14. Business Combinations

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

We account 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, we 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. We expensed $33 and $306 of acquisition-related costs for the three months ended June 30, 2023 and 2022, respectively. We expensed $33 and $435 of acquisition-related costs for the six months ended June 30, 2023 and 2022, 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, 2023, no goodwill was recorded. For the three and six months ended June 30, 2022, the amount of acquired goodwill not deductible for income tax purposes was $386.

2023 Acquisition

During the three and six months ended June 30, 2023, we acquired the assets and liabilities of one conveyorized car wash in one acquisition for total consideration of $4,985, which was paid in cash. This acquisition resulted in the preliminary recognition of $5,369 of property and equipment, $130 of intangible assets, $137 of other net liabilities and $376 of a bargain purchase gain. The bargain purchase gain is not material and is recorded within Gain on sale of assets, net on the condensed consolidated statements of operations and comprehensive income. We do not believe this acquisition is material to our overall consolidated financial statements.

2022 Acquisitions

For the year ended December 31, 2022, we acquired the assets and liabilities of 11 conveyorized car washes in four acquisitions for total consideration of approximately $98,548, which was paid in cash. These acquisitions resulted in the preliminary recognition of $57,856 of goodwill, $37,174 of property and equipment, $1,540 of intangible assets related to covenant not to compete, $1,978 of other assets and liabilities. There were no adjustments related to 2022 acquisitions in the current year.

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

The acquisitions were located in the following markets: