 47 billion per year crash repair industry.

Caliber Collision and Abra Auto Body Repair of America announced the merger on Wednesday, claiming that the deal will serve its customers and insurance customers better.

Terms of the deal were not disclosed. The companies said in a joint statement that the transaction is expected to be completed 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 customers with the flexibility and convenience that comes with the widest geographic coverage in the United States and a complete package 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 to bring together the key elements of success and best practices from both organizations," the statement said.

Private equity firm Hellman & Freidman, Abra & # 39; s majority shareholder since 2014, becomes majority shareholder of the combined company, according to the statement. Abra is headquartered near Minneapolis in Brooklyn Park, Minn.

Synergy advantage

Brad Mewes, director of Supplement Advisory, a consulting firm in Irvine, California, said the deal is great for Caliber, especially from a geographic point of view.

"Geographically, this merger is very synergistic," Mewes said. "Most of Abra's locations were in states where Caliber previously was not present." Of the 28 states where Abra was active, Caliber worked in only 10 of those states. Caliber, with its headquarters near Dallas in Lewisville, now has beach heads in 18 additional states and is now active in 38 national states. "

Large consolidators such as Abra, Caliber, ServiceKing Collision Repair Centers and Boyd Group compete aggressively with dealers in their own stores because the costs of doing business increase. From a competitive point of view, Mewes said that Caliber now has a significant presence on the market in each of the primary markets of its main competitors, ServiceKing and Boyd Group.

"In every state, with the exception of Michigan and some less populated states, Caliber now has the most stores or a similar number of stores compared to its competitors," he said.

Mewes said he was not surprised by the merger and called it "only a matter of time". The companies merged to take advantage of synergies with regard to costs, capital and income, he said.

"The idea with cost synergies is that when you, for example, take a company like Caliber or AutoNation and they acquire a dealership, they minimize the high costs of hiring a CEO and other company positions because they already have them at their company. of these high costs without adding costs at the same time, which is the idea behind economies of scale. "

Threat for dealers

Mewes told Fixed Ops Journal in June that key intermediaries pose a greater threat to dealers who maintain bodyshops, but do not invest in and do not expand their recovery operations for collisions. He said the four main intermediaries have the capital and scale to overcome the headwinds facing the industry, including repairing vehicles with advanced driver assistance systems, meeting the certification standards of automakers and stricter environmental regulations of regulators and dealing with greater legal liability.

"This is a sector whose cost structure will continue to rise," Mewes told Fixed Ops Journal. "It will be harder for smaller players to compete in that environment, because larger companies will have an investment advantage."

In addition, he told Automotive News Wednesday that Caliber will in the long term be able to invest aggressively in automaker certification, imaging and branding, leading to more competition in the traditional area where dealers work.

"As part of the mergers and acquisitions and growth strategy, Caliber has developed a core competency for new location development, using developers and real estate investors to expand," Mewes said. "Although Calibre 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 outside the press release.