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 $195 and $82 of acquisition-related costs for the three months ended September 30, 2023 and 2022, respectively. We expensed $228 and $517 of acquisition-related costs for the nine months ended September 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 nine months ended September 30, 2023, goodwill of $25,691 was recorded. For the three and nine months ended September 30, 2023, the amount of acquired goodwill not deductible for income tax purposes was $0. For the three and nine months ended September 30, 2022, the amount of acquired goodwill not deductible for income tax purposes was $692 and $1,078, respectively.

2023 Acquisitions

During the three months ended September 30, 2023, we acquired the assets and liabilities of five conveyorized car washes in one acquisition for total consideration of $46,905, which was paid in cash. During the nine months ended September 30, 2023, we acquired the assets and liabilities of six conveyorized car washes in two acquisitions for total consideration of $51,890, which was paid in cash. The acquisitions resulted in the preliminary recognition of $25,691 of goodwill, $22,455 of property and equipment, $3,580 of ROU assets, $640 of intangible assets, $100 of other net liabilities, and $376 of a bargain purchase gain. The bargain purchase gain is not material and is recorded within (Gain) loss on sale of assets, net on the condensed consolidated statements of operations and comprehensive income. We do not believe these acquisitions are 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: