Last year, Mr. Lube’s management team, with direction and support from its board, completed the sale of its intellectual property and trademarks from the successful franchise business to Diversified Royalty Corp.
Mr. Lube, which runs 170 franchises, was founded in 1976 by Edmonton’s Giese family and pioneered the Canadian quick-lube industry by focusing on convenience and “no appointment necessary.” Shortly after, Ted Ticknor partnered with the family and helped drive growth of the business.
In early 2006, two months before Ticknor passed away from prostate cancer, he brought in partners George Melville and Jim Treliving, co-founders in the Boston Pizza International Inc. franchise. Mr. Lube then hired chief financial officer Pamela Lee and other key executives to assist with developing and executing a strategic plan for continued growth.
The company focused on strengthening its brand and franchise system. It exited the warehouse business and arranged for direct shipping of supplies to locations to reduce product cost at the store level.
Mr. Lube then began divesting corporate locations and moving to a full franchise model. It further built the brand, enhanced customer experience and partnerships with such major retailers as Walmart Canada, and doubled the number of stores in about 10 years.
When the Vancouver-based company began considering a sale a couple of years ago, it wanted a buyer that enabled the owners to monetize their investment while positioning the company for continued expansion.
The sale process began by contacting potential financial advisers and asking for detailed information on their relevant experience, buyer knowledge and ability to deliver the owners’ target valuation.
After a competitive bid process PwC was selected. Its credentials included the sale of a Mr. Lube competitor 18 months earlier for a favourable valuation.
“We knew that they [PwC] understood the industry very well and had good market knowledge,” Lee says. “I think what impressed us most, though, was their depth of relationships, as well as access and knowledge with respect to potential buyers. PwC delivered a very unique buyer analysis. Their depth of buyer knowledge and relationships clearly separated them from other potential advisers.”
Mr. Lube was marketed to strategic and private equity parties globally. Multiple bids were received for the business. The process was complex and fast-paced, but PwC helped navigate every twist and turn, including the tax perspective. Nine months into the process, Mr. Lube sealed a deal with Diversified Royalty Corp., a publicly listed company (TSX:DIV) that purchases intellectual property and trademarks from franchised businesses and licenses them back for an annual royalty. Their model is typically based on a top-line royalty from the business and allows existing partners to monetize a large proportion of holdings while retaining overall ownership.
Lee is optimistic about expansion because Mr. Lube and Diversified Royalty Corp. strategies are aligned.
“They want growth in the system so that they can continue to see higher royalty payments,” Lee says. “Mr. Lube and our franchises want growth in the system so we can continue to service our customers as market leaders in the industry.”
At PwC we understand private businesses from small to large and are committed to helping owners and CEOs achieve their long-term personal and business goals. For more information contact Jim Crooks, partner in our PwC Corporate Finance group at 604.806.7306, email [email protected] or visit www.pwc.com/ca/en/private-company.html.
This content was produced by Business in Vancouver’s advertising department. BIV’s editorial department was not involved in its creation.
