WhiteHorse Capital Backs Texas Car Wash Consolidation in Strategic Debt Deal

The express car wash industry's consolidation wave gained fresh momentum this week as WhiteHorse Capital, the direct lending arm of H.I.G. Capital, provided senior secured financing to support ClearWater Express Wash's acquisition of BlueWave Express Car Wash. The transaction unites two complementary operators to create an 81-location platform spanning Texas and California, marking another significant step in private equity's ongoing transformation of America's highly fragmented car wash sector.

The deal, announced January 12, combines ClearWater's 28 locations with BlueWave's 53 express car wash locations, instantly creating what industry sources describe as the largest privately owned express car wash operator in Texas. The financing package refinanced existing debt, funded the BlueWave acquisition, covered transaction expenses, and crucially, provides additional capital for future site development and acquisitions—signaling management's intention to continue expanding the platform.

What makes this transaction particularly compelling is the strategic fit between the two companies and the pre-existing operational integration that significantly de-risks execution.

Founded in 2007, BlueWave Express brings nearly two decades of operating experience and an established multi-state footprint. The company maintains significant presence in Houston, the Rio Grande Valley, and San Antonio, with additional sites in Central Texas and Northern California. BlueWave has differentiated itself through environmental stewardship, incorporating water-filtration and conservation systems across its sites with environmental management as a core operating practice—an increasingly important consideration as water scarcity concerns mount in Texas and California.

ClearWater, by contrast, represents a newer but rapidly growing platform. Founded in 2020, the company has built its competitive advantage around greenfield development, supported by an in-house real estate and development team. This internal capability has enabled ClearWater to grow primarily through new unit development rather than acquisitions, with the company emphasizing consistent operations and customer experience across its locations.

Perhaps most importantly, the two companies weren't strangers at the altar. Since 2023, BlueWave's operations have been fully managed by ClearWater, meaning the operational integration was already well underway before the formal acquisition. This pre-existing relationship substantially reduces the execution risk that typically accompanies platform combinations of this scale.

WhiteHorse Capital's involvement reflects the lender's growing appetite for backing consolidation plays in fragmented service sectors with strong unit economics. The firm recently closed H.I.G. WhiteHorse Middle Market Lending Fund IV with $5.9 billion of assets, continuing its strategy of originating senior secured loans across the U.S. middle market.

"We're excited to partner with WhiteHorse Capital as we enter the next phase of our Company's growth," said Terral Hill, CEO of ClearWater, in the announcement. "Their flexible capital and deep understanding of our business will support us as we continue to execute on our strategic objectives and expand our platform."

James Favero, Managing Director at WhiteHorse Capital, emphasized the combined entity's growth potential: "ClearWater is well-positioned to be a dominant player in the car wash space in Texas, California and beyond. We are enthusiastic to support the Company in their continued expansion and growth trajectory."

The "flexible capital" reference is significant. Unlike traditional bank financing, which often comes with restrictive covenants that can limit growth initiatives, private credit providers like WhiteHorse typically structure facilities with more operational flexibility—particularly important for a platform pursuing both organic development and acquisition-driven growth. The explicit mention of "additional capital available to develop and acquire future sites" suggests the credit facility includes an accordion feature or growth capital component that can be drawn as opportunities arise.

WhiteHorse's parent, H.I.G. Capital, manages $70 billion of capital under management across multiple strategies, providing WhiteHorse with substantial dry powder and the ability to support portfolio companies through multiple stages of growth. The firm provides debt financing to both non-sponsor and sponsor middle market companies across a wide range of industries, including Business Services, with car wash operators falling squarely within their target profile.

The ClearWater-BlueWave combination arrives at an inflection point for the express car wash industry. After years of explosive growth fueled by private equity capital and the shift toward subscription-based unlimited wash memberships, the sector is entering a period of more measured expansion.

According to the International Carwash Association's Q4 2025 CAR WASH Pulse report, the industry is entering 2026 with tempered growth expectations, steady consumer behavior and a widening gap between retailer and supplier outlooks. The report notes that expectations for 2026 point to modest single-digit growth with success increasingly tied to efficiency, differentiation and disciplined investment.

Yet industry fundamentals remain attractive. The subscription model continues to generate highly predictable revenue streams—a single location can generate $1.2 million in guaranteed revenue annually from 5,000 subscribers at just $20 per month, according to Mammoth Holdings' vice president of development. This recurring revenue profile, combined with the express model's relatively low labor costs, continues to attract private equity interest despite the more cautious growth outlook.

Industry observers note that the express carwash model remains one of the most durable, high-quality business models in the service sector, with both consolidators and new entrants looking to expand their presence in key markets. After several years of post-COVID caution, operators are once again scouting locations for new express car washes, though with more disciplined underwriting than during the sector's peak frenzy.

The private equity investment thesis remains intact despite slower deal activity in 2023-2024. As one industry report noted, private equity investment rationale remains given the attractive fundamentals of the car wash sector: highly fragmented space, whitespace potential, strong unit economics, recurring revenue subscription business, and low-cost labor express wash model.

The combined ClearWater-BlueWave platform is now positioned to execute a multi-pronged growth strategy that leverages the strengths of both legacy organizations.

