Sonny's sells portion of business to private equity firm

[robert roman]

On December 5th, 2016, Sentinel Capital Partners (private equity firm) issued a press release announcing it had invested in Sonny’s Enterprises Inc. through a recapitalization.

Reportedly, Sonny’s CEO Paul Fazio, Jr. will continue to run the company and maintain a substantial ownership stake.

Anybody want to guess why the world’s leading manufacturer of conveyor equipment was sufficiently motivated to sell major portion of the business for cash?

 

[mac]

Bob this is fun. There is only one real reason to do something like that, and that would be because they couldn't carry the debt. And that is with super low interest rates. If , or when actually, the rates go back up, there will be a lot of anxious people out there. It's been difficult for me to do much in their market with them in my back yard. They have always shot to be the cheapest out there. To me that's just a dumb business model. I've seen a lot of their stuff go in, and then ripped out after 3 or 4 years. And of course there has been the usual industry practice of some management moving from one company to the next. The results speak for themselves. Like I said, fun to watch.

 

[Washmee]

Or it was a good time to start the process of selling the business and looking towards retirement for Fazio.

 

[rph9168]

Sonny built a good business and Paul made it even better. He is a shrewd businessman and a good family man. He has done a fantastic job building the business. Times are changing in our industry and I think we all find a time in our life when it is time to stop and smell the roses. I wish him the best in whatever he chooses to do.

 

[Back4More]

Jon is correct. It had nothing to do with the debt load. It's called an exit strategy and as part of any exit strategy the main players remain to ensure a smooth transition of the company. Also as Robert surely knows, there is normally a deal where the selling company must hit a certain sales figure within a period of time to receive additional money in the sale. Anthony Analetto now is now a shareholder in the company.

Sincerely,
Ron

 

[robert roman]

I started thread to observe reaction of industry participants. There was not much.

Subsequent to press release, dean of the Carwash College posted video on LinkedIn where Mr. Fazio explained some details of partnering as well as his outlook for industry.

It was interesting to watch.

 

[JMMUSTANG]

There is a private equity firm that is interested in purchasing car wash mfg. companies .
This firm owns companies that are well known in other industries.
My limited understanding is that they approached them not the other way around.
I was asked about Sonnys among others.
They told me Sonnys was acting like they were God when it came to the asking price.
I told them they were the #1 car wash co.
And I said "what does it feel like talking to God."

 

[Back4More]

That's too funny. lol

 

[Earl Weiss]

.................... They have always shot to be the cheapest out there. To me that's just a dumb business model. I've seen a lot of their stuff go in, and then ripped out after 3 or 4 years. .

AFAIAC they have outstanding service outreach. A couple of times I made a forum post about an issue I had with their equipment, someone at Sonny's took the time to find my phone number and call me to reach a solution. Even fabricating a fix and only charging me for shipping. I bought some equipment someone took out after a few years. Lasted a few years for me and then the cement ceiling fell in and smashed it. I expect the non smashed 901 mitter will continue to give service for years.

 

[robert roman]

“It's called an exit strategy.”

Maybe, however, Sonny’s is privately held, so who knows for sure. For example, Anthony is now stakeholder but how much. Reportedly, Fazio has substantial share but is it controlling share?

“I told them they were the #1 car wash co.’”

Sonny’ old advertising claim (online) was it is largest manufacturer of conveyorized car wash equipment. Now online its, “SONNY’S sells more tunnel car wash equipment than anyone in the world.”

Sonny’s is like Wawa or Buc’ees or Auto Bell or Mister. Represents best in class and complete from top to bottom.

“And I said "what does it feel like talking to God."

Total spending on conveyor equipment in 2005 was estimated at $158 million. Today, maybe it’s slightly over $100 million. Carwash chains have greater sales than this.

There are about 12 major OEM’s of conveyor systems in U.S. (including MacNeil in Canada), median plant size is 45,000 SF. This is cottage industry size.

However, I believe it’s concerning when industry’s big cheeses make moves like this.

For example, Harrell's Car Wash Systems, one of the country's largest equipment and service providers, was also acquired by a private equity firm in 2016.

I also got several inquiries from private equity firms last year. Basically, they came across as bunch of suits looking for free information about the “space.”

Also, private equity is not in business of buy and hold long-term.

 

[mac]

So mustang, when you talked to God, did you have to press #1 for English? Just curious.