Presented by Car Wash Advisory: M&A & Capital Markets in and of the Carwash Industry
Presented by Car Wash Advisory: M&A & Capital Markets in and of the Carwash Industry
The first half of 2024 has brought a major and significant slowdown in carwash M&A, along with a stark decrease in the dispersion of acquiring parties. Transaction count is down ~46% and the number of sites sold and acquired is down nearly 40%, both compared to the first half of 2023. By way of most active acquirers, 2024 posted a large increase in deal concentration. Most notably, during the first half of 2023, the most active acquiror by transaction count was El Car Wash, having been the acquiring group in just 11% of the announced transactions. The first half of 2024 had Whistle Express representing a commanding 43% of deals as the acquiring group. In this industry report, we cover all announced M&A transactions in Q2 and provide a candid overview of market trends.
Thank you everybody for coming today. It means an awful lot, and it’s quite a pleasure to have this opportunity. We have a ton to talk about, and the main topic of discussion will be M&A and capital markets as pertaining to the car wash space. So we’ll get started. Okay.
Okay. So, I can’t quite believe it, but it’s been six and a half years since I founded Car Wash Advisory, and it’s been quite a six and a half years for the industry. A lot has changed. It’s a very different industry, which we’re going to go through as we dive into a brief history on it. But, truth be told, and for level setting for everybody in the room, I had zero business getting involved in this industry—none. I had no family involved in the car wash industry. I had no friends who owned car washes. And if you promise not to tell anybody else, I didn’t own a car when I started Car Wash Advisory, and I had never been to a car wash, so don’t judge me too hard, but I washed my own car. So nothing said, “Harry, you have to go into the car wash industry.” In fact, it was quite an uphill battle in many regards.
But what drew me to the industry was, more so honestly, a little bit of extra time and a general sort of sense of intrigue. And what started Car Wash Advisory—I’d like to tell you it’s because I’m a genius, and I saw how profitable these businesses are and how fantastic they are and how much money they make and this boom of private equity that was going to come in—I knew none of that. I actually was exposed to the industry via one of these trade shows and earnestly just fell in love with the people—down to earth, extremely competent at their disciplines, and just wonderfully authentic human beings. And it just so happened that the businesses themselves were as wonderful as the people are.
So before we kind of jump in here, I think it’s important to address the elephant in the room, which is that there’s a lot of negative headlines surrounding the industry today. There’s bankruptcies, there’s subpar purchases of large portfolios and companies, and there’s extreme levels of discontent and potential concern around performance. If you think that this is going to be anything like last year in terms of “hey, there’s bankruptcies coming,” it’s not. And I want to tell everybody that here we are, six and a half years later, and all the same reasons why I joined this industry and got involved are, truthfully, more present and impactful than ever before. So this will not be a doom-and-gloom story of the industry and all the despair that is to come, but rather a story of what’s going to come next, which is going to be a lot of incremental progress and a lot of positive movement for the industry as a whole. With that said, we’re going to cover all of this today. So first and foremost, we’ll take a brief look at history over the last six years and what’s gone on in the space to lay that framework. We’ll look at the state of the industry as it sits today. We’ll dive into M&A—we will certainly touch on everybody’s favorite topic, which of course is valuations. We’ll talk about capital markets and the potential ramifications that nearsightedness may have in terms of the rest of the topics being covered. And then, most important of all, we will absolutely address in full color and detail what’s going to happen here over the next couple of years.
Okay, so these slides that you’re about to see are truthfully kind of wild to look at. So as we go through this presentation, we’re going to be framing everything in terms of 2019 (which is the run-up), 2022 (which is the peak), and 2025 (where we stand today). And it’s wild—it’s absolutely wild to look at this stuff.
Funny enough, all the way to the left here is the first piece of content I ever published and created in Microsoft PowerPoint for Car Wash Advisory, and it was an image of private equity’s involvement in the space at that time. The whole world, the whole universe of this industry was very different. There were no real large players, but two—one of which no longer exists in its current form, being International Car Wash Group. There were very, very few private equity players in the space, which we’re going to delve into further in just a second. There were certainly no publicly traded companies, as we have now with Mister Car Wash.
And it’s hard to imagine this, but if you put yourself back into the shoes we were in at that time, there was no national obsession. It wasn’t crazy cool to be involved in car washes. It was going to come very soon, but not at that time, and there was no media attention being given to the industry. We jump three years forward here, and all of a sudden this infographic, which is just an updated version, shows a lot more color, a lot more companies, and a lot more washes. Private equity has built up at this point quite a significance in the industry as a whole. At this point, Mister is publicly traded. There is nationwide fervor. We’re all reading stuff in the Wall Street Journal about car washes, which made no sense and nobody could have foreseen coming. And truthfully, in mid-2022 there was absolutely no end in sight. Nobody was predicting a near-term correction or any sort of change in the dynamic that we’d all been privy to and experiencing over the years prior.
And this brings us to today. This has not been published yet—it’ll come out in a couple weeks or whatnot—but this, you can’t even desert [sic] a single logo—every private equity is here and in full color, and we’ll talk about this more in just a second. But again, it’s a very starkly different picture than it was just three years prior. And now, for the first time, it’s not all up and to the right. It’s movement in all directions. We have divestitures. We have partial acquisitions. We have some spin-offs occurring. We have bankruptcies. We have new entrants coming into the space, buying first-time platforms. But it’s no longer unilaterally up and to the right in the proverbial sense. The majority of the industry is private-equity-backed. There is absolutely known stress in many of the larger operators, and there is a general looming level of uncertainty and an undeniable objective level of slowdown, especially when it comes to transactional volume.
So this is wild. You would think that this was maybe decades of evolution. It’s not—it’s six years. So looking at it a different way, focusing in on that sense of private equity’s ownership in this space, this is actually a little mind-boggling.
In 2019, the documented ownership percentage of private equity in the high-volume (100K+ cars/year) express-exterior market of the U.S., by site count, was 13%—nothing to scoff at, but far, far, far from a majority. Three years later, we nearly doubled that stake to roughly 25%. That’s significant. And that’s exactly what was reflected in the infographic on the prior slide.
What’s crazy is this: in today’s world, 61% of the high-volume express-exterior market is owned by private equity and institutional investors. That is not even close to the 13% we had five years ago—they are officially the majority, and undeniably so. It’s wild that all this could transpire in six years’ time.
And it’s not all bad—we’ll talk about private equity’s influence in a moment—but just this graphic alone should be quite sobering in terms of how much everything’s changed in so little time.
But that’s not all that has changed over the last six years. In 2019, as I mentioned, private equity groups were rising into full force, and we saw a commiserate surge in M&A activity—sale-leasebacks became commonplace, whereas five years prior they were unheard of. And then, as we reached our very peak, the equilibrium between new-build economics and M&A shifted drastically toward new builds. Then we entered the “Dark Ages,” if you will, in 2023, when people were less worried about growing site count and more worried about density. Which brings us to today, an absolutely astronomical level of slowdown across the board.
So keep all of that in mind. In six years, the entire industry has changed so dramatically that you’d be forgiven for thinking it was a different industry today than it was five years ago.
Here’s what I want to talk about as we go through today, and where the industry currently stands. I’d rather frame it around questions that are the most topical, meaningful, and commonly asked.
Answer: No, the U.S. express-exterior car-wash market is not saturated by any measure. You must be strategic about where you build, but white space remains.
There are roughly 60,000 car washes total (an almost meaningless number).
27–30K conveyorized washes (still broad).
About 10,000 express-exterior sites, of which 7,000 do 100,000+ cars/year—this is our investable universe.
Of those, 5,500 are owned by operators with 10+ sites, leaving approximately 1,500 sites held by smaller players. If you assume those smaller players average three sites each, that’s roughly 500 identifiable, targetable owner-operators nationwide.
That’s about 10 per state, on average—a number to sit with. The market is still fragmented, but it’s no longer completely unconsolidated.
Four core reasons car washing was attractive in the first place:
Zip’s: Officially bankrupt (expected to emerge soon).
Take 5: Not bankrupt—acquired by Whistle Express for a fraction of replacement cost.
Let’s compare Zip and Take 5 to other operators:
Conclusion: Zip and Take 5’s troubles are company-specific, not indicative of the broader industry. They grew faster than the market could sustain, and that combination of factors—not interest rates or consumer softness—drove their woes.
Key takeaway: Zip and Take 5 are not the industry. What sank them was what they did, not something inherent to car washing.
We constrain to these real-estate-owned, high-volume deals:
Note: The chart is non-temporally weighted. In reality, the industry sat at 5–6× for many years before 2019.
Relative view: Car washes have strong cash flows, few external threats, and unsaturated markets—ought to have easier credit than most sectors. The challenge is overcoming lenders’ irrationality.
Current ownership by site count (high-volume, express-exterior):
100 sites: 43%
Key question: What will this look like by 2030? Will the big just get bigger? Not necessarily—drivers like labor economics and human capital suggest a more balanced future.
I’m Harry Caruso, founder of Car Wash Advisory—an investment bank solely focused on car-wash M&A in the $25–$500 M range. If you’d like the full slide deck, please reach out. Now, let’s open it up to questions.
Question: “What does that say to opportunities for other companies of color?”
“Depends on whether or not Mister Car Wash gets taken private. I don’t think the whole industry would see a benefit if Mister Car Wash went private, but it would likely block a public market exit for another player for quite some time.”
Question: “What about bonus depreciation—does that drive investment to or from the space?”
“The bonus depreciation is a red herring. It’s akin to leverage: if your fundamental thesis doesn’t work because of capital markets or interest rates, you probably shouldn’t be in the space. If you can’t make a 55% cash-flow margin work without bonus depreciation, you’re in the wrong business.”
Question: “Do you see private equity pulling back from car-wash acquisitions as building costs and debt service rise, favoring experienced operators over RE-driven models?”
“Debt service isn’t what sinks a promising car-wash venture. If you can’t absorb 2% interest on a 55% cash-flow margin, you have fundamental operational issues. Interest rates make a convenient scapegoat, but true problems lie elsewhere.”
Question: “You spoke about picking profitable sites. When advising on a transaction, how do you benchmark a target against local peers—are they growing, shrinking?”
“We’re in a weird data-availability state: you can use things like Placer AI to proxy volumes, but that’s noisy. The best way—though folks hate to hear it—is to physically count cars at each site. Hire someone for a day, and you’ll know your competitor’s volume.”
“All right, well, thank you everybody.”
Transcribed by https://otter.ai
Private equity doesn’t always “work.” Hopefully, this comes as no surprise. Private equity’s involvement in the car wash sector is no exception. The formula that combines outside money, tenured industry experts, and a fitting and applicable industry is far from infallible.
What They Mean for Valuations: Featured in AutoLaundry News
