Service King I
Leveraging the One Carlyle culture and approach to value creation, Carlyle helped transform Service King, a collision repair company, from a quality local operator into a national powerhouse. From August 2012 to August 2014, Service King nearly quadrupled in size and expanded into 19 additional states while increasing employment from 1,457 to 4,087.
About Service King and the Transaction
Service King, headquartered in Richardson, Texas, and founded in 1976, is one of the largest and fastest-growing multiple-shop operators of automotive collision repair centers nationwide. Service King operated 177 collision repair centers across 20 states as of June 30, 2014.
In August 2012, Carlyle invested in Service King, a collision repair services company in Texas. Carlyle saw the opportunity to partner with the company’s management team and expand Service King’s operating practices into new markets nationwide. With a strong culture, emphasis on training and investment in IT infrastructure, Service King committed itself to repair performance and quality as well as customer satisfaction. Service King’s reputation with automotive insurers, as well as its scalable operating and acquisition model, enabled it to consolidate top, highly professionalized national operators. Collision repair is an extremely fragmented industry nationally, comprising approximately 34,000 primarily independent or entrepreneur-owned repair shops. Carlyle helped Service King rapidly transform through a series of successively larger and more complex acquisitions.
Key Value Creation Metrics Through August 2014
- Increased footprint from 47 Texas locations to 177 locations across 20 states
- Executed 18 acquisitions in two years
- Increased annualized revenue from $270m to ~$710m; annualized EBITDA grew by 84%
- Upgraded the finance and accounting department to accommodate the company’s shift from a local founder-owned business to a sophisticated national operation
- Entered into an enterprise-wide supply partnership with Axalta Coating Systems (a Carlyle Partners V portfolio company), a global provider of liquid and powder coatings in the automotive industry
Major Value Creation Initiatives
Executing Effective Growth Strategy
Following Carlyle’s investment, Service King and Carlyle embarked on a transformative acquisition program to deploy Service King’s operating model into new markets. Service King rapidly completed two platform acquisitions, representing its initial entry into metropolitan markets outside of Texas, and subsequently worked with Carlyle to develop its internal team and strategy for sourcing, executing and integrating acquisitions seamlessly, regardless of scale or location. Service King leveraged Carlyle’s expertise in arranging access to capital to fuel its growth program.
Strengthening Management Team to Support National Platform
Carlyle augmented Service King’s financial and accounting team, bringing in a new Chief Financial Officer who led a staff-wide upgrade to support an expanding business. Alongside Carlyle, the Service King team was able to optimize its debt funding, particularly to support growth. Additionally Carlyle worked with Service King to refine its acquisition due diligence and transaction staffing and process, which ultimately led to the successful integration of 18 acquisitions.
Forming a Significant Partnership with Axalta
Leveraging the One Carlyle collaborative network, Carlyle facilitated the formation of a strategic partnership between Service King and Axalta, a business relationship that has resulted in substantial economic benefits to Service King. In addition to providing Service King with high quality paints systemwide, the partnership offers significant co-marketing efforts as well as dedicated paint support for transitioning Service King’s acquisitions into a common platform.
Embarking on Next Phase of Growth
In August 2014, Carlyle entered into a recapitalization transaction in which The Blackstone Group, another prominent private equity firm, became Service King’s majority investor. Carlyle, its co-investors, and the management and employees of Service King retain a significant minority stake in the company. As part of the recapitalization transaction, Carlyle completed a full exit from its first investment in Service King, and re-invested in the newly-capitalized company.