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1、Fall 2024The U.S.Convenience Store and Car Wash Industry Fuel,Food,and FoamHoulihan Lokey,Inc.(NYSE:HLI)is a leading global investment bank with expertise in mergers and acquisitions,capital markets,financial restructuring,and financial and valuation advisory.Our firm is the trusted advisor to more

2、top decision-makers than any other independent global investment bank.Leading Capital Markets AdvisorNo.1Global Restructuring AdvisorNo.1Global M&A Fairness Opinion Advisor Over the Past 25 Years1,700+Transactions Completed Valued at More Than$3.5 Trillion Collectively2,000+Annual Valuation Engageme

3、ntsNo.1Global M&A Advisor Under$1 BillionAbout Our Firm2Learn more about how our advisors can serve your needsCorporate FinanceCorporate Finance Financial and Valuation AdvisoryFinancial andValuation AdvisoryFinancial RestructuringFinancial RestructuringOur Industry CoverageOur Industry CoverageCORP

4、ORATE FINANCEFINANCIAL RESTRUCTURINGFINANCIAL AND VALUATION ADVISORY19992023 Global M&A Fairness Advisory RankingsDealsAdvisor1,247Houlihan Lokey11,035JP Morgan2977Duff&Phelps,A Kroll Business3884UBS4716Morgan Stanley5Source:LSEG(formerly Refinitiv).Announced or completed transactions.2023 Global Di

5、stressed Debt&Bankruptcy Restructuring RankingsDealsAdvisor73Houlihan Lokey164PJT Partners Inc251Rothschild&Co337Lazard427Evercore Partners5Source:LSEG(formerly Refinitiv).2023 M&A Advisory RankingsGlobal Transactions Under$1 BillionDealsAdvisor346Houlihan Lokey1308Rothschild&Co2200Lazard3187JP Morg

6、an4176Goldman Sachs&Co5Source:LSEG(formerly Refinitiv).Excludes accounting firms and brokers.No.1 M&A AdvisorAll U.S.Consumer TransactionsLeading Global Independent Investment Bank32023 M&A Advisory RankingsAll U.S.Consumer TransactionsAdvisorDeals1Houlihan Lokey252Goldman Sachs203Generational Equit

7、y184JP Morgan125Benchmark International115Jeffries 115Moelis 11Source:LSEG(formerly Refinitiv).14Locations Worldwide130+Consumer Bankers100+Total Consumer Deals in Past Three Years600+Cross-Border Transactions Since 2011AMERICASAtlantaLos AngelesBaltimoreMiamiBostonMinneapolisCharlotteNew YorkChicag

8、oSan FranciscoDallasSo PauloHoustonWashington,D.C.EUROPE&MIDDLE EASTAmsterdamMilanAntwerpMunichDubaiParisFrankfurtStockholmLondonTel AvivMadridZurichManchesterASIA-PACIFICBeijingShanghaiFukuokaSingaporeGurugramSydneyHong Kong SARTokyoMumbaiKenny KraftAlexandra FeldmanDan NycholatNatalie YeeGabrielle

9、 HarvatinManaging DirectorConsumer GroupVice PresidentConsumer GroupAssociateConsumer GroupFinancial AnalystConsumer GroupFinancial AnalystConsumer GroupKenny.KraftHL.comAFeldmanHL.comDan.NycholatHL.comNatalie.YeeHL.comGabrielle.HarvatinHL.com+1 404.495.7010+1 212.497.4285+1 212.497.7895+1 212.801.8

10、043+1 646.893.0899Dedicated Houlihan Lokey Team for the Convenience Store Sector4Request a MeetingLearn More About UsContact UsPlease reach out to us to schedule a call to discuss this quarters market update or to explore how we can serve your business needs.010203Convenience Stores and Car WashExec

11、utive SummaryConvenience StoreOverviewCar Wash OverviewTable of ContentsConvenience Stores and Car WashExecutive SummaryConvenience Stores and Car WashExecutive Summary7M&A activity in the convenience store space has persisted with more than 295 transactions across the past decade(1).Despite this ma

12、ssive wave of consolidation,the space remains highly fragmented,creating ample opportunity for further consolidation and new platforms of scale.Additionally,as store formats evolve to appeal to a broader universe of consumers(with increasingly sophisticated foodservice offerings),new-to-industry(NTI

13、)site growth and raze-and-rebuild(RNR)of existing units are yielding continually strong ROIs for operators(even in the current interest rate environment).Additionally,M&A activity in the car wash space experienced a boom from 20192022 led by a significant wave of$10 billion+of investment by private

14、equity firms and family offices(1).Given a disconnect between public market valuations and private market valuation expectations,M&A has somewhat cooled,with existing operators electing to allocate capital toward greenfield strategies.Despite broader macroeconomic challenges,our outlook for both sec

15、tors remains favorable as operators benefit from recurring traffic,stable demand,strong unit economics,and a core consumer that deems these products and services essential.In this piece,we share insights and observations on the themes currently driving the M&A market and those expected to drive it g

16、oing forward.We will highlight the key consumer trends driving market behavior and the key criteria and factors that optimize acquirer interest and value in todays environment.The convenience store and car wash industries operate in some of the most resilient categories within the multi-site/retail

