International Car Wash Group - A Conversation with Tom Mangas
Thomas B. Mangas is the CEO of United Kingdom-based International Car Wash Group (ICWG), the world’s largest car wash operator. He joined the company in October 2018. Roark Capital, an Atlanta-based private equity firm acquired ICWG in October 2017. Auto Laundry News recently had the opportunity to talk with Mangas about ICWG’s activities and plans for expansion in the United States.
ALN: Press releases from ICWG invariably term ICWG the world’s largest local car wash company. What is the significance of that formulation?
TM: We are doing that intentionally. The numbers speak for themselves. We have 900 car washes across the globe, around 730 in Europe, another 20 in Australia, and about 150 in the United States. By the sheer numbers, we are triple the next closest competitor. And we are global in that respect. However, consumers see us — and I think see most car washes — as a very local member of the community. As a result, we aspire for our service profile — how we should look to consumers — to be their favorite, most trusted car wash. So, it is a bit of an expression of how we want to be perceived by our customers and in the communities we serve.
ALN: Does that also explain why you don’t rebrand all your acquisitions with a single brand?
TM: That is right. I think the insight is consumers today don’t seem to assign significant value to — at least not in the U.S. — to a nationally branded car wash, at least not enough in our mind to justify significant cost to rebrand and to get a common look and feel. Now I know some of our competitors may view that differently — and in Europe we do. In Europe we do have a common brand. However, we are finding the brands we have acquired in the U.S. like Goo Goo, Supersonic, and Car Wash USA Express, already have great local consumer appeal and achieve great consumer ratings, so we have not seen great value in trying to convert them to another brand. As we expand into other parts of the U.S., and we find brands with similarly strong consumer equity, we might retain those as well. We are comfortable having a portfolio of brands, but we don’t want to be a company of 100 brands. I think there is some benefit to having some scale, to have a network effect in communities, so we do rebrand many of the car washes that we acquire that are already in existing networks that have a significant presence.
ALN: Will this be your main avenue to expansion, i.e., through acquisitions?
TM: Yes. I would say we are comfortable building greenfields and we continue to do so, but our preferred approach would be to acquire. We think there are already somewhere between nine and 10 thousand conveyor car washes in the U.S. and tens of thousands of other forms of car washes, so there are plenty of operators out there. It’s a very fragmented space, and our ambition is to grow and to do that through acquisition, provided we can find them at a reasonable valuation. And where we can’t find them at a reasonable valuation, we will go ahead and build greenfields.
ALN: There is a wave of acquisitions taking place. How do you set yourself apart from all those other acquirers in the business right now?
TM: At the core for sellers, valuation and economics are obviously top of mind. There are few things that are more important in the selling process for us than the actual value of the company that they have worked hard to build and put a lot of sweat equity into. That said, I do think that due to our approach to branding and our approach to people management and integration, we are perceived in the marketplace as a pretty flexible acquirer, easy to do business with. We do what we say we are going to do, we close on time, and we treat employees and the brands within the communities they have been serving with great respect. That helps us be an effective acquirer choice.
ALN: You’ve spoken about integration of employees. What about the principals involved?
TM: As part of our flexibility, we want to know what the ownership’s desires are. In most of the cases, in the acquisitions we’ve done, the primary owner has often decided to walk away and enjoy what’s next in their life. However, in most of our large acquisitions, we have retained their number two person, and those people continue to serve as our region vice presidents in our larger acquisitions. Certainly, we are interested to know what is of interest to them, and how they might fit, whether they are interested in helping us with further acquisitions or greenfield developments. Our experience has been that most of the owners who had larger scale operations preferred not to become an employee of ICWG but the rest of the organization has.
ALN: Is there a specific type of wash that you target?
TM: Our focus is on the express conveyor car wash. Certainly, given how many of these companies have evolved over time, local operators might have started with a jet wash and then got into conveyors. Now they are selling all their car washes and so we are open to buying things that are not in the express conveyor space. We have full service in our network today — it’s about 10 percent of our network. The ideal sweet spot would be the express conveyor space, but we don’t want to walk away from a deal that has other things in there. We can manage it in our system and find a way to get value.
ALN: Having been founded in Germany, I imagine that is not the target you started off with. What sort of operations do you have in Europe and are you still targeting those for acquisition?
TM: You will be surprised to learn that 100 percent of our car washes in Europe and Australia are express conveyor operations. We have about 300 in Germany under the IMO brand versus 250 in the UK, and the balance through Western Europe and Australia. In fact, in the UK we are the only conveyor operator.
Most of the competitors we face are hand washes. That’s what has driven our entrance into the U.S. market where the conveyor market has obviously exploded over the last couple of decades. So we think we have a pretty good base of know how and innovation that we can translate here in the U.S. from that European heritage.
ALN: What is the corporate setup of ICWG?
TM: ICWG group is a UK-based company. Our headquarters have been in the UK for the past several decades. However, we’ve moved the leadership of the company to Denver, CO in the last eight months, inclusive of my hiring, the new CFO, and the rest of the leadership team, really to focus on the U.S. market. We want to be a leader and drive an aggressive growth ambition in the U.S. Our ownership thought it would be better to have a U.S.-based leadership team, working with U.S.-based owners to develop the business, grow the brands, and deliver a superior consumer experience.
ALN: You employ a proprietary chemical system in your car washes called Polymer Pro.
TM: Yes, it’s an example of an innovation first developed in Europe in our car washes under the name Ultra HD. It’s a fabulous finish system to the wash, which really fills in the micro scratches in a clear-coat finish, gives it a beautiful luster, really restores the finish to a car. We get tremendous consumer reaction to that wash. We rolled it out in the U.S. in the last 18 months under the Polymer Pro banner. That chemical lineup is being standardized throughout our U.S. locations.
ALN: How about equipment?
TM: I would say that being an aggregation of acquisitions, we do have disparate manufacturer equipment in our car washes. We don’t feel a particular urgency to convert into a standard manufacturer platform. When we build greenfield, we have a standard package that we put in on our own, but we are happy to buy car washes that are founded on different manufacturer technology and figure out an effective way that our service network can make sure they are running very effectively and delivering a great product.
ALN: You have many years of experience in the consumer products area, starting off with P&G, and the hospitality industry.
TM: With a stop in between in commercial and residential building materials. Starwood Hotels and Resorts are a very different kind of multi-unit retail, but still very consumer centric. People love to talk about the great vacations they had at the hotels, they want to tell you if they had a bad experience. In the car wash business, I find — in this job today — people take great pride in their cars. They want to get it washed, they are more proud of their car when its clean, they want a great outcome when they go for a car wash. That is what this business is about. We can talk about acquisitions, but our goal is to make sure that those consumers feel like they got a great value, got a great wash, and it was super convenient — and that they come back every time because of that experience.