IPO possible? Industry reacts to Mavis-TBC deal

AKRON — Mavis Tire Express Services' deal to buy TBC Corp.'s retail tire/auto service business is a win-win for both companies, allowing each to focus on its respective strengths, a number of industry players observed in the wake of the deal's closing on June 1.

"The deal reflects the right motivations for both firms," Steven Rathbone, managing director of Stout Risius Ross L.L.C.'s investment banking sector. "Kudos to both for closing what had to be difficult deal."

For Mavis, the deal represents the addition of "retail density in existing markets plus a presence in some key growth markets, like Texas, Florida and the Midwest," he said, noting that the dealership has doubled or even tripled its presence in some markets.

"Clearly this brings Mavis meaningful scale, something it's been seeking for some time ... and potentially puts the possibility of a public listing at some point on the table."

Private-equity investors — Mavis has a quartet of them following the disclosure that New York-based Neuberger Berman Alternatives took an undisclosed position in the Millwood, N.Y.-based dealership in connection with the TBC deal — are always thinking about an exit, Rathbone said.

A public market option looks like a likely exit strategy, considering Mavis' size now, he said.

"At some point a listing will take care of both of liquidity needs and ... provide currency (stock) to work with," he said.

A public company can pursue measured growth and integration synergies, Rathbone said, whereas under private equity, firms have to focus more on rapid growth, and that raises the question of where the additional resources come from to support that growth.

As for TBC, Rathbone said the deal allows it to focus on its core strengths of wholesale and franchising, with the contract provision that TBC will be supplying Mavis' entire network a key element.

Rathbone's positions on the deal were echoed in large part by Sailun Tire Americas President Ron Dolan, who said Sailun — which goes to market in the U.S. through TBC's wholesale network — believes Mavis and TBC "are going to be able to do some things together and be interesting synergies going forward."

"We believe that TBC has a strong strategy, and by them moving away from company-owned retail, (it) lets them focus what they're amazing at, which is distribution," Dolan said in an exclusive interview with Tire Business.

"I'm very positive that with this new focus on distribution, that TBC's business will grow."

Dolan called Mavis "a fantastic partner of our group as well," and lauded what the future holds on the retail side.

"Obviously that expansion of their retail is positive because that is what they are really good at," Dolan said.

"We see both these companies doubling down on their skill sets, what they're really good at, and we believe both companies will have growth from this move in their respective areas of strength."

Moving forward, Rathbone raised a few aspects of the deal that bear watching, including: customer reaction/response; potential employee/management attrition; fate of the NTB and/or Tire Kingdom brands; and competitors' taking advantage of potential gaps in coverage.

On a broader scale, Rathbone cautioned that this deal — and others of pending or of recent vintage — are winnowing down the pool of quality acquisition candidates, which likely will result in bidding wars for those top-tier businesses.

At the same time, the private-equity sector for the most part is in a holding pattern waiting for interest rates to settle. This opens the door for more traditional enterprises, especially with cash reserves, to consider acquisitions.