Geographic Expansion: With established operations in Texas and a beachhead in Northern California, the platform can pursue both market densification in existing regions and expansion into adjacent markets. Texas, with its population growth and car-dependent culture, remains one of the most attractive markets for car wash operators. California, despite higher regulatory hurdles and operating costs, offers substantial market opportunity and premium pricing potential.

Development Pipeline: ClearWater's in-house real estate and development team provides a competitive advantage in identifying, securing, and developing greenfield sites. This capability becomes even more valuable when paired with BlueWave's established operational playbook and brand recognition in key markets. The additional capital available in the credit facility specifically earmarked for development suggests an aggressive new-build pipeline is planned.

Operational Leverage: With 81 locations, the combined entity achieves meaningful scale advantages in purchasing, marketing, technology deployment, and overhead absorption. The platform can now justify investments in advanced systems—including the license plate recognition (LPR) technology, automated payment solutions, and mobile apps that leading express carwash operators are deploying to streamline transactions, personalize promotions and track customer behavior.

Acquisition Currency: As a larger, better-capitalized platform backed by a sophisticated lender, ClearWater is now positioned to pursue additional tuck-in acquisitions of smaller operators. The fragmented nature of the industry means thousands of single-site and small multi-site operators remain potential acquisition targets, particularly as older owners seek liquidity and smaller operators struggle to compete with well-capitalized platforms.

Environmental Differentiation: BlueWave's emphasis on water conservation and environmental management provides a differentiation angle that could prove increasingly valuable. As water scarcity concerns intensify in the Southwest and regulatory scrutiny of water usage increases, operators with proven conservation systems may enjoy competitive advantages in permitting and community relations.

The structure of this transaction—using senior secured debt rather than equity—reflects several important dynamics in today's middle market financing environment.

First, it suggests the existing equity sponsors (if any) and management wanted to minimize dilution while still accessing growth capital. Debt financing allows them to maintain ownership stakes while leveraging the business to fund expansion.

Second, it indicates confidence in the business's cash flow generation. Senior secured lenders like WhiteHorse underwrite to the borrower's ability to service debt from operating cash flow. The willingness to provide acquisition financing plus growth capital suggests WhiteHorse's diligence validated strong unit-level economics and a clear path to deleveraging through organic growth.

Third, the timing aligns with private credit's continued displacement of traditional bank lending in the middle market. As regional banks have retrenched from leveraged lending, firms like WhiteHorse have filled the void, often providing more flexible terms and faster execution than traditional bank syndicates.

The senior secured structure means WhiteHorse holds a first-priority lien on the company's assets—the real estate, equipment, and potentially the membership contracts that generate recurring revenue. This collateral package, combined with the essential nature of the business and its subscription revenue base, likely enabled attractive pricing despite the current higher-rate environment.

Despite the strategic logic, the combined entity faces several headwinds that will test management's execution capabilities.

Market Saturation: Some Texas markets, particularly Houston and Dallas-Fort Worth, have seen substantial car wash development in recent years. The risk of over-saturation in certain submarkets could pressure pricing and membership growth rates.

Labor and Operating Costs: While the express model is relatively labor-light, wage inflation continues to pressure margins. Additionally, utility costs—particularly water and electricity—have risen substantially in Texas and California.

Consumer Spending Sensitivity: Although car wash memberships have proven relatively recession-resistant, a significant economic downturn could lead to membership cancellations as consumers cut discretionary spending.

Integration Execution: While the companies have been operating in tandem since 2023, fully integrating systems, branding, and cultures across 81 locations will require disciplined execution. Any stumbles could distract from growth initiatives.

Competitive Intensity: The industry's attractive economics have drawn numerous well-capitalized competitors. Public operators like Mister Car Wash and private equity-backed platforms like Mammoth Holdings and Crew Carwash are all pursuing aggressive expansion strategies in overlapping markets.

The ClearWater-BlueWave transaction exemplifies the ongoing maturation of the express car wash industry. The days of indiscriminate expansion and sky-high valuations have given way to a more strategic phase focused on operational excellence, disciplined capital deployment, and platform building.

For WhiteHorse Capital, the deal represents a bet on a proven management team, attractive unit economics, and a fragmented industry with continued consolidation runway. The lender's willingness to provide not just acquisition financing but also growth capital signals confidence in the platform's ability to generate returns that justify the leverage.

For ClearWater's management, the transaction provides the scale and capital to compete with larger, better-resourced competitors while maintaining the operational focus and development capabilities that drove the company's initial success. The challenge now is executing on the growth plan while integrating operations and maintaining the customer experience that both brands built their reputations on.

As the express car wash industry navigates the transition from hypergrowth to sustainable expansion, transactions like this one—combining complementary platforms with patient capital from sophisticated lenders—may well define the next chapter of consolidation. The winners will be those operators who can balance growth ambitions with operational discipline, leveraging scale advantages while maintaining the local market knowledge and customer focus that drive unit-level performance.

The car wash industry's transformation from a fragmented, mom-and-pop sector to an institutionalized, professionally managed business continues apace. With platforms like ClearWater-BlueWave now operating at meaningful scale and backed by deep-pocketed capital partners, the pressure on smaller operators to either consolidate or exit will only intensify. For investors, lenders, and operators alike, the question is no longer whether consolidation will continue, but rather which platforms will emerge as the dominant regional and national players when the dust settles.