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By Counterman
Steady. Adaptable. Resilient. Recession-proof.
These are a few of the superlatives that association leaders and members of the trade press (guilty as charged!) often use to describe the automotive aftermarket.
Sure, we may be biased. But we’re not the only ones drinking the proverbial Kool-Aid. Many of the same qualities that make the aftermarket a great place to do business also make it a tantalizing investment space for private equity.
In recent years, PE firms have been consummating deals at a steady clip. A few notable examples include Kohlberg & Co.’s majority-stake investment in Parts Authority in 2020; Hidden Harbor Capital Partners’ acquisition of Dayco in 2022; MidOcean Partners’ acquisition of Cloyes in 2022; and more recently, Kinderhook Industries’ acquisition of Auto-Wares in March.
When MidOcean acquired Cloyes (from Hidden Harbor) in February 2022, it was MidOcean’s third investment in the automotive aftermarket in a span of 15 months. At the time, MidOcean Managing Director Daniel Penn said the firm “continue[s] to see significant tailwinds” in the aftermarket.
One could argue that those tailwinds are stronger than ever today.
One of the most frequently cited tailwinds is the growing and aging light-vehicle parc. In 2022, the average age of light vehicles in the United States hit an all-time high of 12.2 years, even as the vehicle parc climbed to 283 million passenger cars and light trucks, according to S&P Global Mobility. Meanwhile, the number of eight- to 11-year-old vehicles – the so-called “sweet spot” for the aftermarket – is expected to increase incrementally through 2026, according to the 2023 Mergers & Acquisitions Outlook Report from Stifel and MEMA Aftermarket Suppliers.
One lingering impact of the pandemic – the semiconductor shortage – has provided another boost to the aftermarket. Surging demand for consumer electronics at the height of the pandemic triggered (or some might say exacerbated) a global chip shortage. The supply crunch has taken its toll on new-vehicle production, making it harder for dealers to get their hands on new inventory. The scarcity of new vehicles has goosed prices for new and used cars, trucks and SUVs. As a result, many motorists have had little choice but to hold on to their existing vehicles as long as they can.
It all supports the narrative that the automotive aftermarket is a safe haven for investment – in good times and bad.
“A lot of private-equity investors like it when there’s a stable, steady market,” explains Rick Schwartz, co-founder and managing partner of Schwartz Advisors. “Many people who haven’t dealt with private-equity firms misunderstand how PEs work. Most PEs that we deal with are interested in building businesses and creating jobs. When there’s a slow, steady, stable market, the question is, ‘Hey, if we buy a company – or even if we buy a collection of companies and roll them into one – can we somehow outpace the historical growth?’ Because if they can, that can make for a very attractive investment.”
Lightbulb Moment
Joe Sparacino, managing director, head of automotive aftermarket for Stifel, points to the Great Recession as a watershed moment when “lightbulbs went off in investors’ heads” that the automotive aftermarket was a great place to deploy their cash.
The Great Recession lasted from December 2007 to June 2009, according to the Federal Reserve, making it the longest – and deepest – recession since World War II. During the Great Recession, the unemployment rate more than doubled, and U.S. gross domestic product plummeted 4.3% from peak to trough.
Still, even with the economy in a tailspin, publicly traded parts retailers seemed to be doing just fine. O’Reilly Automotive, for example, reported a 42% year-over-year increase in full-year 2008 sales (and even scooped up specialty retailer CSK in a tough credit market). Full-year diluted earnings per share for AutoZone jumped nearly 18%, and the company announced several share buybacks in 2008.
Those examples of growth even in the most challenging economic conditions are among the reasons that the automotive aftermarket – hitherto lumped in with the rest of the auto industry – emerged as an attractive investment target for private equity.
“Consumers deferred purchasing new vehicles and therefore put more money into the vehicles they already had,” Sparacino says of the recession. “[Parts retailers] weren’t immune fully from the effects of the recession, but they did show stability through that period. And as the credit markets eased on the backside of the recession, private equity really took notice of the space, and you saw investments picking up a lot at that time.”
