By Hunt Demarest, CPA, Host of Business by the Numbers Podcast

If you’ve been in this industry for a while, you’ve probably heard the rumblings: private equity groups are buying up independent auto repair shops. Maybe they’ve even approached you or one of your competitors. And if you’re wondering what that really means for your shop and for our industry, you’re not alone.

I’ve been working with auto repair shops for close to 20 years, and in just the last four, I’ve seen more than 100 shops sell to private equity. This isn’t some far-off trend anymore — it’s happening right now, and it’s shaping the landscape for shop owners across the country.

But before we go any further, let me be clear: this is not me telling you to sell to private equity, or that you shouldn’t. What I want to do here is explain who these groups are, what they’re looking for, and what we as shop owners can learn from them.

 What Exactly Is Private Equity?

At its core, private equity is just a group of investors pooling money to buy businesses. They’re not just interested in auto repair — these groups have already bought up dealerships, body shops, HVAC companies, plumbing firms, even accounting firms like mine.

Why auto repair now? Because private equity sees opportunity. They’ve watched what happened in the collision space, where consolidation created giants like Caliber Collision. By rolling shops together, those companies gained bargaining power with insurers, vendors, and customers.

The same playbook is being applied to auto repair. These investors believe that if they can buy enough strong, profitable shops, they can gain scale, reduce costs, and flip those businesses later for a hefty profit.

Here’s How They Make Their Money

Private equity isn’t in this for the long haul. Most groups plan to hold onto shops for five years or less. During that time, they focus on two things:

1. Boosting profits quickly – They eliminate services that don’t make money, double down on what does, and standardize operations across all their locations.
2. Positioning for a sale – Once they’ve scaled up to 50, 80, or 100 locations, the value of the whole package increases dramatically. That’s when they cash out, often doubling their money in the process.

A big part of their advantage comes from scale. Your overhead is your overhead — your bookkeeper, your advertising, your HR costs. For them, those costs get spread across dozens of shops. They also get better deals on parts and tires just by buying in bulk.

Some groups I’ve spoken with even told me they don’t care much about an individual shop’s parts margins. Why? Because they know once they roll that shop into their group, their purchasing power changes the math.

LISTEN TO PODCAST EPISODE 183, FOR MORE ON THIS TOPIC.

Why You Should Pay Attention

Now, I know this all sounds a little scary. You might be thinking: “Great, Hunt, now I’ve got mega-corporations moving in down the street with deep pockets and slick systems. How am I supposed to compete with that?”

Here’s the good news: private equity is often missing a critical piece of what makes independent shops successful — the relationship with your customers and employees.

Think about it. Your customers come to you because they trust you, not because you’re the cheapest or the biggest name in town. Many of them have had a bad experience at a chain store and came to you for that personal, boutique-level service. Private equity groups can buy buildings and equipment, but they can’t buy relationships.

Same goes for your employees. When one of my clients sold to private equity, he had 50 employees. A year later, only two were still there. Why? Because most of his people weren’t working for a brand name — they were working for him.

That means when your competitor sells, it might actually be good news for you. Customers get frustrated with the new ownership, employees leave, and suddenly the independent shops that remain have an opportunity to pick up both.

Lessons Shop Owners Can Take

Even if you never plan to sell, there’s a lot you can learn from how private equity operates. Here are three big takeaways:

1. Stop doing unprofitable work. Private equity doesn’t mess around with services that lose money. If there’s something in your shop that constantly ties up time, resources, and talent without delivering a healthy return, why are you still doing it?
2. Double down on what you do best. Find your most profitable services and scale them. If that means increasing your ad spend in areas you know you get strong returns, do it. If it means dropping diagnostics you hate and focusing more on brakes and tires, that’s fine too.
3. Have enough capital to grow. You don’t need the kind of cash reserves private equity has, but you do need enough to invest when opportunities arise. If your growth is limited by what you can “afford” this month instead of what your business truly needs, you’re already behind.

 So, What’s Next?

Private equity is here to stay — at least for the near future. Whether this trend continues to explode or fizzles out depends on what happens when these groups start selling their investments. If the first wave of buyers cashes out for big money, more investors will rush in. If not, the market may cool off.

Either way, the fact that institutional money is pouring into auto repair should actually be a positive sign for you. These groups wouldn’t be here if they didn’t see a bright future for this industry.

So yes, the game is changing. But independent shops still have a strong hand to play. By staying profitable, doubling down on what you do best, and leaning into the relationships that private equity can’t replicate, you can not only survive — you can thrive.

 Final Thought: Don’t ignore what these groups are doing. Learn from them. Borrow what makes sense. But remember — the heart of your shop is something private equity can’t buy. That’s your biggest competitive advantage.