Green Merger News – February 2011

These days are often frustrating to me because many of the clients and potential clients I would otherwise be talking to are entirely focused on serving their clients with emergency snow and ice removal services.

We all know that a “good” snow season makes all the difference to many landscape operators in the snow-belt (and this year somewhat beyond). Even though some landscape companies may not be really excited at snow removal as a service, they know that it can be very profitable, especially tantalizing given the business downturn many have experienced over the past three years. In addition, it can provide work for their crews during a time when many might otherwise be subject to either seasonal layoffs or, at a minimum, subject to a very much reduced work schedule.

Even though not every year provides the opportunities in this service line that the winter of 2010-2011 has so far, some operators have a contingency plan in place to be able to mobilize quickly to respond when the opportunity to provide snow removal services presents itself, either in a routine way or in the more significant and critical way that La Niña seems to have provided this year.  Those landscape companies that have gone through the planning process are by far the most likely to really take advantage of a snow event when it occurs.

Because I have been thinking about, focusing on and writing about exit strategy planning for some time now, I asked myself “What do snow removal services and exit strategy planning have in common?  The answer I came up is pretty simple – those that plan for the unexpected or uncertain have the best chance to profit from their ability to seize the opportunity when it presents itself.

Carpe diem!

As always, if you are considering the purchase or sale of a green industry business or beginning to plan an exit strategy, we’d welcome the opportunity to speak with you.

——Ron Edmonds

Preserving the Value of Your Business

In many cases, exit planning begins long before an exit event actually happens, either planned or unplanned.  In fact, traditional wisdom suggests that exit planning should begin the day you start or buy a business.  Therefore, there may be a significant time lag from the point that you first begin exit planning and the time that plan is executed.  In earlier articles, we have focused on understanding the value of your business and improving the value of your business over time.  In this article, we focus on preserving the value of your business prior to completing an exit strategy.

A good way to begin assessing how to preserve the value of the business is to ask what risks the company faces that might affect its value between the present time and a planned exit point.  Of course the business world is full of risks – some we can control and some we can’t.

What if something happens to you as the business owner that prevents you from devoting your time to the business either temporarily or permanently?  Some examples would include your death or disability or your need to focus on other issues, such as the health of a family member.

Is your business so dependent on the continued services of one or more key employees that the business would be severely impacted as a result of their absence?  The same things that could happen to you as a business owner could happen to a key employee.  In addition, they might simply decide to leave for a whole host of reasons, one of which could actually be to compete with you.

Many risks that threaten the value of the business are related to the business owner having mentally made a decision to exit the business and, therefore, becoming complacent about competitive threats and marketplace shifts or hesitant to make the investments required to achieve its potential.

Of course, there are the traditional risks, many of which may be insurable or controllable, to consider.  This is not a time to skimp on insurance and risk management.

Many of us focus on what would happen in the event of our death.  However, for a typical 40 to 50-year old business owner, the risk of becoming disabled is approximately twice the risk of dying during your remaining time in the active workforce.  We usually think about the adequacy of life insurance and disability insurance to meet your family’s needs in the event of your death or disability, but meeting the needs of your business  in the event of your death or incapacity may be a key step in preserving its value as your most important asset.

Business continuity planning has the goal of making sure your business can continue to operate, not only after a natural calamity but also in the event of other disruptions including illness or departure of key employees, supply chain issues or other challenges that businesses face from time to time.   It can prove a valuable part of preserving the value of your business.

Here are some important questions to ask yourself as a business owner:

·  Do you have a written plan for your business if something unexpected happens to you?  Have you thought about what would be best for your business and you family in this event?

·  Have you identified a person who can manage the business in your absence?  This person could be a family member, a key employee or perhaps even a competitor.  The key here is to identify this person, gain their agreement and make it known in some fashion that this is your desire.

·  Have you identified a person who can oversee  the finances of your business in your absence?  This person could be a family member, a key employee or perhaps your accountant or another professional advisor.

·  What would be the impact of your death, disability or absence on your business’s financing arrangements?

·  Do you have a specific written strategy or plan to retain employees critical to the operation of the business if you can no longer be active in the business due to death, disability or other reasons?

·  If you have partners, do you have a current buy-sell agreement in place?  Is it backed by a method of financing the buy-sell transaction, e.g. insurance?

·  Have you communicated your continuity plan to key employees?

