AMA Group Limited (AMA) announced on the 1st of October 2019 that they are acquiring 90% of Capital Smart Repairs Australia Pty Ltd (Capital S.M.A.R.T) from Suncorp Insurance Ventures Pty Ltd (Suncorp) for 420 million AUD. It will also acquire 100% of ACM Parts Pty Ltd (ACM) for an additional 20 million AUD.
AMA Group is a locally-owned public company that produces vehicle aftercare items and accessories. They have roughly 1,230 workers and operate in Australia and New Zealand, with a corporate office in Clontarf, Queensland, and registered office in Melbourne, Victoria.
The AMA Group controls several companies in automotive component remanufacturing, automotive electrical and 4WD accessories (distribution), automotive workshops and performance products, vehicle panel repair, vehicle protection products and ute/commercial accessories (manufacturing).
Capital S.M.A.R.T was founded in 2010, providing repairs for slightly- to moderately-damaged vehicles as a result of a crash or accident. They employ 1,300 workers and have a capacity of servicing 3,200 customers weekly at their 50 sites spread across the metropolitan areas of Australia and New Zealand. It operates under a long-term service agreement with Suncorp, providing repairs under the Motor Repair Services Agreement (MRSA).
There are several reasons for AMA Group's purchase. Capital S.M.A.R.T is a good fit for the existing group of companies that AMA controls. The current MRSA agreement will further reinforce the long-lasting relationship between AMA and Suncorp. Combined, they will have roughly 10% market share in the driveable repair sector and appealing shareholder values. Capital's management team and staff will remain in place post-purchase, which will mitigate any transitional issues.
The reasoning behind the sale can be attributed to disappointing results by Suncorp, with a significant drop in revenue from higher hazard claims as well as higher regulatory costs. The sale comes in less than a month after Steve Johnston was appointed chief executive, following the unexpected departure of Michael Cameron. The existing MRSA agreement will allow them to continue to receive benefits even after the sale.
The original idea behind Suncorp operating Capital S.M.A.R.T and ACM was to create a chain of revenue, where insured cars would be repaired at Capital, the damaged parts would go to ACM, while recycled or original parts would be used at Capital. This strategy was supposed to reduce the inflating cost of parts and improve turnaround times.
Despite the overall success of Suncorp and ACM, it would seem that the sale of both companies has not been as successful as anticipated. Chief executive Steve Johnson had this to say, “The increasing complexity of repairs is driving significant changes in the smash repair and parts procurement industry, and the divestment means Suncorp can focus on its core insurance and banking operations."
Since AMA Group plans to keep the team and staff of the Capital S.M.A.R.T, it seems that the issue was with the corporate management team of ACM parts. The second part of the statement implies that the business template used for the insurance company is the best fit for the car parts and repair industry. This could have resulted in some sub-optimal hiring choices for individual site operators and salesmen who could not keep up with the demands for repairs and parts purchase. Things will most likely change under the AMA Group, as they have experience and expert staff in the field.
Author: Luka Kusic