Checking All the Boxes
While the performance of the publicly traded parts retailers may have served as a proxy for the overall health of the aftermarket, investors discovered there was a lot to like when they peeled back the curtain.
One of the fundamental factors that PE investors consider is the total addressable market, or TAM. With a TAM pushing 300 million light-duty vehicles – and an aging one at that – the $1.8 trillion global aftermarket checks off an important box, says Schwartz. “There may be some industries where a private-equity investor may get excited about a specific business, but it’s not a really big market. How much can you grow it? The big VIO and the aging VIO make [the aftermarket] an attractive space.”
The aftermarket’s unique business landscape – its preponderance of small independents and mom-and-pop shops – only added to the allure. Mix in a long, favorable stretch of low interest rates, and it’s been a tantalizing cocktail for PE investors.
“You have a lot of family-owned businesses or privately held businesses where there isn’t necessarily a next generation,” Schwartz says. “That presents a good opportunity for the business owners to exit. There’s also an opportunity [for investors] to consolidate and get some scale and reduce some of the operating expenses.”
Sparacino adds: “It’s a very fragmented industry and there are clear benefits to scale. This dynamic has drawn private-equity investments in companies that can serve as platforms for consolidation.”
Collision Course
If any segment epitomizes the aftermarket’s favorable dynamics for PE investment, it’s collision repair.
Collision repair has been a bull market for consolidation, with a handful of players – Caliber Collision, Boyd Group and Service King – leading the initial charge. “During the beginning years, the initial consolidators were working on designing and creating the modeling that we’ve watched evolve into what it is today: a large platform of corporate-owned collision centers offering nationwide service,” Laura Gay explains
link hidden, please login to view. She adds: “Independent shops – both single and small multi-shop owners (MSOs) – sell right and left for many reasons, including COVID, financials, stress, staffing challenges, remaining profitable in the face of inflation and natural attrition.”
The M&A frenzy in collision repair has taken some dramatic twists and turns in recent years.
Service King, for example, was on the brink of bankruptcy before Clearlake Capital Group acquired the company in 2022 and simultaneously merged it with Crash Champions, creating an auto body conglomerate that boasts more than 550 locations in 35 states and the District of Columbia. In 2019, Hellman & Friedman acquired Caliber Collision and merged it with ABRA (which the PE firm had owned since 2014), creating the largest auto body MSO in the industry.
The consolidation is expected to continue, and some newer PE-backed players are emerging. For example, since New Mountain Capital acquired Classic Collision in 2020, the Atlanta-based MSO has expanded from 34 locations to more than 200 today. Meanwhile, TSG Consumer Partners acquired Joe Hudson’s Collision Centers in 2019, and the auto body chain has grown from 110 to 157 locations since the deal, according to the 2023 Mergers & Acquisitions Outlook Report.
“M&A activity from these [newer] platforms is expected to continue, and mergers among two or more of these entities is possible,” the report concludes.
Private equity has taken quite a shine to the carwash segment as well. Some recent deals include Atlantic Street Capital’s acquisition of Express Zips Car Wash in 2020; Golden Gate Capital’s acquisition of Tidal Wave Auto Spa in 2021; and Percheron Capital’s acquisition of Caliber Car Wash in late 2021.
“High fragmentation, strong cash flows, acquisition-multiple arbitrage and advancements in automation are among the many characteristics that make private-equity investment in the carwash sector increasingly attractive,” the Stifel/MEMA report explains. “Since the beginning of 2020, over a dozen private-equity-backed platforms have emerged, with every platform nearly doubling or tripling total site count since initial investment.”
Looking Ahead
With so many tailwinds and so many favorable dynamics, the automotive aftermarket likely will continue to be a compelling investment target for private equity. Sparacino and Schwartz expect segments such as collision repair, carwash and general repair/service – especially tire – to stay hot. Schwartz also believes that the heavy-duty market is starting to percolate.
