What aftermarket companies could be sold in 2024?

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After a flurry of activity in 2023, what other deals could be in store for 2024 in the Canadian automotive aftermarket?

Canada saw a pair of distributor giants announce their sales in 2023 with LKQ’s acquisition of Uni-Select and O’Reilly Automotive announcing in December that it plans to close its deal with the parent company of Vast-Auto this month.

Elsewhere, Auto Parts Central and Central Canada Industries joined Uni-Select. The parent company of Worldpac and Carquest is looking into selling both those companies.

What should we expect in 2024? While discussing the Vast-O’Reilly deal, the question was put to three aftermarket experts.

They pointed to a variety of possibilities. Joe Mercanti, retired industry veteran, initially thought that Carquest would be a natural target for O’Reilly before hearing about its acquisition of Vast-Auto.

However, he noted, O’Reilly may eye the other Auto Value members as part of a nationwide expansion. Vast-Auto was part of the Auto Value buying group under the Automotive Aftermarket Parts Alliance.

Meanwhile, an industry source who was granted anonymity in order to speak freely, urged people to keep an eye on LKQ.

“I suspect it will be decision time at some point specific to their automotive group, as they focus in on the [paint, body and equipment] sectors, which is their strength,” the anonymous source said. “Cracks starting to show now with their independent membership.”

“With Advance and NAPA and now O’Reilly, all the big three have some footprint over here. So, who knows, maybe next up is AutoZone.”

A natural thought might be AutoZone moving into the Canadian market next now that its competitors have moved north of the border, even as Advance looks to sell Carquest, observed Kumar Saha, U.S. vice president and Canadian managing director of global automotive data firm Eucon.

“So who remains? AutoZone, who doesn’t really have any kind of a presence in the market,” he said in an interview. “With Advance and NAPA and now O’Reilly, all the big three have some footprint over here. So, who knows, maybe next up is AutoZone.

As you look across the Canadian aftermarket landscape, keep an eye on distributors that have aging ownership — what are their plans and with which companies do they fit best, the source wondered.

Furthermore, he noted, look for NAPA, Modern Sales, Monaco Gorup and Bestbuy to pick up members that don’t fit within the O’Reilly platform. They will be the winners.

And what of Worldpac? The folks we talked to were divided.

“I also believe Advance will have a tough time selling Worldpac, as they are up for all of North America, not just Canada,” the source told Auto Service World.

Mercanti, on the other hand, told Auto Service World that he believes Worldpac will be picked up quickly and from a non-industry player. He was a national sales manager with the distributor until his retirement in 2021.

“In a year, it will be bought, and it will be bought by an equity firm. This is my opinion. And the reason being because it makes money,” Mercanti said. “It’ll surprise me if a competitor buys them but I don’t think so. I think that no competitor has the deep pockets as you’re going to need to do that.”

On the cost to acquire, the anonymous source agrees.

“Other network groups probably cannot afford Worldpac, except LKQ,” they said. “Which, if that happened, could solidify their position in parts; as opposed to PBE and crash parts.”

“They’re going to get the best bang for the buck from Worldpac and bring in a lot of cash. That’s what Advance needs.”

Mercanti and the source agreed that Carquest will be a separate transaction from Worldpac.

“And, for a long shot, don’t count [Canadian Tire] out of the Carquest purchase,” the source said. “Their auto repair sector has been sliding for years now (except for tires and batteries) for a number of reasons, and PartSource is stagnant. I suspect they are also noodling their aftermarket strategy these days.”

Or, perhaps as Mercanti observed, its parent company, Advance Auto Parts, may decide to hang on to Carquest.

“They might even keep it,” he said. “They’re going to get the best bang for the buck from Worldpac and bring in a lot of cash. That’s what Advance needs.”

Nevertheless, expect more moves. “It’s kind of hard to say what the future holds,” Saha said, “But I think we will start to see more consolidation.”

And with more consolidation, the pressure goes up on suppliers, Saha noted.

“When consolidation happens in the market, I think the biggest challenges faced by suppliers because they feel pressure to keep their costs low and there’s more bargaining power,” Saha observed. “I think within Canada, there was slightly more bargaining power in the market for suppliers. But if consolidation starts to keep pace at this way, then that could be an issue for some suppliers down the road.”