GB Auto looks for continued growth

PHOENIX — Any employee who has heard these words knows how scary they can be: We have sold the business.

Workers immediately begin to wonder: What will happen to my job? How will it change? Will they cut our staff? Will I have a job?

Frank Kneller, CEO of GB Automotive Service Inc., knows all about the uncertainty that comes with the sale of a business. That's one of the reasons, he said, that he and his team approach every acquisition that GB makes — a dozen separate deals involving 181 locations in five states, and counting, with plans to reach 300 or more in the next year — with compassion and enthusiasm toward employees at each new location.

"Everyone looks for stability. They've grown to like and work hard for their current owner, and when you change that, especially going from an individual owner to a corporate, private equity model, that's a big difference," Mr. Kneller told Tire Business.

"I tell the group (being acquired) that we will do what's best for that new business. We want it to be successful. A lot of that is communication, making sure we address employees concerns, and it's really where our focus is."

Mr. Kneller pointed out that every employee of GB Automotive — a subsidiary of Rye, N.Y.-based Greenbriar Equity Group L.P. — has been through the acquisition process.

"We're not a very large business where acquisition is just a part of what we do," said Mr. Kneller, who joined GB in 2018 after serving as CEO at Los Angeles-based Horizon Solar Power (2015-2018).

"It's a lot of our focus. ... Everyone is very sensitive and understands what that person is going through on the other end."

According to Chris Garman, GB's vice president of business development, GB has retained about 90% of all "desired employees" after each acquisition.

"There is a tremendous amount of effort on retention of employees, starting with communication, extensive training on new policies and procedures and additional opportunities that come with larger scale," Mr. Garman said. "(It's an) extremely high level of importance, as employee loyalty drives customer loyalty.

"GB Auto is a team of acquired employees, so there is a very high level of empathy and commitment for new team members coming into the company."

To describe GB's recent acquisition activity as aggressive might be an understatement.

GB Auto, which began operations in December 2017, has added 55 locations over the last nine months, including:

• Three ServiceOne Automotive locations in the Houston area (December); Three Reliable Automotive locations in the Austin, Texas, area (November); Seven Tate Boys Tire & Service locations in Oklahoma (September); 32 Sun Devil Auto and Sun Auto Service locations in the Phoenix and Houston metro areas and Nevada (July); and 10 Louetta Automotive & Tire Service locations in Houston (July).

The only acquisitions that were larger during that span were by two large investor groups: Meritage Group, which purchased Les Schwab Tire Centers (492 locations); and BayPine L.P., which announced a deal on March 5 to acquire Mavis Tire Express Service Corp., a network of more than 1,100 locations. Those groups, however, play less of a role in managing those locations.

Mr. Kneller said GB — the seventh largest independent tire retailer in the U.S., according to Tire Business research — expects it to be even more aggressive than in the past. GB Auto does not disclose revenue, but based on sales of some of the firm's acquisitions prior to being bought, the business' proforma annual revenue could exceed $300 million.

"As we have scale, ... we feel like we've got the size to take on more," he said. "We're looking to grow even faster through acquisitions, and we still have a very robust pipeline of greenfields. We're going to get back to that same store growth, too."

Besides growing organically or via acquisitions, he said more business owners — whether it be with one, two or three stores — are approaching GB for a potential sale, perhaps as the independent dealers grow weary of fighting through the challenges of the COVID-19 pandemic.

"If it's a good location and they have a nice customer following," he said, "we'll go after those, too."

For the immediate future, he said GB will follow its strategy of bolstering its original target investment region: the South/Southwest, with "huge" opportunities," he said, in Texas (Austin, Dallas-Fort Worth, Houston), Arizona (Phoenix) and Nevada, along with Southern California.

The target area could stretch up the West Coast, he said, to Oregon and Washington.

Some prospective sellers, he said, are drawn to GB because of its commitment to maintaining the dealership brand.

"If that business has that solid branding in the market, why would it want to give up on that?" Mr. Kneller asked. "Our guests see it, our employees are loyal to it, and we want to continue ... to build on brand equity in the marketplace."

Mr. Garman, who is responsible for all M&A activity, new store development and the integration of newly acquired stores, said GB has demonstrated its commitment to partnering with "strong, local brands" focused on customer service and employee loyalty.

"Sellers have spent decades building their brands," he said, "and (GB Auto) gives them an opportunity to exit while preserving that legacy."

According to Mr. Kneller, each of the brands GB acquires has a "hidden jewel" in the way it approaches business.

"While we say we are GB Auto, there is no overarching culture there," he said. "We are a group of individual brands that we take all the best practices and put them together. It allows us when we acquire a business to be very open to look at it and say, 'We're not going to fit you into this mold.' Our mold is continually changing, and we've become a better company all the time."

In fact, Mr. Kneller said GB is trying to take some of the best aspects of some of its acquired businesses and make them best practices across the organization.

Two examples: First, the Sun Devil group, he said, excels at heavy-line work.

"A lot of people are running away from (that work)," Mr. Kneller said. "They embrace it. We're saying, 'Hey, there's an opportunity to do work across the market. Don't be afraid of doing that work. Embrace it. And they have great process for doing that."

Tate Boys, he said, has an "incredible system" of pampering customers, whether it's delivering serviced vehicles or streamlining the processes for quick oil and/or tire changes.

"We are taking what we learned from them and the Tate Boys leadership is bringing those processes and culture to our Tire Works (Total Car Care network of 15 stores) process in Las Vegas."

The biggest change a store will undergo is a transition to GB's point-of-sale system. When employees balk at the change, he said, GB is quick to remind them that, should they leave the company for another, they would have to learn a new system either way.

"And they're not going to have the support they have here," he said.

GB offers advantages to its 1,400-plus employees that previous owners couldn't, such as the mobility to change jobs including perhaps a move to another location in another state.

"We're giving them the opportunity to move around and even more importantly to grow, take on more responsibility in the business," he said.

Mr. Kneller said GB's focus of maintaining the brand and transitioning new employees set it apart from other dealerships looking for growth opportunities. As part of that, he said he makes sure he meets all new employees personally — pre-COVID, at least.

"Each (acquisition) is more customized to figuring out what's the best way to do the transition with the company," he said. "It's not a cookie cutter approach. Each one is important to us."

Mr. Kneller said the importance and resiliency of the tire and automotive service industry makes it attractive for investors.

"Now it's proven to be COVID-resistant, recession-resistant and ... Amazon-proof, too," he said.

"It's a very fragmented industry still. You have some large players out there, but the majority are smaller. There are plenty that are ripe for consolidation. It doesn't require a lot of capital expense to run it right once you get your equipment and your building leased. Those are the things that attract a private equity."

Separately, Greenbriar Equity Group L.P. acquired Oil Changer Inc., a Merced, Calif.-based oil change business doing business as Oil Changers, with 50 locations in California and Hawaii. .