Many green industry company owner/operators build excellent companies that focus on particular green industry services. The most obvious include chemical lawn care, tree services, pest control and irrigation. Companies that specialize in these services also make attractive acquisition targets that, when sold or merged with other companies, can provide their founders with retirement funds or with seed money for new business endeavors.
Jean Nowry, executive vice president of Massey Services, echoes the sentiments of other company executives by sharing the most important factors buyers consider in purchasing other companies. The Orlando-based company, which has been expanding its footprint in the U.S. Southwest in recent years, offers a range of services, including termite, pest control, lawn care and irrigation.
“Massey Services has achieved 31 years of profitable growth primarily through organic growth along with a handful of acquisitions,” says Nowry. Factors that make another company attractive for acquisition by Massey include:
- The ability to retain its team members and customers.
- Cultural similarities.
- Size of recurring revenue base.
- Services provided.
“Acquisition opportunities that are most attractive to us allow for geographical diversification or increased density within areas where we currently operate. Consistent profitable growth provides opportunities for our team members,” adds Nowry.
Arrow Exterminators, headquartered in Atlanta and claiming to be the sixth largest pest control company in the nation, has been no less busy expanding its brand. The company promotes its desire to continue to grow through M&As on its website where it lists the names and locations of about 115 companies it has acquired since 1988.
Arrow now has locations throughout the U.S. Southeast and into Texas and Arizona, as well. Many of its sites offer lawn care and related property management services as well as termite and pest control.
Acquisition activity can be cyclical
Ron Edmonds, principal consultant for Memphis-based Principium Group Inc., over the past 15 years, has facilitated more than 300 M&A transactions. The Principium Group offers information and a full range of services surrounding the buying, selling and valuing of small businesses, mostly in the green industry.
While Edmonds has been busier on the landscape side of M&A recently, for many years the lawn care market kept him very busy, and much of that working with TruGreen. That activity peaked soon after October 2003 when the U.S. Federal Trade Commission’s Do Not Call Registry became effective. TruGreen, from its founding in the mid-1970s until implementation of the registry, relied strongly on telemarketing to attract and retain customers. Seeing this avenue of growth threatened, it set its sights on acquiring smaller, independent, regional lawn care companies to bolster its customer count and increase its revenues.
TruGreen continued to make acquisitions sporadically since then. In 2015 it snapped up Massachusetts- based Noon Lawn Care, which itself had used acquisitions to grow to $8 million. As 2015 drew to a close, TruGreen announced it was acquiring a 70 percent stake of Scotts LawnService and merging the two companies under the TruGreen banner. That merger, producing a company with about $1.3 billion in revenue, was completed in April 2016.
Since then, the M&A activity in the lawn care market has been relatively quiet.
“M&As are extremely cyclical,” says Principium’s Edmonds. “Factors that affect them include interest rates, public attitudes and news coming out of Washington. Election years are strange times and it’s always hard to know how they will affect markets. And this [past] election year is the most bizarre of all.”
While the TruGreen-Scotts news grabbed the most attention this past year, other major green industry players have continued buying smaller specialty service companies.
Tree services always in demand
In 2016, The Davey Tree Expert Co., headquartered in Kent, Ohio, acquired the assets of Memphis-based Jones Brothers Tree & Landscape. That acquisition, which brought Bob Jurgens, owner and president of Jones Brothers, and 30 experienced employees under the Davey umbrella, further strengthened Davey Tree’s presence in the mid-South.
That acquisition, one of approximately 20 these past six years, is part of the company’s carefully mapped strategy to grow both organically and by buying other companies and bringing them, their employees and, in many cases, their owners and managers into Davey.
“We will continue to focus on high-quality companies with customer demographics that are similar to our own within markets where we want to grow density,” says Jim Stief, Davey Tree executive vice president of operations.
Other companies acquired by Davey Tree in recent years include:
- Kerns Brothers Tree Service and Landscaping, a 40-year-old company with approximately 20 employees serving the greater Wilmington, Delaware, region in May 2015.
- S&S Tree & Landscaping Services, St. Paul, Minnesota. “This will strengthen Davey’s presence in the Midwest and will bring additional regional business expertise, talented arborists and employee owners to our organization,” said Pat Covey, Davey’s chief operating officer, in announcing the 2013 deal.
- Green Tree Experts Inc., Raleigh, North Carolina. “The difficult decision to step back from the business was made easier knowing that Davey Tree shares our commitment to quality tree care and customer service,” said Green Tree founder and owner Derek Green in announcing the acquisition in May 2013.
Acquisitions happening nationwide
Other established national and regional green industry powers were no less busy making strategic acquisitions.
Senske Services, Kennewick, Washington, continued to build its presence in the Inter-mountain West by acquiring Headman Lawncare of Spanish Fork, Utah. This acquisition expands upon Senske’s current holdings in both Ogden and Salt Lake City, Utah.
Senske also added Guardian Pest Defense in Las Vegas. “As a result of family demands I needed to spend more time with my family at this stage of my life,” says Ammon Hartner, former owner of Guardian Pest Defense. “After carefully considering several options and selecting a company that aligned with my guarantees, ethics, reliability and reputation, I was excited to announce that Senske Pest Control would be caring for my customer’s properties.
“It was a very good experience working with Senske,” Hartner adds. “They offered a fair price and it only took 35 days from our first conversation to closing the deal.”
- Mega-Mergers Cause Shift in Industry Pecking Order
- Mergers from an Employee’s Perspective
Private Equity Interest Remains Strong
Monarch Landscape Holdings, this past April, announced the acquisition of Jensen Landscape, based in San Jose, California, and also added Northwest Landscape Services, Woodinville, Washington. Monarch Landscape Holdings was formed by One Rock Capital Partners, a New York-based investment firm, May 2015, and quickly acquired the assets of Signature Landscape Services, Redmond, Washington, while also signaling that it would be making additional acquisitions in Washington, Oregon and California.
“Monarch represents an opportunity for One Rock to invest in a highly fragmented industry with attractive dynamics and growth opportunities,” One Rock Managing Partner Tony Lee said at the time. Monarch’s management has made it known it is on the lookout for companies with strong commercial maintenance services and revenues in the $10 million to $50 million range. With its two most recent acquisitions, Monarch has grown to about $80 million in revenue.
Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity. Capital for private equity is raised from retail and institutional investors and can be used to fund new technologies, expand working capital within an owned company, make acquisitions, or to strengthen a balance sheet, says Investopia.com.
“You don’t find the best financial minds and the money in this space unless there are huge growth opportunities,” comments Judy Guido, founder and Guido & Associates. “I get three or four calls every month from private equity groups looking to invest in our industry whether it’s a company or a product.”
If you own a growing and successful landscape company in a strong market, become familiar with private equity. Start with a free download from The Principium Group Inc., which offers a range of services related to evaluating, buying and selling landscape and lawn care companies. Ron Edmonds, Principium’s principal consultant, tracks and regularly reports on M&A activity in the industry.
Recently, he posted a 15-page document “Private Equity Investment In The Landscape Industry.” It is an excellent primer on private equity. The document also provides financial terminology all serious business owners should understand.