17、industry.Valuations for these categories persist at elevated multiples relative to the broader retail space.Both the convenience store and car wash industries remain extremely fragmented,even with the significant amount of consolidation that has occurred over the past decade.Sources:(1)PitchbookCOVI

18、D-19Macro Landscape1)Resilient Automotive Fundamentals1)Resilient Automotive Fundamentals8U.S.Car Parc Expected to Approach 300 Million Cars by 2030(1)Annual Light Vehicles in Operation,Values in Millions25626226727127828127928228528728929129329529629815161718192021222324E25E26E27E28E29E30EU.S.Fleet

19、 Is Aging,Increasing Aftermarket Service Demand(2)Average Vehicle Age18%19%19%19%19%18%17%16%15%15%16%18%17%19%20%22%22%23%23%23%22%21%23%21%19%17%15%15%17%18%20%21%21%41%42%43%44%44%44%43%42%42%42%43%20142015201620172018201920202021202220232024E03 Years:(0.9%)12+Years:0.9%811 Years:5.9%47 Years:(3.

20、1%)Total VIO:0.7%3 Yr.VIO CAGRStable Underlying Demand Driven by Rebounding VMT(3)Historical VMT,Miles in Billions3,2403,2612,9033,1383,1973,264201820192020202120222023Automotive Industry TrendsThe broader automotive landscape provides a favorable backdrop that warrants continued demand for convenie

21、nce stores and car washes.The total U.S.car parc has grown steadily as the overall number of vehicles in the car parc is expected to reach 300 million by 2030.Further,the age of the fleet continues to increase,which highlights not only the continued need to service vehicles but the longevity of fuel

22、-consuming vehicles as part of the overall parc.Likely the biggest driver of demand for convenience retail and car wash is vehicle miles traveled(VMT),where after a brief drop-off in 2020 because of the pandemic,miles driven have continued to increase and have now surpassed pre-pandemic levels.The c

23、orrelation between miles driven,convenience store traffic,and car wash utilization is undeniable.As miles driven grows,refueling visits become more frequent for ICE vehicles,and all vehicle owners are more inclined to wash their cars.1)Resilient Automotive FundamentalsNotes:VIO represents vehicles i

24、n operation;VMT represents vehicle miles traveled.Sources:(1)Bloomberg,S&P Global Mobility/IHS,U.S.DOT Information;(2)BofA Global Research;(3)Federal Reserve Economic Data.0%2%4%6%8%10%Aug-19Aug-20Aug-21Aug-22Aug-23Aug-24Macro Landscape2)Watchful Eye on Consumer2)Watchful Eye on Consumer 9State of t

25、he ConsumerIndex Value(1966:Q1=100)Year-Over-Year Change in U.S.CPI(2)Seasonally AdjustedSources:(1)University of Michigan Survey of Consumers;(2)U.S.Bureau of Labor Statistics.455565758595105Aug-19Aug-20Aug-21Aug-22Aug-23Aug-24+18 ptsConsumer sentiment is recovering,up 18 points from its five-year

26、low of 50 in June 2022.Another important factor driving sector demand is the overall health of the consumer.A challenging 2023 macroeconomic environment resulted in consumers reducing discretionary expenditures.However,there has been an uptick in consumer spending over the past five years,allowing g

27、reater amounts of disposable income to be allocated toward nonessential goods and services offered in the convenience store and car wash industries.Stable economic conditions and increased consumer confidence will support continued consumer spending and market growth in these categories.Inflationary

28、 pressures have abated somewhat in July and August with the CPI having finally reached below 3%(the first time since March 2021).Energy and food prices,the most volatile two contributors to the CPI and the key two inputs to the convenience store space,were both relatively flat this summer.With a gen

29、eral sense that inflation is largely under control,Central Banks now seem more focused on employment data and the health of the job market as they prepare interest rate policy for the remainder of the year.Consumer Sentiment Index(1)YoY CPI is down 12 bps LTM,with YoY change in CPI sitting at 2.5%as

30、 of August 2024.2)Watchful Eye on Consumer Down 12 bps LTMMacro Landscape3)Gas Prices3)Gas Prices 10Oil and Gas Economic Landscape Fuel sales,which account for more than two-thirds of total sales at a convenience store,depend on underlying oil prices,which can move swiftly based on supply and demand

31、 imbalances.These prices have been in a volatile period since the pandemic,hitting peak volatility in 2022 and 2023.Volatility in these times was driven primarily by the aftereffects of COVID-19 and geopolitical conflicts(particularly Russias ongoing conflict with Ukraine).In 2024,the price of oil a

32、nd corresponding retail fuel prices began relatively flat but have seen recent declinesa byproduct of steady supply in the U.S.and weaker global demand(particularly in Asia).Around$70 as of September 2024,oil is at its lowest level since December 2023 and OPEC has responded with production cuts exte

33、nded through November 2024 to stabilize pricing.Despite top-line challenges of declining fuel prices,fuel retailers tend to enhance gross profit during periods of declining fuel prices by managing inventory balances and optimizing price strategies in step with the declines to protect margins.WTI Cru

34、de Oil PriceU.S.Retail Gasoline PriceDollars per BarrelDollars per GallonNote:Crude oil price as of 9/30/24;gasoline price as of 10/7/24.Source:U.S.Energy Information Administration.3)Gas Prices$68.75$3.14($50)$0$50$100$1502000200220042006200820102012201420162018202020222024$0$1$2$3$4$5$620002002200

35、42006200820102012201420162018202020222024Convenience StoreOverviewConvenience StoreOverview12Market Size Today,there are more than 150,000 convenience stores in the U.S.,a figure that has remained relatively unchanged over the past decade.Of those stores,approximately two-thirds remain owned by mom-

36、and-pop(less than 10 store operators).Despite a steady wave of ongoing consolidation driven by the largest retailers in the industry,market fragmentation suggests that an increasing number of acquisitions could occur,particularly as founder-owners seek to retire,transition their businesses,or capita

37、lize on the current valuation environment.Further,the convenience store industry has seen a shift to favor players with scale particularly evident by the increase in breakeven fuel margins(which increased significantly during the COVID-19 pandemic and have held at elevated levels).In todays operatin

38、g environment with increased operating costs,higher interest rates,and heavy competition,those operators with scale can offer enhanced customer proposition with appealing food offerings,loyalty programs,vertical integration(in-store and in the forecourt),experience(signage,cleanliness,service),and t

39、echnology.The benefit of chain stores operating with scale is evidenced by looking at store counts over the past decade.Since 2014,the total number of chain stores has grown by 7.3%,while the number of single stores has declined by nearly 5%in that time.The overall number of single stores is still 1

40、.5x the number of chain stores,which showcases the significant level of fragmentation in the space and the fact that the consolidation story is still in the early innings.Source:NACS/NIQ TDLinx Convenience Industry Store Count.Chain Stores Have Grown 7.3%Since 201496,31891,79956,47660,59720142023Cha

41、in StoresSingle Stores152,794152,396Count of U.S.Convenience StoresC-Store Market Share by Store CountNumber of Stores in C-Store Chain,Percent of Market Share63%6%6%3%22%110115051200201500501+Key Trends1)Market Resiliency1)Market Resiliency 13$213.5$327.62014202322.439.42014202348.4%Of Consumers Vi

42、sit Convenience Stores 12 Times per Week40 Cents per Gallon Annual Average Margin in 22 and 23Gross margin in 24 is expected to exceed the recent record levels.The convenience store sector has weathered many challenges in recent years,including but not limited to the pandemic,inflation,rising intere

43、st rates,labor shortages,geopolitical conflict,coin shortages,and unfavorable weather.Despite myriad challenges,inside sales and demand for convenience store products continue to increase.In fact,the c-store sector has experienced growth through every recessionary period since 1980.These favorable r

44、esults are evidenced by the current financial performance of the public peers.Given the aforementioned fuel volatility and a fundamental reset of pricing strategies during the pandemic,CPG(margin per gallon at the pump)has remained elevated while SSS growth inside the store continues to persist.This

45、 strong operating performance indicates that the U.S.consumer,busier than ever,increasingly values convenience.Many other food categories,notably restaurants,have experienced SSS declines since the pandemic(particularly in Q2 2024),as the consumer pushes back on price increases and feels the effects

46、 of the broader economic challenges.Public convenience store peers,as a proxy for the industry as a whole,have shown outsized sales growth and profitability in recent yearseven outperforming pre-pandemic levels.Share price performance,shown later in this report,also illustrates how strong the conven

47、ience store sector has performed relative to other consumer-exposed sectors.Despite a Number of Operating Challenges and Industry Headwinds,the Convenience Store Space Has Proven its ResiliencySources:(1)NACS and the NACS CSX Benchmarking Database,2023 NACS Convenience Voices;(2)2023 OPIS Retail Yea

48、r in Review.Inside Sales Growth(1)Dollars in BillionsFuel Margins:Rack-to-Retail Margin Index(2)Cents per Gallon for Regular Unleaded Gasoline1)Market Resiliency+5%CAGR+6%CAGRKey Trends1)Market Resiliency 1)Market Resiliency(cont.)(cont.)14Public Company Operating Performance:Mean in 2018 vs.2023Ave

49、rage Values Across Primary Convenience Store Peer SetNote:Primary convenience store peer set includes Alimentation Couche-Tard,ARKO Corp.,Caseys,and Murphy USA.Sources:S&P Capital IQ,public company filings.Cents per Gallon(CPG)18.235.820182023+17.6 Cents27.5%30.0%20182023Inside Gross Margin%+2.5 pp1

50、.5%4.0%20182023Same-Store-Sales(SSS)+2.5 pp4.3%5.5%20182023EBITDA Margin%+1.2 pp1)Market ResiliencyKey Trends 2)Consolidation Wave Ongoing2)Consolidation Wave Ongoing15DateTargetAcquirerStrategic RationaleArticle Link08-24(1)The transaction would unlock global reach and improve economies of scale;Co

51、uche-Tard divestitures are likely required by FTC.Learn More08-24(2)Adds 270 locations to Couche-Tards North America network;enables GetGo parent Giant Eagle to exit the c-store industry.Learn More08-24(2)FEMSA entry into the U.S.market,Delek,provides a foothold in the Southwest region.Learn More07-

52、24(2)Provides Caseys with an expanded presence in Texas and the Southeast region;Caseys projects$45 million in run-rate synergies post-close.Learn More06-24(2)Enables Zuber Issa to operate the U.K.convenience market as TDR and Moshin Issa continue to focus on a broader asset base.Learn More05-24Incr

53、ease presence in West Texas and rebrand locations to Kent Kwik.Learn More04-24Acquisition of remaining Stripes stores related to the Sunoco transaction.Learn More11-23The consortium bid approach gives both operators the chance to continue to grow in the Southeast U.S.Learn More08-23The acquisition d

54、oubles Maveriks footprint and creates a top-12 player in the market.Learn More03-23Building presence in the Southeast market;stores to continue operating under Tom Thumb banner.Learn MoreFeatured Key C-Store M&A TransactionsNotes:(1)Approach data;(2)Announcement date.Sources:S&P Capital IQ,public co

55、mpany filings.Convenience store M&A volume continues at a rapid pace with more than 295 transactions completed over the past decade.Given how fragmented the space remains,and continued challenges for smaller operators to compete with scaled incumbents,we foresee M&A volume remaining elevated in the

56、next few years.Further,strategic appetite for assets should persist given the economic benefits of scale that larger operators experience.Private equity platforms have become increasingly popular in recent years,typically starting with a smaller acquisition and utilizing that vehicle as a platform t

57、o consolidate.Given increasing regulatory limitations for certain acquirers in the sector,we could see increased private equity activity in coming years in addition to foreign strategics and adjacent category players(such as refiners/marketers)who are getting increasingly more involved in M&A proces

58、ses today.M&A Deal Activity Continues at a Near-Record PaceZuber Issa2)Consolidation Wave OngoingKey Trends3)Enhanced Regulatory Environment3)Enhanced Regulatory Environment 16InternationalRefiners/MarketersPrivate EquityPrivate StrategicsRegulatory Environment Has Given Rise to New Entrants in M&A

59、ProcessesIn 2021,the FTC published commentary regarding the convenience store sector detailing enhanced scrutiny procedures around potential transactions.According to the FTC,markets for retail gasoline are made on a highly localized basis,and consumers do not have practical alternatives to purchase

60、 fuel outside of gas retailers.Generally,the FTC indicates a desire to maintain competition with three or more operators selling fuel in a given localized market,dictated by a tight mile radius depending on geographic location.While M&A activity has not been curtailed,the regulatory implications of

61、large-chain M&A remain top of mind.This dynamic has given rise to a variety of new entrants who historically had either been uncompetitive in M&A processes(e.g.,financial investors)or sought growth via other channels(e.g.,less historically acquisitive strategics).M&A processes remain competitive wit

62、h multiple avenues for prospective buyer pools.Large chain acquisitions by strategics often result in FTC-mandated divestitures prior to closing the transaction,creating a secondary environment for c-store acquirers even after deals are announced.Regulatory Environment Plays a Significant Role in M&

63、A Processes as FTC Focused on Consumer Protection,Geographic Overlap3)Enhanced Regulatory Environment1125710121489857272697372722018201920202021202220232024E2025EEV SalesICE SalesKey Trends4)Watchful Eye on Long4)Watchful Eye on Long-Term Headwinds Term Headwinds 17Global Light Vehicle Sales(1)Globa

64、l Annual Unit Sales,Values in MillionsProjected New Vehicle Offerings by Powertrain(2)%of New Nameplate and Powertrain Count 2025E2028EEV Sales Momentum Is Mixed(3)Global Monthly EV Unit Sales,Values in Thousands1,2971,1521,2801,333 1,3331,4401,6231,0928341,3561,2281,3781,496Jun-23Aug-23Oct-23Dec-23

65、Feb-24Apr-24Jun-2440%40%20%ICEElectricHybridRisks to continued strong market performance include CPG margin compression,electric vehicle proliferation,autonomous fleet and ride-sharing in urban markets,and digital delivery.While the EV adoption story is top of mind,gallons purchased and overall c-st

66、ore traffic indicate the sector is well-positioned in the relatively near term.Additionally,many operators are piloting EV charging programs,which increase traffic time inside the store.Relative to EV,trends should be monitored with respect to the convenience channel impact,but adoption rates do not

67、 present an immediate threat.ICE unit sales have stabilized in recent years while EV sales momentum has been mixed.In addition to selectively adding charging stations and renewable fuels at locations that might benefit from doing so,operators are increasingly focused on enhancing foodservice offerin

68、gs as a means of offsetting these long-term threats.These offerings include prepared foods,beverage programs,or even foodservice partnerships or co-locating with restaurant franchisees.Being a source destination for foodservice has the added benefit of sales uplift to grocery items such as center-of

69、-the-store merchandise and packaged beverage.Certain Longer-Term Risks Present Threats to the Current Operating Model:Electric Vehicles,Ride Sharing,Digital Food DeliveryNotes:ICE represents internal combustion engine;Fuel Cell powertrain makes up 50%of target EBITDA on average in the past decade).B

70、ased on our recent transaction experience,deals that warrant the highest EBITDA valuations have elements of the following:EBITDA ValuationsFuel ProcurementThese synergies are derived from three major sources:Merchandise ProcurementG&A SavingsValuation Environment(cont.)19Notes:Market data as of 10/7

71、/24;indices are weighted by market capitalization.Sources:FactSet,S&P Capital IQ.Valuations in the public markets remain strong and elevated relative to historical periods.Most operators have witnessed multiple expansions on a higher base of earnings,resulting in outsized share price performance ver

