Green Merger News – August 2011

As I write this, the temperature is hovering near 100 degrees.  At the same time, the politicians have been playing their game of brinkmanship in Washington for many days.  Much like the weather, I am weary of it all and anxious for them to move forward.

Many companies in the industry also seem to be anxious to move forward.  There is a good bit of activity developing in the green industry marketplace.  A number of companies are taking the opportunity to expand their footprints coming out of the recession.  For example, The Brickman Group moved into the key Los Angeles market with an acquisition.

The sustained downturn in commercial real estate construction continues to take its toll on companies focused on that segment, particularly in markets like Florida that saw the deepest drop in construction activity.  It is distressing to see former industry leaders struggle.  We know, however, that even those situations create new opportunities.

This is a good time to take stock and examine where the best opportunities lie for your business.

As always, if you are considering buying or selling a green industry business or are interested in exploring the exit planning process, we would be happy to speak with you.

—Ron Edmonds

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The Issues Multiply

Every day, it happens to somebody in the green industry.  Events dictate that they must leave a business that they have owned, either individually or as a part of some form of partnership.  The reasons range from critical ones, such as illness, disability, divorce or other family matters, to a desire for a change of vocation or location.  Oftentimes, it may triggered by the simple fact that partners, for whatever reasons, don’t want to be partners any more.

Whether or not one is the sole owner of his business or one of several partners, it is a given that one day they will want to (or need to) exit the business.  That situation is usually complicated and often stressful under the best of scenarios.  When the business has more than one owner, the issues multiply.

While business partnerships are very common, partners may have very different personal situations and perspectives which may make planning for the exit of one partner very difficult.

Several questions come to mind:

· If one partner wants to or needs to leave the business, will the remaining owners (or the business  itself)  be obligated to buy him or her out?

· If a partner does leave the business, can he or she compete against the existing business?

· How will the business be valued for the purposes of buying out a partner?

· How will the buy-out be financed?  Will the partner be paid out in cash or in installments over time?

· How will the inevitable disagreements be resolved?

· What if one partner believes the time is right to sell the business and another doesn’t?

These questions are best addressed when the business is formed or acquired (or when a new owner is added).  An agreement among the partners covering these topics is called a “buy-sell agreement.” Even when a buy-sell agreement is already in place, it is a good idea to review where a business stands with its owners regularly and to update

the agreement based on changing circumstances.  The complexity of the buy-sell agreement is likely to increase as the business is successful and grows.

It is particularly important to address how the obligations under a buy-sell agreement will be funded under various circumstances.  For example, it is rather uncommon for a small business in this industry to be able to self-fund a cash buyout of a partner.  In the current lending environment, it may also be very difficult to borrow the funds to buy out a partner. It may be necessary to make the buy-out a payment over time funded from the business’s cash flows.  In some caes, insurance can play a role. It is fairly common for a business to use life insurance to fund the business’s obligations under a buy-sell agreement in the event of the death of a partner.  But, of course, death is only one of many situations that a buy-sell agreement must address.  For example, in many cases the risk of one partner becoming disabled is far greater than of a partner dying.

The objectives of the buy-sell agreement include producing  a fair result to all of the owners of the business and preserving the value of the business for its owners, both those who will remain with the business and those who will exit.  Achieving those objectives requires planning on the front end.  It also requires regular updates to make sure that the plan that made sense when the agreement was written still makes sense in the present and can be executed when the time comes.

Recent Transactions

In a Canadian private equity deal, DDR Landscaping Contractors, Ltd. of Oakville, Ontario, has been acquired by a joint venture of GC-Global Capital Corp. and Rossmore and Partners Investment Corp.  The acquisition price was $2.5 million (Canadian).  In connection with the transaction, Rossmore’s Susan Tanenbaum has been named president & CEO of DDR.   DDR has been a commercial site contractor in Ontario for the past 15 years.

Austin Outdoor, the Florida unit of Yellowstone Landscape Group, has acquired Acorn Landscaping, a commercial landscape maintenance business based in Port St. Lucie, Florida.  Yellowstone is a portfolio company of Gridiron Capital, LLC, a private equity firm.

Broccolo Tree & Lawn Care, located in Rochester, New York, has acquired Country Way Garden Center.  Country Way, which includes both a retail garden center and a landscaping operation, will continue to operate under its existing name.  Country Way’s previous owners will remain active in the business.

Editors’ Note:  We believe the synergy between retail garden centers and landscape design/build businesses can be dramatic.  Using a high-visibility garden center location to demonstrate landscaping projects such as hardscapes, outdoor living spaces, etc. can help drive business to a the landscape design/build part of the business.

Scott Lawn & Landscape, Inc. of Oviada, Florida has acquired Pristine Image Landscaping.

Cantu Enterprises, parent of Express Services of McKinney, Texas, has acquired Discount Pest & Lawn, based in Carrolton, Texas.

According to published reports, Florida-based Vila & Son is seeking a buyer or investor.

Vila, which ranked 14th on last year’s Lawn and Landscape Top 100 list, is heavily dependent on landscape construction and has been deeply affected by the downturn in construction in Florida. It had approximately $48 million in revenue in 2010.

Vila & Son is based in Homestead, Florida, and has eight branches across the state. The Company has had a “chief restructuring officer” since March. The Company recently filed notice with a state agency that it may lay off all of its 641 employees in August.

Brickman Enters LA Market With Acquisition of Dworsky Cos.

This article is based on a press release from Brickman. 

Marking its entrance into the Los Angeles market, national landscape services provider The Brickman Group has acquired Dworsky Cos., one of L.A.’s leading commercial landscape services firms. The acquisition of Dworsky, a family-owned company founded in 2002, gives Brickman a stronger foothold in the Southern California market — with more than 1,000 employees — as it builds upon its nationwide expansion. Dworsky is headed by Founder Dave Dworsky, who in his 20 years in the industry has stamped an expansive mark servicing the Greater Los Angeles area. The terms of the acquisition were not disclosed.

The acquisition marks another step in the systematic growth of the 72-year-old Brickman Group, which for the past 20 years has been expanding as the nation’s largest landscape management provider. The third-generation business now satisfies national and regional clients requesting service for their portfolios in the Los Angeles area. Dworsky brings four new branches to Brickman’s portfolio, which now stands at 15 branches in Southern California. Brickman has more than 170 branches in 30 states.

“In Dworsky Cos., we have acquired a fellow family-owned-and-operated firm with deep roots in Los Angeles, which is one of the last major markets we have yet to serve,” said Brickman Executive Vice President Mike Bogan. “This acquisition will help Brickman further penetrate the So Cal market, thanks to the energy and passion the Dworsky family brings to its work. Dave Dworsky’s company has an excellent reputation and the same set of values and service ethics Brickman offers. His firm will no doubt help cement the Brickman brand in the Southern California market.”

With the move, Dworsky Cos. will become The Brickman Group, Ltd., in 2011, while all team members, managers and service areas will remain the same. The Dworsky family, which has owned the firm since its creation, will continue overseeing its part of the company’s day-to-day operations. Dworsky brings a grassroots approach to business, as well as a tradition of rewarding hard work. That practice included his son Dan Dworsky, who has been with the company for 11 years, having started at entry level before working his way up through the ranks.

“This allows us to take the next step in our growth,” emphasized Dave Dworsky. “In today’s climate, having access to a national platform, along with the additional resources and processes in place to service a broader spectrum of clientele, enables us to build upon what we love most: focusing on customer service and growing our business in the Los Angeles region.”

Dworsky’s focus is on the landscape maintenance of commercial centers and office parks. Its client list includes properties such as Hughes Center, Sun America and Equity Office Properties.

Dworsky Cos. was represented by The Principium Group in connection with this transaction.

We’d like to meet with you

We plan to attend the following industry events:

Green Industry Conference, Louisville, KY, October 26-29

Lawn Care Summit, Aventura, FL, December 7-9

National Green Centre, Kansas City, January 8-9

Green Industry Great Escape, Nassau, March 1-4

If you are attending any of these events and would like to meet, please give us a call or send us an email to schedule a time.

FaceBook Page

The Principium Group’s  FaceBook page can be found at:  www.facebook.com/principium .

We invite you to visit (and “like”) our page.  The FaceBook page is updated regularly with commentary and links to articles and information we find interesting related to green industry mergers and acquisitions and related topics.

We also welcome comments and questions there which may be of interest to other visitors as well.  We will do our best to respond to your questions and comments.

If you have suggestions for pages for us to include as favorites, please let us know.  We’d be happy to link to your pages in that way.

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