Green Merger News – January 2012

Commentary – Looking Back & