In the late 1990s and early 2000s, there was a short-lived boom, driven by large companies like Mace Security International, the maker of Mace Pepper Spray.
The recent acquisition spree isn’t the first for the industry. The biggest misunderstanding is that car washes are turn-key, absentee businesses-they’re not. “And car washes were on the top of every single fund list,” he says. “There are instances where you can buy a car wash for $2 million and the day you close on buying it, you can sell the real estate for $2.5 million and still own the business,” says Caruso, whose firm now fields dozens of calls per week from high net worth individuals and large private equity funds like KKR inquiring about opportunities in the space.Ĭaruso explains that the private equity investors his firm has worked with were tasked to find assets that would maximize returns in the wake of the pandemic. This didn’t exist in the car wash space a few years ago, according to Caruso, but now it’s becoming a common practice. According to Harry Caruso, the founder and CEO of Car Wash Advisory, a broker focused exclusively on the space, there has been a proliferation of sale-leasebacks, a strategy where a business generates a return on investment costs by selling its real estate and then leasing it back from a purchaser. One reason for the uptick in car wash acquisitions is the potential for a quick return on investment. The company acquired three car wash brands in the first months of 2021 alone. One of the most active acquirers in the space is Mammoth Holdings, a portfolio company of Atlantabased Red Dog Equity, which owns 14 car wash businesses with over 60 locations across the Southern and Midwestern U.S. Nepfin’s lower middle-market deal tracker recorded a similar number of car wash transactions in 2021, including the purchase of Riptide Auto Wash by Imperial Capital, Motor City Car Wash by Wafra, and HyperShine Car Wash by Skyknight Capital. Considering that each company could represent dozens of franchise locations, that translates to hundreds of auto cleaning facilities entering private equity ownership in just five months. This year, 14 such deals have been completed as of May, according to Grata. Between 20, the number of deals involving car wash companies increased from one to 14, according to Grata analysis. Fewer than 1% have any private capital backing-but that’s starting to change. Of the more than 4,500 car wash businesses indexed by Grata, a company search engine, over 98% are independently owned. In the last year, there has been an unprecedented uptick in interest from investors looking to acquire car wash businesses, even as industry-watchers caution about the challenges involved with running these companies effectively. The next time you run your vehicle through the local car wash, odds are you may see private equity dollars at work.
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