A business continuity plan is on many business owners’ to-do lists.  Well, maybe it is on at least a few business owners’ to-do lists. With the pressure of day-to-day operations and the rest of life’s obligations, it rarely makes it to the top of the list.  In the context of exit strategy planning, the need to preserve the value of your business in order to achieve your exit strategy objectives becomes extremely significant and should not be ignored.  There is no quicker way to destroy the value of a business than to remove its visionary leader, its manager, and often its chief sales person without a well thought-out plan for dealing with the void that is left behind.

We often tell clients that the single most important thing they can do to improve their prospects for the sale of their business is to make sure it is continuing to “operate on all cylinders” and to avoid getting so wrapped up in the process of the sale of the business that they lose their edge with the business itself.  A business that is stagnant, is not growing or does not react to changes in the market will not be nearly as attractive an acquisition target.

Timing your exit is a complex process.  For the most optimum result, your business has to be ready, you, as a business owner, have to be ready and market conditions have to be right.  Because those  things don’t always happen at the same time, additional risks enter into the equation.  While those risks certainly cannot be completely controlled, taking steps like those we’ve recommended here can help make it more likely that when you are ready to sell your business and market conditions are right, that your business will be ready as well.

Recent Transactions

SavATree, the tree care and lawn care services company based in Bedford, New York recently expanded its operations into Illinois, merging first with  Autumn Tree Experts, which added three Chcago-land branches t the SavATree network and then with the similarly-named Save A Tree, which has been merged into  Autumn Tree Experts.

SavATree has been serving customers from New England through the Mid-Atlantic for over 25 years.  It now has 23 branches in eight states.  SavATree also offers lawn care services under the SavaLawn brand name.

SavATree also acquired DeerTech in late 2010.  DeerTech’s  service combines a patented ultra-sound technology with a proprietary treatment program to provide maximum protection.

SavATree has made a number of acquisitions of local tree and lawncare companies in recent years.  The Illinois acquisitions represent a significant geographic expansion for the company, whose other operations are in the Northeast.

Daniel van Starrenburg, president & CEO of SavATree, commented on the company’s acquisition program, “Our reputation and track record make SavATree an ideal company for others looking to join forces.  We have successfully integrated a number of businesses and are always diligent to understand what made these companies successful and then leverage those capabilities to make us both better.”

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Clark Pest Control of Lodi, California, recently announced two acquisitions – High Desert Pest Control of  Sparks, Nevada and  Smart Pest Control of San Diego, California.  Clark provides lawn and garden services in addition to general pest control and termite services.

In Brief

The January issue of Landscape Management magazine has a pair of interesting articles related to mergers & acquisitions  by its editor-in-chief Nicole Wisnewski.

The cover story is entitled “Smart Money”.  In this article, she investigates the attractiveness of the green industry for investment capital.  Among a variety of other industry experts, Ron Edmonds of The Principium Group was quoted in this article.

“Buy & Build” chronicles the emergence of Yellowstone landscape Group including its launch in 2008 by GridIron Capital and its three platform acquisitions:  BIO Landscape & Maintenance in Texas, Piedmont Landscape Contractors of Georgia and Austin Outdoor of Florida.

Some Perspective

By Richard Helling

“That’s a stupid question.” All of us have been told that before and there is nothing worse than feeling like you are an idiot. That’s why people will tell you that. They want to make you feel dumb. When you feel dumb you feel unprepared and there is nothing worse in business than feeling unprepared. Being unprepared is disarming. Being unprepared is what keeps a business owner up at night. It makes them pace their houses when no one else is around because they don’t have the answers and they don’t know where to turn to ask the questions.

Selling a lawn or landscape business can be hard. So can owning a lawn or landscape business.

Business owners are an interesting breed apart from the average person. That’s why we have always liked working with them. Their independence and can-do attitude make things happen and excite possibilities. However, this same can-do attitude is also frequently the highest hurdle that business owners face because they feel like they should know all the answers. The great quote we all have heard is “experience is something you’ve gained just after you’ve needed it.” It’s a great quote because we have all had that feeling. If you want to sell your lawn care business we don’t have all the answers, but we have the tools and the experience to help find the best answers available. There are no dumb questions, only those too stupid not to ask what they haven’t yet learned.

Give us a call if you would like to talk about buying or selling a green industry business.  We promise NEVER to tell you you’ve asked a stupid question.