For Jax Kar Wash CEO Jon Zimmerman, a good deal involves a number of things — the right location, reasonable level of competition, and also a realistic owner.
“I like to compare my market right now to the whole Disney World experience,” Zimmerman said at the Detroit Smart Business Dealmakers Conference. “Remember when you took your kids to Disney World? Now, fast forward to Monday morning when they had to go back to school and that reality check set in. That's exactly what's going on in my space. I've got these large groups of competitors who have been out there, and my market was flying two years ago. Well, it's not anymore. Things have pulled back. But the owners, they remember what took place two years ago. So for us, we need owners that have a realistic expectation of what the value of their business is. But at the same side, we also need owners who value us and what we bring to the table.”
He says when he sold his business, he had multiple offers. He selected TRP Capital Partners because he says he trusted them and knew he could count on them not to play games at the finish line. Now he needs the same thing from the sellers with whom he engages.
“I knew when I got to the finish line there weren't going to be any games played,” he says. “And that doesn't take place in my space right now. For a good deal to take place for me, I need someone to recognize that we're not playing games. We get them to the finish line. We're going to close the deal.”
When digging deeper into a deal and working toward that close, he says sometimes he uncovers a mess. However, that mess could mean opportunity.
“If I get into a deal and it's a mess and someone's not giving us financials that are accurate for what we expect, that's a different story,” he says. “But a mess can be that opportunity where if I look at a site and it's just not properly managed — we spend a lot of energy on labor, how we run labor; we emphasize on that. So, that's an area for growth for us. How are they handling production? That's an area of growth for us. We see growth in a lot of our messes. So, that's a great opportunity for us.
Still, digging for Zimmerman can look different than what others might expect. While evaluating a business based on its EBITDA is common in M&A, he says sometimes he doesn’t know a company’s EBITDA before they make an offer. But it’s a different type of business.
“We sometimes go into deals and we don't know a lot about what they're doing,” he says. “They don't want us to know a lot about what they're doing.”
Looking broadly at the market today, he says they’re being selective and strategic with the deals they pursue.
“Our business is based on density,” Zimmerman says. “We've got to be where our customers live, where they work and where they travel. That's our key. So, for the right strategic opportunity, we're going to pursue it.”
He says in once case they passed on a deal because there was way too much competition in the market — plenty of both new washes and old-school washes. That made it clear the better decision was not to chase it, and not be upset when competitors did.
“There was no way for us to pursue that market,” he says. “That's their problem. It's not going to be ours. So, strategic decisions that can get us into a market, we're going to move forward with those.”
Still, he says they’re seeing many opportunities come across their desks. For him, it means seeing it as a chess match.
“What are we doing? Where are our competitors going? Where do we need to be? We're just focusing on those types of things,” Zimmerman says. “Traditionally, when the market got tight, we moved away from the acquisition and started just completely focusing on the green field, the ground-up build. Recently, though, we've decided that filling in our holes, we need to start focusing on density. So, we're definitely back in the game. We're just looking for those right opportunities.”
