By Giorgio AndonianPublished On: November 15, 2024

The Impact of Wheel Pros/Hoonigan’s Bankruptcy on the Automotive Aftermarket Industry

Wheel Pros, the owner of well-known brands like Hoonigan, recently filed for Chapter 11 bankruptcy to help restructure around $1.2 billion in debt. As part of the agreement, they’ll receive $570 million in new financing to keep their business running, with their lenders expected to take a majority stake.

While Wheel Pros aims to keep operating, there’s talk that some of their non-core brands may be sold off as they reorganize. Here’s a look at how this could impact other businesses in the automotive aftermarket, especially small businesses.

3 Lessons the Automotive Aftermarket Can Learn from the Wheel Pros/Hoonigan Bankruptcy

1. Potential Opportunities for Smaller Brands

Big changes at large companies can create opportunities for small businesses. If Wheel Pros has to cut back on certain brands or product lines, for example, there may be an opening for other aftermarket businesses to step in and gain market share.

For smaller wheel brands or automotive lifestyle businesses, this could be a chance to reach customers who may be uncertain about Wheel Pros’ future offerings. Similarly, if certain product lines become harder to get, small businesses focused on custom or niche parts may find more customers looking their way.

2. A Warning About High Debt Levels

Wheel Pros’ situation is also a reminder of the risks that come with taking on too much debt. For small business owners in particular, the ups and downs in consumer spending can make it harder to stay on top of high debt payments.

If you’re thinking of selling your business at some point, and you’re carrying debt, timing is key. Holding high levels of debt can make it harder to find a buyer without some sort of restructuring.

Buyers can be hesitant to take on companies with too much debt, and they may negotiate for lower prices or specific terms if they see financial risks.

3. Will This Impact How I Sell or Grow My Business?

Wheel Pros’ bankruptcy also gives us some insight into how lenders are playing a bigger role in companies’ futures. In their case, lenders are set to become the main owners post-bankruptcy. This creates added risk from the buyer perspective if they think lenders could take control during rough patches.

For business owners planning an exit, staying on top of debt and proactively reorganizing if needed could help protect your business’s value and reassure potential buyers.

Wheel Pros’ bankruptcy should act as a lesson for small businesses that strong fundamentals are still in demand, especially those with a loyal customer base. By managing finances carefully and adapting to changes in the market, small businesses in the automotive aftermarket can stay competitive and continue to attract interest—whether they’re planning to sell or simply looking to grow.

Interesting in learning more? Contact Giorgio Andonian at [email protected].

Giorgio Andonian is a Managing Director at FOCUS Investment Banking, where he specializes in mergers, acquisitions, recapitalizations, and capital raises for middle-market businesses across the automotive aftermarket industry. He brings over 15 years of operational experience from the tire and service sector. He began his career at his family's business, Discount Tire Centers of Southern California, where he held positions spanning finance, business analysis, operations, inventory management, and purchasing. He later served as vice president of a regional tire chain in Southern California, overseeing all aspects of operations and successfully preparing the business for an exit to a private equity platform. Since joining FOCUS in 2019, Andonian has become a recognized voice in the automotive aftermarket, providing insights on industry trends, M&A activity, and market dynamics from OEM manufacturers through distributors, jobbers, and retail operators to the end consumer. His unique combination of hands-on operational expertise and investment banking acumen allows him to analyze the entire value chain and understand how changes at one level ripple throughout the industry. Andonian holds an MBA with an emphasis in finance from Pepperdine University's Graziadio School of Business and Management and a Bachelor of Science in Business Administration with emphases in finance and supply chain management from the University of San Diego. He holds Series 79, Series 82, and Series 63 licenses.