The steady stream of PE investment certainly is a testament to the health and vitality of the automotive aftermarket. But it’s fair to ask: Is private equity a good thing for the aftermarket?
Sparacino and Schwartz believe it is. “The private-equity investors leading consolidations are growth-oriented,” Sparacino says. “They’re looking to back high-quality businesses in partnership with proven management teams to build even better companies.” When PE firms partner with strong businesses and leverage their financial resources and strategic expertise,
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By Counterman
There are many ways that a vehicle tries to tell you when there’s something wrong – some of them subtle, some of them not so subtle.
A “Check Engine” light or other malfunction indicator light is a clear signal that there’s an issue that needs to be addressed.
However, other clues – such as an unusual sound, smell or vibration – can be much harder to interpret, depending on the owner’s knowledge and understanding of automotive systems and diagnostics.
For many drivers, it’s tempting to ignore these clues and hope the issue goes away – or pray that the vehicle will remain drivable until they have the time (or money) to take it to a repair shop.
When an engine overheats, hoping and praying go out the window.
An overheated engine is a blatant indication that something is seriously wrong. At the risk of being melodramatic, it’s a cry for help from the engine – often the result of cues (such as that puddle of coolant in the driveway) that were missed or ignored. That cry for help usually comes in the form of steam emanating from under the hood; the temperature gauge indicating that the engine is running hot; and/or a noticeable smell coming from the engine.
As for the causes of an overheated engine, let’s round up some of the usual suspects.
Coolant Leak
As the name implies, coolant helps maintain a consistent temperature that won’t overheat components such as the cylinder head. According to Prestone, coolant touches 17 essential parts of an engine. Not surprisingly, a coolant leak is a primary cause of engine overheating.
A bad head gasket can result in coolant leaking into the combustion chamber or onto the ground.
A cracked or corroded radiator can allow coolant to seep or stream out if the leak gets bad enough.
As rubber coolant hoses get old, they can get hard and brittle, creating small cracks that let coolant escape.
Coolant leaks also can occur at the water-pump-shaft seal, coolant reservoir or heater core.
Restricted coolant flow is another potential culprit. Buildup of mineral deposits and other debris in the radiator can dramatically reduce the ability of the cooling system to do its job. Likewise, buildup in the hoses can slow the flow of coolant, leading to reduced cooling and even clogs in the system from loose corrosion. When coolant flow is restricted, it’s a recipe for overheating.
What can you do to help prevent these situations? Make sure you’re encouraging your customers to follow the vehicle’s recommended flush-and-fill schedule, and to always use the coolant specified by the vehicle manufacturer.
Bad Thermostat
The thermostat regulates the coolant temperature to keep it consistent for efficient engine operation. A conventional thermostat reacts to changes in the coolant temperature based on the status of the wax inside it. When the wax melts, a spring pushes the valve open and coolant flows. When the coolant drops in temperature, the wax solidifies, and the valve closes.
If the thermostat gets stuck in the closed position, coolant won’t pass through the radiator, and the engine becomes overheated. Conversely, when the thermostat is stuck in the open position, the continuous circulation of coolant can lead to a condition known as overcooling. Both scenarios are bad news for an engine.
Water Pump
Since water pumps move such a vast amount of coolant through the cooling system (something like seven gallons of coolant during a driven mile), it stands to reason that a failed water pump will cause the engine to overheat. Without a properly functioning water pump, the cooling system can’t maintain the pressure needed to push coolant to vital engine parts.
One of the biggest causes of water-pump failure is the result of leaks, either around the shaft or from a worn bearing or seal. Debris can enter the system and score the shaft seal, creating a leak path.
Cavitation – tiny bubbles of super-heated vapor inside the water pump – also can cause damage and leaks. Worn belts or tensioners are another potential culprit. A loose belt might not allow the pump to rotate as fast as it should, which then causes the engine to overheat.
Parting Thoughts
Cooling systems in modern vehicles are evolving. We’re seeing new twists on traditional concepts – electronically controlled thermostats, for example – and we’re seeing entirely new components, such as active grille shutters.
Still, the basic premise hasn’t changed. Cooling systems manage the heat produced by the engine. If the system can’t maintain the pressure needed to circulate coolant, the engine will overheat.
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By Rona
If new brake pads make noise at low speeds, it's often because the old brake pads have worn the brake discs. The complete solution is to polish the disc, but if that's not possible, a temporary solution is to polish the brake pads. If there's a sudden noise after driving for a period of time, the foreign objects causing the noise should be removed. If there's a rattling sound regardless of whether you step on the brake, the brake accessories should be properly installed.
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By NAPA
Troubleshooting With NAPA: Why Is My Car Heater Blowing Cold Air?
It’s easy to take modern conveniences for granted. An electric coffee pot brewing while you step out of the room. A garage door that opens with the click of a button. Heated air pumping out of the vents into your vehicle on a cold winter’s morning. But what would you do if those conveniences just stop working? Specifically, how do you fix a car heater that is blowing cold air?
Before you panic, let’s double check the obvious. Is your vehicle warmed up enough from a cold start to push out heated air? For your car heater to function properly, the temperature gauge on your dash (which measures the heat around your engine) should read in the middle, not in the blue cold zone or the red hot zone. If you’re too impatient to wait for your vehicle to run long enough to push out hot air before hitting the road, our experts suggest
link hidden, please login to view to give yourself some extra time. Next, let’s check the settings of your internal cabin temperature controls. Has your automatic climate control system set itself to defrost only for the first few minutes? Are the vents on your dashboard open and angled properly to disperse a strong current of air? If those quick checks were the problem, we promise, we won’t tell anyone. However, if you still haven’t found the answer to ‘why is my heater blowing cold air into my car,’ the next step is to lift the hood to remove any possible obstructions, like leaves and debris, that might be blocking the cold air intake system. Airflow backup could also be caused by a dirty, clogged cabin air filter. A
link hidden, please login to view keeps the air inside your vehicle clean, while also trapping dust and dirt before it enters your heater core and evaporator. Locate your air filter, and remove it for inspection. If the pleats are clogged with debris, it’s due for a change. As part of a maintenance routine, replace your cabin air filter every 20,000 miles or 12 months, whichever comes first. Another easy solution to solving a car heater problem is topping off the coolant level. If the coolant level is low, not only will heat not reach your heater core, but the built-up heat not being transmitted properly by coolant could damage your engine. If your coolant level is low, top it off. Be aware, it is critical that you also check for signs of damaged hoses or loose connections that could be leaking.
Another common problem that causes a car heater to pump out cold air is if the control valves in the thermostat are stuck open or closed. A thermostat is a temperature regulator in the form of a valve, situated between the engine coolant outlet and the radiator inlet. If possible, fix the stuck valves, or follow these tips for a full
link hidden, please login to view. The Fix Is In, And It Won’t Be Pretty
Any quick fix for no heat in a car was mentioned above. If you are still experiencing car link hidden, please login to viewheating problems, it is likely a more costly and time-consuming solution. Let’s start with the fan, often called the blower. You should hear the fan running if your heater is turned on, especially full blast. It is possible debris has been lodged or wrapped around the fan, which would cause a tapping noise or popping sound.
If the airflow is weak coming out of your HVAC system, then it is likely a blown
link hidden, please login to view. When you turn on your interior heat, a fan behind the core starts up and blows heat into the passenger compartment. If there is no air current, the solution could be as simple as replacing a fuse or as complicated as replacing the fan itself. If your heater is blowing cold air, the fan motor might be working, but the water pump, actuator or heater core could be failing. A car heater not working could be due to the vital role the
link hidden, please login to view performs. The water pump is typically driven by the accessory drive belt, serpentine belt or timing belt. A worn-out belt can prevent your water pump from operating at peak efficiency. A slow leak from your water pump will cause residue to build up around the pump. Look for coolant trails leading down from the pump or a gunky deposit around the outside. Still car heater troubleshooting?
