AutoCanada (ACQ) initiated a strategic review of its collision business, which management believes isn’t fully reflected in the share price. While the segment is small at ~3% of revenue…

… it’s grown much faster than the company’s core dealership operations…

… runs at structurally higher margins…

… and has plenty of room to scale in a highly fragmented Canadian market.

ACQ grew its collision business to nearly 40 locations through M&A, buying at an average of 6-8x EBITDA - which would translate to an EV of $112-149M if applied to the platform today…

… with that number approaching $200M if you assume the platform deserves some level of multiple expansion. Larger comps like Boyd Group (BYD) have commanded 13x historically, slightly above where ACQ trades…

… so if the company isn’t looking to get big, a divestment would make sense from both a valuation and strategy perspective - given scale is the only way to unlock operating leverage.

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