Colormaster sale to FinishMaster prepares for ‘new reality’ of industry consolidation
St. Louis—The collision repair industry is changing rapidly across the country, with consolidation of shops and distributors alike.
A case in point is Dale Hughes’ sale last December of Colormaster Automotive Paint, a 15-location business he founded in 1991, to FinishMaster, the Indianapolis-based wholly owned subsidiary of Uni-Select that caters to the collision repair industry, with more than 205 locations and 1,600 employees nationwide.
The combination of a changing business climate and peak valuation meant the time was ripe to sell, said Tom Adams, who worked for Colormaster for 23 years, most recently as general manager. Adams now has similar duties as business director for FinishMaster for the 12 former Colormaster locations in Illinois and Missouri. (The two Colormaster locations in Texas, and one in Louisiana, were turned over to FinishMaster management in those states.)
“We had a very successful business for a long time,” Adams said. “We typically had double-digit growth every single year for 24 years straight. That trend started to slow a little bit, and I would say the unknown with the MSOs was a big factor. It appeared to us that the paint companies want to deal with fewer and fewer distribution points. They make that pretty clear in the way they operate. And from a national and global perspective, that’s OK.”
The St. Louis market has just one national MSO and several regional MSOs, in contrast with other markets across the country that have several national MSOs. But as he and FinishMaster Sales Manager Kevin McDermott have studied what’s happening across the country, they’ve concluded it’s only a matter of time before shop consolidation happens first in St. Louis and later in midsize markets, Adams said, reducing their customer base.
“A lot of our shops don’t believe it,” McDermott said. “They’re in denial: ‘It won’t happen here.’”
“And when the national MSOs get here, since all of those deals are done at a national level, the gross margins for a jobber are very, very slim,” Adams said.
FinishMaster’s national footprint, its purchasing strength, existing agreements with national MSOs, and larger infrastructure allow Adams to be prepared for what he calls the “new reality” for collision repair shops and jobbers of increasing consolidation. If a national MSO opens a location, the chances are good it can be serviced by a FinishMaster outlet, he said.
“There are so many big-picture things in play with paint companies and what they are going to do,” he said. “How are they going to align themselves with MSOs, and how are they going to align themselves with distribution? There are business plays made every day on a national level that were definitely in our head before, but now they’re at the forefront of what we have to think about.”
Familiar faces with new ownership
Out of Colormaster’s 15 stores and 93 people, all of the personnel have remained, save for an office assistant — whose duties are now handled at the Indianapolis headquarters — and Dale and Christy Hughes, Adams said. He praised Dale Hughes and FinishMaster for enabling such things as compensation packages and time served to be retained by Colormaster employees.
Customers benefit from new ownership
Beyond the new name on the invoice, changes for the customer have been, and should continue to be, positive, Adams said, noting that his stores can now provide customers with additional services and reporting capabilities.
“We have a computer system that is just leaps and bounds above what a normal independent jobber would have,” he said.
And all FinishMaster paint techs will soon have an iPad loaded with the TechTracker program, McDermott said, enabling them to pull up technical or safety data sheets and view training videos on YouTube.
For every visit with customers, McDermott said, techs will type a synopsis that will be emailed to “all of the points of contact: the owner of the body shop, me, and if it’s an Axalta customer, to the Axalta paint rep so everybody is in the loop. Every shop I’ve talked to is thrilled. They think it’s going to be a really nice benefit that will help them.”
Adams said the reporting feature will provide transparency and a “constant reminder of the service level they’re getting from FinishMaster,” adding that account managers will soon also use a similar program.
FinishMaster, which sells a number of paint brands nationwide, including AkzoNobel, Axalta, BASF, and PPG, also offers its exclusive SMART brand of allied products such as body filler, masking paper and plastic, lacquer thinner, and two-part adhesives and sealers, which are quality products that are competitively priced, he said.
With so many employees in relatively close proximity to one another — Chicago, Indianapolis, Kansas City, Mo., Nashville, Tenn. — FinishMaster’s personnel resources are “tremendous,” McDermott said, which can be helpful for larger installations or staff shortages.
“And because we buy so much paint from these vendors, I would say we have better vendor support,” he said. “We had very good vendor support, but it’s even better now.”
At the time of the buyout, customers feared the unknown, McDermott said.
“Our No. 1 priority has always been, and will continue to be, supporting our customer,” Adams said. “That part is not negotiable.”
“The message to the customer from day one has been that nothing’s going to change,” Adams said. “Your pricing stays the same, your people stay the same, the product stays the same, and your service level hopefully even improves with the added resources. From a customer perspective, that’s our charge, to make sure that they don’t see anything other than the name change.”
And for customers who expressed concern about buying from a publicly traded company, Adams offers this: “These are 90 people who live, work, breathe, and eat in the same community you do. Our livelihoods, our paychecks, our benefits, what we do in life depend on you. We are local.”