link hidden, please login to view are critical to controlling heat, the A/C and even defrost. Knocking, clicking and fluctuating air flow could point to a bad actuator, or two. Cold air output could be an issue if either of the hoses connected to your link hidden, please login to view have become loose. One hose is tasked with transporting hot coolant from the water pump to the heater core. The second hose returns the coolant to the top of the engine. Worst case scenario, if the area inside your vehicle, underneath the dash, is damp from a continuous leak, it is highly likely your heater core needs replaced. Most drivers are not equipped to fix a car heater blowing cold air. Just to diagnose the problem can require a jack, jack stand and many, many hand tools. The solution, even if simple, could involve specialty hoses, connections and clamps. To replace an entire heater core entails removing several components to get behind the firewall, or even removing the entire dash inside your cabin. Newer model vehicles, packed with sensitive electronics, make things even more challenging. When in doubt, take your vehicle to
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By NAPA
Tread Carefully! It’s a Slippery Slope
If you live in an icy climate, you know the danger that comes with venturing onto roads layered with snow and sleet. Any slippery surface like that requires superior traction to maintain a sense of control. Without proper handling of your vehicle, you’re raising the risk of an accident, getting stranded and ruining the underbelly of your vehicle. That’s why it’s always important to have a
link hidden, please login to view. No matter if you feel confident trekking snowy terrain, loss of tire traction can result from a lot of things, including worn tires, hurried acceleration and climbing steep hills that cause wheels to spin. Even in climates where it isn’t the norm, having the right gear to handle those one-off snow days is critical! That’s when tire snow chains come in handy. Rather than investing in costly
link hidden, please login to view for your vehicle, link hidden, please login to view are a budget-friendly solution that improves the grip your tires have on ice and snow. These are chain systems help dig into packed snow and icy surfaces with spiked grip, improving the traction of your vehicle so you aren’t prone to skidding. Not a One-Size-Fits-All Solution link hidden, please login to view
Before you get started, you’ll want to know the right kind and amount of snow tire chains needed for your specific vehicle. It’s also important to check the legal restrictions of tire chain use as some states don’t allow them. Clearance heights and material restrictions also apply to certain vehicles. If you need a refresher on your specific needs, check your owner’s manual for details.
Once you’ve read up on OEM requirements and sizing, the next step is to look for chains that fit your application. For example, if you’re dealing with more icy conditions than snow, you want to look for chains that feature spiked ends, studs or “icebreakers” that can properly grip the slick surface. There are also
link hidden, please login to view designed with large, square links that are a bit more rounded, giving you a smoother ride over packed snow. You should also know chains aren’t the only option out there, but they work well for moderately snowy climates. There are also
link hidden, please login to view, which are long pieces of metal cables wrapped in plastic that are ideal for occasional use. They’re typically cheaper, easier to install and allow for higher speeds, but they’re not as durable as chains. We outline the differences in link hidden, please login to view so can narrow down the options for a better lifestyle fit. Survive Snowpocalypse with NAPA
For most snow drivers, chains are the happy medium. However, installing chains and pulling them apart is a process you’ll have to familiarize yourself with before you can use them without damaging your vehicle or road. You’ll need to drive slower than usual and always make sure to pull over and remove the chains when not directly driving over packed snow or ice. Using snow chains over bare pavement or gravel can result in serious damage to your tires and the road itself. For a more in-depth look into how you should incorporate tire chains into your gear collection, check out
link hidden, please login to view Depending on your vehicle’s build and the amount of snow you’re dealing with on a regular basis, your best tool for combatting snow chaos might look different than that of your neighbor. What’s most important is that you stay prepared for the days when you can’t stay indoors and hide from the blistering cold weather. Using traction-enhancing devices to stabilize your vehicle is the key to calm, collected snow driving. Let the friendly NAPA folks help you choose the best tire chains for snow or ice by shopping our selection of
link hidden, please login to view. If you still aren’t sure of the right fit, stop by your link hidden, please login to view to get expert guidance on vehicle-specific parts, tools and more. Photo courtesy of
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