Car wash industry

December 17, 2020

by an investor from Concordia University - John Molson School of Business in Downtown Montreal, Montreal, QC, Canada

Does anyone have experience looking at deals in this space? Would love to get your views on the industry as a potential search fund acquisition target.

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Reply by a searcher
in Chicago, IL, USA

I looked into this industry at one point. My biggest advice would be to zero in on the labor requirements and capital expenditure needs. These businesses tend to have stable revenue but it can often be difficult to tell how much fixups and equipment replacements will be needed in the next few years. Often times, capex can also be lumpy. The seller can say they haven't had a need to replace anything for a few years but if you look 7 years back you'll see a huge $20k payment.

Reply by a professional
in Fort Worth, TX, USA

Looked at quite a few of these and just did a refi of one a few months ago. They are either cash cows or money pits, I've never seen one in between. Most banks have strict UW guidelines, especially on LTV. There's a lot of $ in equipment, but most banks will put more focus on the RE and only give 50% +/- on equipment. This usually present an issue if you aren't willing to put more $ into the deal.

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