National Oil & Lube News

March 2017

Digital issues of National Oil & Lube News, the trade magazine for the preventive maintenance industry

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Industry Buying Mode? ese recent acquisitions by Driven Brands and Valvoline may suggest that more mergers are likely to come, yet very small and independently owned businesses may not at- tract the interest from these large industry players. In oth- er words, small shops looking to be acquired may not be as desirable. "It is a bit of a shift in the industry," said Michael Baynes, president of Auto Center Sales, which helps auto shop oper- ators sell their businesses. "e folks like Driven Brands and Valvoline are looking at multi-operational brands to buy. It is really an economy of scale." Part of this is that the quick lube industry is now em- bracing how private equity, capital not noted on a public ex- change, is being used in these deals. "Private equity, of course, isn't new, but it is new to the quick lube world," Baynes said. "ere will be more of this, but one thing to remember is there is a finite number of large multi-operational brands that can be bought or sold." As for why the smaller shops — the so-called mom-and- pops — are less desirable comes back to that economy of scale. "e juice isn't worth the squeeze if it gets too small," Baynes said. "at isn't to say it won't happen, but the valu- ations for the buyers will shrink." What the industry also shouldn't expect is a mega-merg- er, however. "at's not going to happen, but these brands will contin- ue to look at shops that have 50 to 75 locations," Baynes said. "ere isn't anyone out there right now that is bigger." What's Desirable? While size matters, there are other factors that play into what might attract a larger player – and Valvoline's Puckett countered the notion that individual shops might not be so attractive. In many cases, what can attract the larger brands is a shop's track record. "If a quick lube operator is interested in selling, we want to talk to them, regardless of whether they operate a single store or a regional chain," Puckett explained. "Our expertise is in the quick lube business, and those are the businesses we seek to acquire. "e first question we're going to ask is about the store's historical oil change counts; a minimum of 7,500 oil changes per year is our threshold. After that, we're going to look at a lot of variables: the retail trade area the store is located in, ease of ingress and egress, demographics, competitors, plus the store's performance, including annual revenue trends, premium sales, service penetration and the resulting aver- age ticket." Valvoline's strategy has also been to invest in and grow market share across its three business segments: core North America, quick lubes and international. 24 NOLN | www.noln.net

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