Private equity is interesting in that a new previously unnoticed industry can quickly become wildly attractive for investment.
Take PE firm Leonard Green and Partners (LGP), which bought Mister Car Wash for $500 million in 2014. As the Wall Street Journal article linked below reports, at the time of acquisition the company had 134 locations, or about 2% of the market.
But LGP saw the potential for tremendous growth, and they had a plan. When this article was published, Mister Car Wash had over 400 locations, and LGP’s initial $250 million stake was worth over $2.5 billion.
Three big reasons this roll-up worked so well:
- Private equity had never shown much interest in car washes, so competition was light.
- The space was quite fragmented, which gave LGP plenty of room to consolidate.
- LGP instituted operational changes such as a subscription-based service that made revenue more consistent.
Since that time, the space has become crowded, but I’m always curious to see which industry private equity will pursue next.