72、sus the broader retail and oil and gas sectors.The share price index averaging the four pureplay convenience store operators(Alimentation Couche-Tard,ARKO,Caseys,and Murphy USA)has outpaced most retail sectors in recent yearsincluding meaningfully outperforming the Dow Jones U.S.Restaurant&Bars Inde

73、x as well as the Dow Jones U.S.Oil&Gas Index.Stock Price PerformanceNTM EBITDA Multiple Performance%Change Relative to Oct-19Pureplay C-StoreCaseys General Store(NASDAQ:CASY),Murphy USA(NYSE:MUSA),Alimentation Couche-Tard(TSX:ATD),Seven&i Holdings(TSE:3382),Arko(NASAQ:ARKO)C-Store LinkedCross Americ

74、a Partners(NYSE:CAPL),Global Partners(NYSE:GLP),Parkland(TSX:PKI),Sunoco(NYSE:SUN)93.8%68.2%70.5%49.0%21.5%9.6x7.6xCommentary5.0 x6.0 x7.0 x8.0 x9.0 x10.0 x11.0 xOct-19Oct-20Oct-21Oct-22Oct-23Oct-24Pureplay C-StoreC-Store Linked(75%)(50%)(25%)0%25%50%75%100%Oct-19Oct-20Oct-21Oct-22Oct-23Oct-24S&P 50

75、0Oil&Gas IndexPureplay C-StoreRestaurants&Bars IndexC-Store LinkedC-Store EBITDA Multiple Performance20FY 2024E vs.2019ANote:Data as of 10/7/24.Sources:FactSet,S&P Capital IQ.2019A Multiple Based on NTM EBITDAClass2024EDelta2019APureplay13.2x2.3x10.9xPureplay11.5x1.2x10.3xLinked10.9x1.9x9.0 xPurepla

76、y10.7x(0.6x)11.3xLinked9.6x1.3x8.3xLinked8.6x(0.4x)9.0 xPureplay8.3x3.3x5.0 xPureplay7.2xNANALinked6.5x(2.9x)9.5xConvenience Store Landscape Overview Top 50 Operators212024 RankCompanyHeadquartersU.S.Store Count17-ElevenIrving,TX12,5772Alimentation Couche-TardLaval,QC5,8513Caseys General StoresAnken

77、y,IA2,6634EG AmericaWestborough,MA1,5685bp Houston,TX1,5406GPM InvestmentsRichmond,VA1,5157Murphy USAEl Dorado,AK1,1338QuikTripTulsa,OK1,0609WawaMedia,PA1,05010Kwik TripLa Crosse,WI85811MaverikSalt Lake City,UT83212SheetzAltoona,PA72513PilotKnoxville,TN65914Loves Country StoresOklahoma City,OK64715R

78、aceTracAtlanta,GA57916MilitaryArlington,VA53917YeswayFort Worth,TX43418Stewarts ShopsBallston Spa,NY36019Majors ManagementLawrenceville,GA34820Global Partners/Alliance EnergyWaltham,MA33921United PacificLong Beach,CA33722Jacksons Food StoresMeridian,ID31423Anabi OilUpland,CA30724ExtraMile Convenienc

79、e StoresPleasanton,CA30525CrossAmerica PartnersAllentown,PA2942024 RankCompanyHeadquartersU.S.Store Count26Two FarmsBaltimore,MD28627DelekBrentwood,TN25328CrotonPittsburgh,PA23429H&S EnergyOrange,CA23230Giant EaglePittsburgh,PA22931United Refining Co.of PennsylvaniaWarren,PA22832RefuelNorth Charlest

80、on,SC22533Cals ConvenienceFrisco,TX21034Tri Star EnergyNashville,TN19835Fikes WholesaleTemple,TX19336MeijerGrand Rapids,MI18737G&MHuntington Beach,CA17938Terrible HerbstLas Vegas,NV17739United Dairy FarmersCincinnati,OH17640True North EnergyBrecksville,OH17341BollaGarden City,NY17142ShellHouston,TX1

81、6843Hy-VeeWest Des Moines,IA16744Blarney Castle OilBear Lake,MI16645Nouria EnergyWorcester,MA16046CF AltitudeLos Angeles,CA15947Parkland USAMinot,ND13248Petroleum Marketing GroupFalls Church,VA13249Martin&BayleyCarmi,IL12850Go MartGassaway,WV123Source:June 2024 Convenience Store News.Car WashOvervie

82、wCar WashOverview23Market Size Source:IBIS July 2024 Car Wash&Auto Detailing in the U.S.Industry Report.Approximately 60,000 car washes exist in the U.S.,and more than 80%of those are operated by a less-than-five-unit operator.Overall unit count has grown dramatically,increasing at a 15%CAGR since 2

83、012,and the overall installed base of washes is expected to continue its climb and potentially double by 2030.This unit development trend is largely driven by the express tunnel format,leveraging a low-cost labor alternative and touchless wash experience,which can be optimized by the membership mode

84、l that provides 50%of the revenue base for a typical express wash.From 2018 to 2022,the car wash sector experienced an unprecedented level of unit growth,profitability,and corresponding strategic activity.Since 2022,the sector has been somewhat quiet in terms of sector M&A activity,but overall funda

85、mentals remain favorable.Sector resiliency has been a function of several drivers,including the recurring revenue nature of subscription models,continued elevated VMT,and a more stable consumer base that deems car washing to be a necessary service despite broader macroeconomic conditions.Product and

86、 Service Mix%of TotalCustomer Mix%of Total$19.8B$4.4B22.3%60,355RevenueProfitProfit MarginBusinesses192424295.1%2.8%19247.4%19242.3pp192424294.6%3.4%32%20%17%16%10%5%Full-Service Clean(Conveyor Car Washes)Exterior Only Clean(Conveyor Car Washes)Detailing ServicesIn-Bay Automatic Car WashesSelf-Servi

87、ce BayHand Washing Services28%28%26%16%2%Higher-Income BuyersMiddle-Class ConsumersBusinessesLower-Income BuyersGovernmentGeographic LocationSite selection is critical,identifying those locations with easy ingress/egress and limited competition.BrandHaving a strong brand identity improves the overal

88、l look of a wash location,as well as customer loyalty and subscription revenue.LoyaltyMembership models typically account for the majority of annual revenue for the largest operators,delivering a predictable recurring revenue model,enhanced profitability,and higher annual customer throughput.Technol

89、ogyBoth in terms of customer offerings like digital subscriptions,license plate readers,and self-service,but also technological innovations in conveyors,equipment,and coatings.Speed and ServiceSystems that allow customers to process their wash quickly and efficiently while also interacting with help

90、ful staff enhance loyalty and membership data.Consistency of StandardsBrand consistency,offering consistency,wash quality,and service all drive increased traffic,maintaining quality standards while growing scale.Key Trends1)1)Success Factors Driving Strong PerformanceSuccess Factors Driving Strong P

91、erformance 24Car Wash Operators With Key Success Factors Winning Many car wash operators have seen record operating performance in recent years with continued favorable outlook despite rising cap rates,interest rates,and construction costs.The key success factors that the industrys strongest operato

92、rs tend to benefit from include some combination of the following:1)Success Factors Driving Strong PerformanceKey Trends2)2)Heavy Private Equity Investment in Recent YearsHeavy Private Equity Investment in Recent Years 252021 and 2022 saw record levels of private equity investment in the car wash se

93、ctor,and these transactions were done at premium multiples often exceeding 20 x+EBITDA valuations.While the activity has been somewhat slower in 2023 and 2024,private equity investment rationale remains given the attractive fundamentals of the car wash sector:Highly Fragmented SpaceWhitespace Potent

94、ialStrong Unit EconomicsRecurring Revenue Subscription BusinessLow-Cost Labor Express Wash ModelThe pace of deal activity in recent years can be attributed to a pullback in the valuation of the public market car wash operators.While there has been less platform investment activity in recent years,ma

95、ny larger private equity firms continue to evaluate the sector and will likely deploy capital as valuations normalize to pre-2021 levels.The majority of larger PE firms are actively monitoring processes,and some have recently deployed capital in structured transactions(e.g.,Quick Quack/KKR).Importan

96、tly,many financial buyers remain active with ample investible dry powder seeking to be deployed in the car wash space.While not all acquisition activity is driven by PE,the majority of recent transactions have involved the PE universe.Private Equity Continues to Deploy Capital Into the Car Wash Cate

97、gory2)Heavy Private Equity Investment in Recent YearsKey Trends2)2)Heavy Private Equity Investment in Recent Years Heavy Private Equity Investment in Recent Years(cont.)(cont.)26DateTransactionStrategic RationaleArticle Link08-24Expansion in the greater Dallas and Southern California areas;new sites

98、 will be updated with Raceway Car Wash branding.Learn MoreLearn More06-24KKRs minority investment to grow Quick Quack through marketing and expansion.Learn More07-23Recapitalization transaction to focus on growth.Learn More06-23Deal terms undisclosed;focus on New England/Northeastern U.S.footprint.L

99、earn More 01-23Growth capital to fund greenfield development;Wafras second foray into the sector.Learn More01-23Growth investment into Mammoth to fund capex,acquisitions,and integration projects.Learn More12-22Significant footprint overlap;notable given first public convenience store acquirer announ

100、cement.Learn More07-22Unified branding in attractive South Florida market;greenfield story;highly competitive auction.Learn More12-21Largest platform sold since Tidal Wave;a leased platform with an early focus on greenfields.Learn More12-21First significant public company acquisition;focus on Florid

101、a market ownership;owned real estate and greenfield pipeline.Learn More11-21Strong branding in attractive West Coast geographies with expansion plans into Intermountain states.Learn More06-21First pureplay car wash IPO;highest sector valuation multiple post-IPO.Learn More01-21First sector IPO;divers

102、ified automotive services platform including car wash.Learn More12-20Founder-led transaction seeking partnership funding for unit growth strategy.Learn MoreFeatured Key Car Wash M&A Transactions2)Heavy Private Equity Investment in Recent YearsKey Trends3)3)Current Focus on Greenfield vs.AcquisitionC

103、urrent Focus on Greenfield vs.Acquisition 27Year 1Year 2Year 3Buildout Cost$6,300Revenue$1,320$1,910$2,220Sale Leaseback Proceeds$4,5004-Wall EBITDA$270$740$970Net Investment$1,800Margin 20%39%44%Payback Period3 yearsCumulative EBITDA$270$1,010$1,980%Paid Back15%56%110%Car Washes Ranked 110 Based on

