Alloy Wheel Repair in roll-up spree, executive says
Mergermarket
Proprietary Intelligence

Alloy Wheel Repair Specialists, the Soundcore Capital Partners-backed alloy wheel repair and replacement company, has 22 add-on acquisitions currently under letters of intent and has plans to do one a week for the next six to 12 months, said Jarrett Turner, a partner at Soundcore.

The Norcross, Georgia-based company is the largest alloy wheel repairer in the US, according to Turner, and plans to roll up what he perceives as an extremely fragmented space. Turner said that given the fragmented and non-professional nature of the space, he expects acquisition targets would have between USD 300,000 to 4m in annual revenues.

He said 75% of Alloy’s customers are car dealerships, 20% are auto body shops and 5% are tire retailers. Alloy plans to build out the capacity of the acquired companies by deploying capital for repair servicing equipment and infrastructure.

Ultimately the company’s goal is to consider larger sized acquisitions in other auto aftermarket services, he said.

Soundcore’s target is to get Alloy to 100m in sales within a year, Turner said. He declined to disclose the company’s current revenues. The company welcomes approaches regarding businesses for sale and other “creative add-on acquisitions” to think about once the platform has greater scale, he said.

Soundcore took majority ownership of Alloy on 17 November, and expects to complete its first acquisition this Friday. It's zeroing in on the largest add-ons it can find in major cities to extend Alloy’s national distribution model before looking at “filling in the holes” with smaller tertiary cities, Turner said. Alloy currently has 123 domestic locations, Turner said.

After six months, concurrent with ongoing add-ons, Soundcore plans to invest heavily in certain locations to turn the network into a hub-and-spoke model with a number of central wheel remanufacturing centers.

He said Soundcore has not retained a banker or business broker to find targets but auto bankers have “already started reaching out to us with other platforms in the auto aftermarket because we’re in the space now.”

Turner said its largest competitor is LKQ Corporation, which has a wheel remanufacturing segment, and Gridiron Capital-backed Dent Wizard, which also has a wheel repair service, followed far behind by many small shops.

Alloy Wheel Repair, founded in 2001, has never had a negative year and has a 40% EBITDA margin, according to Turner. It has 8% to 9% of the alloy wheel repair market, with the next 90% coming from mom-and-pop outfits.

Founder Tom Morris stepped down as CEO with the acquisition by Soundcore and Rob Wheeley, one of the company's franchisees, was appointed new CEO. Morris retains a minority stake in the business and will be on the board.

Including the first add-on, the company will have approximately 60 employees, Turner said. He expects its headcount to reach 150 within a year.

Alloy is the first platform for Soundcore, which was established in May of this year, Turner said. Soundcore’s strategy is to hold companies for three to seven years but it is more likely to hold Alloy for between three and five years because of favourable sector tailwinds and the speed with which it plans to do the rollup, he added.

Soundcore was advised by Kirkland & Ellis as attorneys in the deal while KPMG conducted due diligence.

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By Harry Brumpton in New York.

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