Global private equity firms line up for laundry chain Cleantotopia, now up for grabs

JKL Partners, a South Korean private equity firm, is set to finalize a shortlist of bidders this month for Cleantopia, the country’s largest laundry service franchise operator, which is drawing interest from multiple global private equity giants, according to investment banking sources on Friday.

JKL is seeking to divest Cleantopia for 700 won-800 billion won ($504 million-$576 million), more than three times its acquisition price of 190 billion won, reflecting a sharp increase in the company’s first-half earnings.

Cleantopia operates a network of around 3,200 franchisees nationwide.

Its expansion into the business-to-business market – providing laundry services to hospitals and caregiving facilities, along with the growth of its laundromat business – has been a key driver of its recent earnings growth.

This year, its earnings before interest, tax, depreciation and amortization (EBITDA) is forecast to exceed 50 billion won, about a 40% increase from 36.5 billion won in 2024.

The asking price represents 12-16 multiples of forward EBITDA, higher than the average of 8-10 times for everyday service businesses.

Cleantopia earns stable fee income from its franchisees with minimum fixed cost overhead. Its business model makes it an attractive target for investment firms chasing assets with a steady stream of cash flow.

UBS and Samil PwC are jointly managing the sale, which JKL Partners aims to close within the year.

However, the franchise operator’s business may see limited growth potential.

The government's move to protect mom-and-pop stores, in sectors such as the laundry market, could pose a risk to its business.

In June, South Korea’s Industry Management Association, a civic organization backed by the Ministry of SMEs and Startups, recommended classifying the industrial laundry sector  – touted as Cleantopia’s growth engine – as a business suitable for small and medium-sized enterprises (SMEs).

Investment bankers draw comparisons with Juno Hair, South Korea’s largest high-end hair salon chain, noting its neighborhood-based business model and consistent cash flow generation.

Blackstone is in talks to acquire Juno Hair at an estimated valuation of 800 billion won, a level comparable to that for Cleantopia.

The two companies matched each other in 2024 EBITDA, each posting 37 billion won.

Write to Dae-Eun Choi at max@hankyung.com
 

Yeonhee Kim edited this article.