Summer is here and that means more people will be getting their cars washed for road trips or just cruising around town. What a good time to talk about consolidation in the industry. Access Holdings-backed Spotless Brands CEO Russ Reynolds spoke to us about M&A trends in the car wash sector.
“In the automotive services industry, this is probably one of the last batches of a highly fragmented industry,” Reynolds tells Mergers & Acquisitions. “Within the industry, the top 10 players control a very small market share.”
Reynolds cites three reasons the market is attractive to private equity:
- Consumers are seeking better service and are willing to pay a premium for it
- Recurring revenue models that are developing (e.g. joining a Car Wash Club)
- Strong unit economics
Access formed Spotless in 2019 and the portfolio now has 120 sites. It recently acquired Ultimate Shine Car Wash, which operates 17 locations across Tennessee, Virginia and West Virginia, joining a stable of franchises including Cobblestone Auto Spa, Okie Express Auto Wash, and Flagship Car Wash. Spotless is aiming to have 250 car washes open by the end of 2023, Reynolds says, with about half of the new locations coming through M&A.
“We have a very focused strategy on where we want to hunt for growth and how we want to hunt for growth in both new and existing markets,” he says.
Reynolds says Spotless will look for acquisitions mainly in the southern portion of the East and West coasts of the U.S. “Like any retail business, you have to have the right components to have sustained growth.”
– Demitri Diakantonis