Acquisitions and transaction activity continued its acceleration path as the relative attractiveness of the car wash industry to outside capital sources and current operators alike was nothing but heightened throughout this year of economic and geopolitical uncertainty.
Investors and external capital continued to enter and grow their positions within the industry throughout 2020. Major drivers of this heightened interest level and commitment to the space include COVID, current interest rate environments, the increased focus on defensive and macroeconomic defensive industries, and most importantly the increase in relative attractiveness of expected yield of investments in this industry in comparison with other alternative investments.
Similar reasons and drivers fueled operator growth and commitment. In addition to the above-mentioned factors, individuals and operators were further driven to largely increase their commitment to the car wash space and their operations by both government loan stimulus (primarily as a result of the CARES Act) and an increase in relative stability and predictability in comparison to akin associates of other industries.
Below you will find the abbreviated version of our now annually released Car Wash Merger & Acquisition Report.
Consolidation in the car wash industry continues and is accompanied by the underlying transaction activity levels one would expect.
The single largest takeaway is that it’s simply getting harder to be considered one of the largest car washes companies. Consolidation continues and average number of sites per quadrant hasn’t reached the point of critical mass quite yet of mega-mergers (even on a relative scale). Across the board, continued consistent and strong acquisition activity seen during 2020 is clear and vibrant and not expected to stop in the near-to-midterm.
Two more nuanced points, but certainly noteworthy in their own rights are the “recycling effect” being seen in the lowest quartile and the impact that new car wash build proliferation vs. acquisitions is contributing to the relative changes in car wash company size within each quartile.
Although the first graph in this report does categorize and cohort and categorize the largest car washes on simply numerical and even basis into four quartiles based on number of sites (i.e. the largest twelve washes of the largest 50 are in the first quadrant, the 25th – 13th largest in the next quadrant, and so on and so fourth); this methodology and categorization is not useful, meaningful, nor appropriate for more in-depth analysis and insights.
For the rest of this report, an alternative categorization methodology and view is taken to categorize and separate the current car wash operator landscape as it relates the largest 50 in the US. The reason the simple numerical quartile approach is vastly inappropriate for the more in-depth analysis throughout the rest of this report is because of the size distribution of the largest car wash companies. The largest car wash universe and operator population does not even roughly fit nor follow a uniform, nor normal for that matter, distribution at all. Rather, and as anyone in the industry certainly knows, the distribution is best categorized as exponential. What this means is that there are a single handful of “juggernauts” (hereafter in the report referred to as the “Largest”). These car wash operators are a near magnitude and scale above and beyond that of their closest smaller scale operators. From here there’s a stark drop to the next level of size (hereafter referred to as “Large”) and then one more drop after that (hereafter referred to as “Mid-Sized”). The read through on the overarching distribution of the largest car wash company size by number of sites is one which is delved in our full report, but let it suffice to say that there are many read throughs to be had when the simple awareness of this distribution is combined with knowledge of the historical consolidation efforts this industry has been subject to; most importantly as the combined knowledge relates to the relative positioning of the car wash industry as a whole on it’s maturation curve.
Even for just the remainder of the abbreviated report featured here, it’s important to visually establish the population categorizations that will be used moving forward from here.
First we’ll look at 2020 growth by number of sites broken out by size category. For those in and / or following the carwash industry, there’s likely to be no surprises in regards to 2020’s top car wash company movers.
The picture does get a bit more interesting when comparing to cumulative top car wash company movers and growth over the past three years and how it differs in some instances and rather reinforced in others.
Our full report, for which the abbreviated version of such is being read here, contains a graphical displays, along with insights on what is the next natural and sequential question one is most probable to be posing at this point; who’s speeding up and who’s slowing down? And of course, why are some speeding up while others are putting on the brakes.
It is essential to understand that so much of the growth by numbers that has been seen over the past three years (with especially large emphasis on the past twelve months), along with the future growth that is to be expected by so many companies in the industry – is not driven by large acquisitions. Such a large amount of the growth is attributable to new builds, and also smaller tack-on acquisitions. The relevant percentage of each contributing growth factor as a driver is something that must be kept top of mind when looking at notable historical M&A transactions in the car wash space.
Please note that for the measurement and qualification to be included here in ‘Notable Transactions’, only singular transactions are considered. If there were multiple smaller acquisitions, even with the same relative target and acquiror but on several instances over time, those are treated as separate transactions and therefore are not combined into a singular transaction for ranking and illustrative purposes here. Additionally, primarily financial sponsor related transactions are not featured in this ranking for including such would dilute the underlying meaning and implications of the data and analysis at hand.
Additionally, Driven’s acquisition of ICWG is not being counted due to it being a intra-holdings portfolio company acquisition and is therefore not meaningfully comparable to other and standard transactions. And financial sponsor purchases or buyouts of pre-existing sponsors stakes are of course excluded as well on the whole.
For all operators, owners, and alike that may be reading this - it’s incredibly important to note that Car Wash Advisory has never, and will never, disclose any non-public information, material thoughts, nor feelings to anyone outside of a sellside process for which the owning seller will be well aware of, cognizent of, and for which any information shared is under strict confidentiality agreement. After all, we at Car Wash Advisory are a car wash specific and solely M&A advisor ourselves, so we don’t take confidentiality lightly. Our reputation is all we have, and we’re quite proud of it.
Please don’t hesitate to reach out if you see anything that may be wrong, omitted or needs to be changed. As we all know, data in the car wash industry is not always of the highest fidelity and or available. We do our best to use all sources avaiable (public only and no information relating to any current, or past transaction for which CWA was involved as an advisor).
The year of 2020 was a very one for the car wash industry. This is due to the confluence of multiple contributing factors, as outlined in the introduction to this report. 2021 is shoring up to be another instrumental year of change in the industry as new builds are at an all-time high, acquisition activity throughout the industry at all relative operator size points is anticipated to continue to increase, and the exogneous factors contributing show few signs of lessening in intensity and direction.
There’s but of course quite a bit more that’s worth covering on the year of 2020 and what 2021 anticipatedly has in store for the industry. Largest transactions, relative increases and decreases on a per company size basis, largest changings and shifts in companies individual relative rankings per year, as well as some more nuanced but incredibly interesting trends, drivers, and statistics in the industry such as the most consistent and predictable in the way of growth, the wild cards, and so on and so forth. For now, hopefully this report and publishing successfully gives you a meaningful synopsis of M&A activity and growth throughout the carwash industry during the past year of 2020. Arguably more importantly still, hopefully this gets everyone reading and all the operators, investors, and all others tangentinally or directly involved in the industry excited for the very exciting year that lies ahead in 2021.
All data and figures used were sourced from a combination of car wash company websites, third party press releases, third-party news releases, and company or related investor issued press releases.
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