14. Business Combinations

From time to time, the Company may pursue acquisitions of conveyorized car washes that either strategically fit with the Company’s business or expand the Company’s presence in new and attractive markets.

The Company accounts for business combinations under the acquisition method of accounting. The assets acquired and liabilities assumed in connection with business acquisitions are recorded at the date of acquisition at their estimated fair values, with any excess of the purchase price over the estimated fair values of the net assets acquired and intangible assets assigned, recorded as goodwill. Significant judgment is required in estimating the fair value of assets acquired and liabilities assumed and in assigning their respective useful lives. Accordingly, the Company may engage third-party valuation specialists to assist in these determinations. The fair value estimates are based on available historical information and on future expectations and assumptions deemed reasonable by management; but are inherently uncertain.

The unaudited condensed consolidated financial statements reflect the operations of an acquired business starting from the effective date of the acquisition. The Company expensed $306 and $94 of acquisition-related costs for the three months ended June 30, 2022 and 2021, respectively. The Company expensed $435 and $243 of acquisition-related costs for the six months ended June 30, 2022

and 2021, respectively. These acquisition-related costs are expensed as incurred and are included in general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations and comprehensive income.

For the three and six months ended June 30, 2022, the amount of acquired goodwill not deductible for income tax purposes was $386. For the three and six months ended June 30, 2021, the amount of acquired goodwill not deductible for income tax purposes was $1,082.

2022 Acquisitions

For the three and six months ended June 30, 2022, the Company acquired the assets and liabilities of five conveyorized car washes in two acquisitions for total consideration of approximately $58,900, which was paid in cash. The acquisitions resulted in the preliminary recognition of $50,851 of goodwill, $7,181 of property and equipment, $750 of intangible assets related to covenants not to compete, and $118 in other assets and liabilities.
 

The weighted-average amortization period for the acquired covenants not to compete is 5.0 years.

2021 Acquisitions

In 2021, the Company acquired the assets and liabilities of 37 conveyorized car washes in five acquisitions for total consideration of approximately $524,839, which was paid in cash. These acquisitions resulted in the preliminary recognition of $323,477 of goodwill, $202,708 of property and equipment, $4,300 of intangible assets related to customer relationships, $3,970 of intangible assets related to covenants not to compete, and $9,665 of net liabilities. In connection with the Downtowner Car Wash acquisition, the Company recognized a contingent consideration liability of $5,750. See Note 9 Fair Value Measurements for additional information regarding the contingent consideration liability. During the three months ended June 30, 2022, as a result of receiving $11,845 in escrow funds associated with an acquired location that did not receive zoning permits as required under the purchase agreement, the Company recorded an adjustment during the measurement period to its Clean Streak Ventures LLC purchase price allocation which reduced goodwill by $10,670 and land by $1,175. Additional adjustments related to 2021 acquisitions were not material in the current period.

The weighted-average amortization periods for the acquired customer relationships and covenants not to compete are 7.0 years and 5.0 years, respectively.