104、 2022 Unit Count0%10%20%30%40%50%60%70%80%90%CarWashes11-50TotalUnits inTop 5021-22 Unit Growth22-23 Unit GrowthHistorically,M&A was the primary growth avenue for the largest players in the car wash sector.Public companies like Mister Car Wash and private equity-backed platforms like Mammoth Holding

105、s utilized the M&A of smaller mom-and-pop operators as a key driver for growth.However,as the sector has evolved,unit growth via greenfield has become the preferred approach.The greenfield strategy possesses advantages,such as the ability to select sites,build density around core flagship markets,ma

106、intain consistent branding,and control build-out economics.In 2023,the top 10 convenience store operators added 300 locations(representing more than 18%-unit growth year-over-year),whereas growth via M&A was significantly lower.In the higher growth period of 2021 to 2022,the top operators added near

107、ly 1,000 units(representing 30%-unit growth year-over-year)as M&A markets were more active and more favorable cap rate and interest rate environments had not yet slowed development activity to more muted levels.Even with increased cap rates,rising construction costs,and economic challenges,the unit

108、economics of a greenfield location and the whitespace potential in the sector warrant continued greenfield investment.The following chart highlights the typical unit-level economics as Mister Car Wash publicly stated in its most recent investor presentation,illustrating attractive$2 million+AUVs,40%

109、+4-wall EBITDA margins,and a less than three-year payback on net investment of$1.8 million.Greenfield Prioritized Over M&AMister Car Wash Average Unit Economics(1)Values in ThousandsUnit Growth of Top Car Washes(2)Sources:(1)Mister Car Wash(MCW)public filings;(2)CarW.3)Current Focus on Greenfield vs

110、.AcquisitionKey Trends4)4)Convenience Store Operators Finding Convenience Store Operators Finding Adjacent Revenue in Car WashAdjacent Revenue in Car Wash28With more than 85%of True Blues locations within three miles of a Circle K location,the transaction provides a strong geographic overlap to supp

111、ort traffic-driving offers between True Blue sites and Circle K convenience stores.Alimentation Couche-Tard(1)4)Convenience Store Operators Finding Adjacent Revenue in Car WashConvenience store operators have become increasingly focused on the car wash sector as a means of driving adjacent revenue s

112、treams above and beyond the core fuel retail and inside sales business.Many operators have begun to develop stand-alone wash tunnels in markets where they have a significant fuel presence,leveraging loyalty programs and brand awareness to drive cross-selling.Additionally,certain operators have sough

113、t out M&A to further car wash growthevidenced by Couche-Tards acquisition of True Blue Car Wash in 2022.We expect to see continued greenfield and M&A activity by c-store operators in the car wash space,given the commercial logic of cross-promotion and loyalty enhancement.Of late,most convenience sto

114、re operators have sought development versus acquisition for building new express wash tunnels.Those operators who have built stand-alone washes tend to do so in markets where their convenience store brand resonates well,leveraging customer loyalty and cross-selling opportunities as a means of drivin

115、g traffic and subscription growth(such as discounts for gas/merchandise at a c-store,offered to car wash subscription members).New Entrants Seeking Adjacent Revenue SourcesSource:(1)December 22,2022,Alimentation Couche-Tard press release.Key Trends5)5)Regulatory Scrutiny Focused on EnvironmentalRegu

116、latory Scrutiny Focused on Environmental 29Regulation has served as both a catalyst for and inhibitor of growth in the car wash sector with the most common two areas being environmental and safety regulations.As climate change and pollution control become increasingly scrutinized by regulators,car w

117、ash operators need to be cognizant of water and chemical usage.This scrutiny has led some operators to implement innovative processes to reclaim or recycle water,which provides for closed-loop systems.Additionally,the rapid growth of the sector has caused many local jurisdictions to seek a cap for t

118、he total number of car washes in a given region.For operators with established density in a region,this can deepen their competitive moat.As an example,earlier in 2024,many city councils in northeast Ohio passed a moratorium on new car wash development,setting per capita limitations on the number of

119、 car washes in a given market.That being said,the EPA has also suggested that consumers take their cars to a professional car wash location rather than washing them at home,given that a home wash can consume up to 140 gallons of water.Plus,homeowners rarely have the proper draining precautions to st

120、op runoff from going into drains or sewers.Car washes can benefit from other broader industry regulations.For example,car wash as a category has received increased institutional investor attention given its agnosticism to electric vehicle adoption rates.As EVs proliferate,the car wash sector will be

121、 of increasing focus for automotive-dedicated investors.Watchful Eye on RegulationThe EPA closely regulates the handling of pollutants used in the car wash industry.NonconventionalPhosphorus,Chlorine,NitrogenConventionalGrease and OilToxicMetals and Artificial CompoundsUnited States Environmental Pr

122、otection Agency5)Regulatory Scrutiny Focused on EnvironmentalValuation Environment30Operators who achieve premium valuations tend to meet many of the following criteria:1Strong Brand Recognition2Density in Certain Markets3Cohort Analysis Supporting Financial Performance Across Multiple Vintages of S

123、tore Openings/Acquisitions4Strong Unit EconomicsPath to$2 million+AUVs at Healthy EBITDA Margins5Scalability of InfrastructureOverhead,Shared Services,etc.6Track Record of Greenfield and/or Acquisition Integration Success7Strong Management TeamThe private market valuation environment for car washes

