The news that captured everyone's attention on the final working Monday of May will change the face of the U.S. tire and automotive service industry markedly.
It's not every day — make that every decade — when more than 600 retail tire and automotive shops change ownership. That's what happened on May 23 when Mavis Tire Express Service Corp. and TBC Corp. disclosed a pending deal for Mavis to take over 595 TBC retail points of sale operating under the National Tire & Battery brand in Texas, the mid-Atlantic, Midwest and Southeast, and Tire Kingdom in Florida.
The deal is expected to close in the coming weeks, at which time Mavis — owned in part by private equity providers since 2014 — will operate a retail network approaching 2,000 stores in scope.
It was a little more than two years ago, in March 2021, when private-equity provider BayPine L.P. acquired the Millwood, N.Y.-based dealership in partnership with TSG Consumer Partners L.P., with West First Management, a holding company controlled by Mavis Tire co-CEOs David and Stephen Sorbaro, retaining an interest as well.
At the time, Mavis operated more than 1,100 locations across 29 states.
The deal includes provisions for TBC to provide wholesale and tire distribution for Mavis' retail locations.
Financial terms of the sale have not been disclosed — yet — but if it's any indication, Tire Business calculates TBC's retail business generates roughly $2 billion in revenue annually.
Mergers and acquisitions have been going on ever since the chicken laid the first egg ... or the egg begat the first chicken.
The last few years, it seems, have been a boon for those looking for a good investment, particularly in the tire industry. As private-equity firms grow in prominence and understand the evergreen nature of the tire and automotive service industry, M&A seemed to occur at a breakneck pace.
Even rising interest rates over the last year haven't slowed things down.
Less than six months into 2023, and counting this latest transaction, Tire Business has tracked 27 transactions involving nearly 900 tire retail/auto repair shops, 21 commercial vehicle service locations, four retread plants, 20-plus wholesale distribution centers, 250-plus truck stops and a fleet of dozens of mobile repair vans.
In 2022, we charted 81 separate transactions involving 248 retail tire/auto repair stores, 97 commercial vehicle service outlets, 21 retread plants and 39 wholesale D/Cs.
So is M&A activity a good thing? Does it help the industry?
Or are M&As disruptive? Can they do more harm than good?
The answer is yes.
For a shop owner who wants to cash out, it can be a great option, particularly if there are no family members, friends or employees willing and/or able to maintain or purchase the business.
If you've spent a lifetime building a successful enterprise, fostering a team of dedicated employees and supporting the communities around you, selling your business can be the pot of gold at the end of the rainbow. It's that culmination of everything you've worked for.
And to those shop owners who not only negotiate a sale, but also stay on in an executive capacity to help run the operation — minus the responsibilities of ownership — it's a win-win.
If you're a long-time employee, however, a merger or acquisition can be a kick in the gut, a wakeup call to the sometimes cruel world of corporate business. Suddenly, the world as you know it changes.
As soon as employees hear that their workplace has been sold, they invariably think: What happens to me? How is my job going to change? Or will I even have a job?
It can be downright scary.
Most shop owners know this and extract assurances from a prospective buyer that their employees will be taken care of after the acquisition is complete. Many have told us that is a prime consideration before any sale is consummated.
Sadly, though, some former owners have told us privately that these assurances often are worthless. New owners will do what they do, how they do it, and the employees must adapt. Or find new work.
On the flipside, an M&A can be a opportunity for employees, particularly those new to their careers or with potential beyond their current job.
Many equity companies that double as tire dealerships have locations in several states. They can offer career mobility, something a smaller dealership is unable to provide.
And because of their sheer volume, bigger companies often can provide improved benefits, including work flexibility, more affordable health care and additional time off.
It will be interesting to follow further developments regarding Mavis. Does the dealership look to grow even more? Become more diversified? Look to enter every state?
Only time will tell.
As long as tires continue to remain round and black, M&As will be part of the tire universe. The choice for those involved is, either hitch a ride on those tires, or get run over by them.