I own an auto body shop and am looking to purchase multiple to consolidate in the industry. 5 year time frame to go public or cash out to private equity.
Checkpoint Collison Group
Investment Summary & Highlights
25 MM** fund size (50 MM Cap) => (25< 35) Auto Collision Centers. The collision industry is an enticing investment on all fronts. With steady cash flow and the retirement of baby boomers, it is a growing private equity trend. Checkpoint Collision Group is poised to capitalize on this significant opportunity and consolidate the market swiftly with a pro active exit strategy.
Market Size and Private Equity Consolidators
The industry landscape has drastically changed since the 1990s. An estimated 31,000 collision shops now generate $44 billion in collision repair revenue annually. Hundreds of small independent shops continue to close each year as consolidators have accelerated their growth, with the top 5 major consolidators growing shops at a 25% compound annual growth rate over the past decade.
Private Equity backed MSOs are as follows
Hellman&Friedman => Caliber Collision (going public between 2024 and 2025)
CLEARLAKE => Crash Champions Collision
GREENBRIAR => Vive Collision (Recently Purchased at a 22x multiple for over 300 mil)
New Mountain Capital => Classic Collision
Blackstone inc => Service King Collision repair
Investment Strategy and Roll up Thesis
An Auto Collision Direct Repair Program (DRP) is a partnership between an insurance company and a specific repair shop. With my exisiting relationship it could be a smooth transition to bring these partnerships to all our facilities. These programs work by the insurance company referring policyholders to these shops, ensuring a steady volume of customers to our facilities while streamlining the claims process and maintaining quality services.
Using our existing relationships with DRP partners we can integrate these programs into each location. This will boost the volume in business and establish a consistent and stream of customers. Using out strong relationships we can secure approvals for new locations before purchase and strategically focus our efforts where DRP presence is lacking,
SPECIFICS
FUND SIZE: $25,000,000.00
TARGET: 30 Auto Body shops along the North and South East using capital from the fund and leverage
Breakdown of areas: New York, New Jersey, Connecticut, Delaware, Florida, Georgia, South Carolina, North Carolina, Vermont
Target EBITDA: $15,000,000.00
Target Exit : 10x-18x Low Value 10x $150,000,000 High Value18x 270,000,000
Conservative Target Time frame of sale : 5 years
Aggressive Time frame of sale: 4 years
CEO/MANAGING PARTNER: Charles DiMarino Owner of New Hyde Park Auto Body
35%/65% Split with Investors
Investors Receive 70% of Proceeds
Managing Partner Receives 30%
Thought process of keeping existing ownership is to retain customer/community relationships as well as any DRP contracts. The roll in strategy also gives incentive to keep growing the business as well as cash out on the sale of the group.
Checkpoint Collision Group will receive quarterly dividends of 70% and the existing owner will receive 30% of EBITDA. Checkpoint will also pay an annual salary to the prior owner as compensation to continue to manage the day to day operations and continue to grow the company.
5% will be charged to each location as a management fee to help with services such as accounting, management, HR, business analytics, marketing, and vendor negotiation. 30% of the 5% will come out of the minority partners dividends. The Fund will be charged a 2.5% management fee from the management company.
Single Shop sale metrics is 2-2 ½ x EBITDA multiple with non DRP
Single Shop sale metrics 2.5-5x EBITDA multiple for DRP
Example SHOP 1: DRP SHOP NASSAU NY Purchase of 4x
Revenue: $3,543,770
EBITDA: $850,000.00
Margin: 24%
Management fee 5%: $177,188.50
Owner Paid Salary: $250,000.00
30% Partner Annual Dividend: $255,000.00
70% Checkpoint Dividend: $595,000.00
Offer to shop would look like :
$3,450,000.00
70 % up front $2,415,000.00
30% rolled in equity $1,035,000.00
Potential Earnout 30 percent of EBITDA (850k) on sale (12x)-(4x) =(8x) $2,040,000.00
TOTAL ON EXIT $5,490,000.00
Total earn out if maintained for 5 years with no growthincluding dividends and salary : $8,380,000.00
Example 2: NON DRP
REVENUE: $2,864,984.00
EBITDA: $484,750.00
Margin: 17%
Management Fee: $143,249.20
Salary: $145,000.00
30% Partner Annual Dividends: $145,425.00
70% Group Dividends: $339,325.00
Offer to Shop:
$1,211,875.00
70% Up Front: $848,312.50
30% Rolled: $363,562.50
Potential Earn Out 30% of Ebitda on sale (12x)-(4x)= (8x): $1,163,400.00
Total on exit: $2,375,274
Checkpoint Collision Group Profits
Based off 2 examples
Ex 1.) Dividends over 5 years would pay out $2,975,000.00 over 5 years with no growth.
Ex.2) Dividends over 5 years would pay out $1,696,625.00 over 5 years with no growth.
Dividends over 5 years would equal $4,671,625.00 over 5 years with no growth.
An average EBITDA of $650,000 for 30 locations would bring Checkpoint Collision Group to a total yearly EBITDA of $19,400,000.00. At that point a sale of the group at 10-18x multiple would be achievable based on the current market of Private Equity in the market space.
$19,400,000.00 x 12x= $232,800,000.
$232,800,000.00 / Rolled in equity pay out (30%) = $69,840,000.00
$162,960,000.00
Investors 70% split = $114,072,000.00
Managing Partner 30% split = $48,888,000.00
We will find these shops to buy through my personal relationships in the industry as well as cold calls and visits. Checkpoints goal will be to close the first 10 shops by end of Q4 2024. In 2025 the goal would be to close another 6-10 shops by Q3 2025. By 2026 Q4 the goal of having 30 shops in the roll up would be attainable. This would set up our timeline to exit with a sale by 2028-2029. We will target each area with data and analytics provided by my contacts with the directors of each insurance company to find high volume insurance claim areas in each location. Through my business relationships and number of shops we will be able to negotiate bigger discounts with suppliers such as oem part discounts and paint manufacturers.