124、remains constructive,though a“bid-ask”spread has grown in recent years as sellers seek out the friendlier valuations of 2021/2022 and buyers seek more constructive levels.While valuations have abated somewhat from the peaks for 2021/2022,precedents do exist in the current market environment for inve

125、stors deploying capital at double-digit EBITDA valuations.Factors that lead to the strongest valuation outcomes include density in resilient markets,minimal competitors of scale or potential for new entrants,a strong membership model with limited churn,and a bias toward an asset-lite express tunnel

126、model.One gating factor in private M&A transactions is the markets willingness to give credit for pro forma adjustments.In prior years,the market was willing to lean in more aggressively on store maturity adjustments,growth in subscriber base,new stores in development pipeline,or M&A targets that ra

127、nge from early engagement to post-LOI.Today,the market meets those adjustments with a higher degree of scrutiny.Operators with a strong track record of delivering on those adjustments are likely to be met with a higher degree of acceptance,though supporting data is of paramount importance.Achieving

128、Premium ValuationsValuation Environment(cont.)3114.1x11.8xNotes:Market data as of 10/7/24;indices are weighted by market capitalization.Sources:FactSet,S&P Capital IQ.CommentaryInvestors looking to the public markets generally focus on Mister Car Wash and Driven Brands as a proxy for the valuation e

129、nvironment for car wash operators,while also evaluating a broader set of automotive service companies and high-growth retailers.Driven Brands and Mister Car Wash went public in 2020 and 2021,respectively,with great initial success.However,share prices and resulting valuation multiples began to decli

130、ne in 2023 due to lower-than-expected sales growth and a muted growth outlook for the future.Stock Price PerformanceNTM EBITDA Multiple Performance%Change Relative to Oct-19Automotive ServicesMister Car Wash(NYSE:MCW),Driven Brands(NASDAQ:DRVN),Boyd Group Services(TSX:BYD),Valvoline(NYSE:VVV)Automot

131、ive AftermarketGenuine Parts Company(NYSE:GPC),LKQ Corp.(NASDAQ:LKQ),Advance Auto Parts(NYSE:AAP),AutoZone(NYSE:AZO),OReilly Automotive(NASDAQ:ORLY)118.5%93.8%85.5%3.0%(50%)0%50%100%150%Oct-19Oct-20Oct-21Oct-22Oct-23Oct-24Automotive AftermarketS&P 500Retail IndexAutomotive Services6x8x10 x12x14x16x1

132、8x20 xOct-19Oct-20Oct-21Oct-22Oct-23Oct-24Automotive AftermarketAutomotive ServicesCar Wash Landscape Overview Top 50 Operators322024 RankCompanyHeadquartersU.S.Store Count1Mister Car WashTucson,AZ4652Take 5 Car WashCharlotte,NC3893ZIPS Car WashPlano,TX2794EWC/Club:Wildcat Car Wash PlatformColumbia,

133、MO2605Tidal Wave Auto SpaThomaston,GA2356Quick Quack Car WashSacramento,CA2257Tommys Express Car WashHolland,MI1858Spotless BrandsOakbrook Terrace,IL1709GO Car WashDenver,CO14410Mammoth HoldingsAtlanta,GA14011Whistle Express Car WashCharlotte,NC13012WhiteWater Express Car WashHouston,TX12513Super St

134、ar Car WashPhoenix,AZ9414Autobell Car WashCharlotte,NC8915ModWashChattanooga,TN8416LUV Car WashGilbert,AZ7317True Blue Car Wash,owned by Circle KTempe,AZ6718Caseys Express WashAnkeny,IA6619Splash Car WashGreenwich,CT5720Golden Nozzle Car WashWorcester,MA5521Summit Car WashPalm Beach Gardens,FL5222Ca

135、liber Car WashAtlanta,GA4723Crew CarwashIndianapolis,IN4624Wash Depot HoldingsFort Lauderdale,FL4625Champion Xpress Car WashLubbock,TX452024 RankCompanyHeadquartersU.S.Store Count26Sams Xpress Car WashMatthews,NC4227BlueWave ExpressSan Rafael,CA4128El Car WashMiami,FL4029Raceway Express Car WashPhoe

136、nix,AZ3930Wash N RollNashville,TN3931Mikes CarwashCincinnati,OH3832Jax Kar WashSouthfield,MI3533Surf Thru Express Car WashBakersfield,CA3534Watershed Car WashSan Antonio,TX3535TerriblesLas Vegas,NV3336WetGo PROPittsburgh,PA3337Richs Car WashMobile,AL3238Delta SonicBuffalo,NY3139The Wash TubSan Anton

137、io,TX3040Brown Bear Car WashSeattle,WA2841Waterway CarwashSt.Louis,MO2842Hurricane Express WashIrmo,SC2743Soapy Joes Car WashSantee,CA2744Trademark CarwashWinston Salem,NC2645Hoffman Car WashAlbany,NY2546Prestige Car WashTaunton,MA2547Fast5xpressNewport Beach,CA2448Rocket CarwashLincoln,NE2449Ultra

138、Clean ExpressDenver,CO2450Zax Auto WashWixom,MI22Source:June 2024 Convenience Store News.Disclaimer 2024 Houlihan Lokey.All rights reserved.This material may not be reproduced in any format by any means or redistributed without the prior written consent of Houlihan Lokey.Houlihan Lokey is a trade na

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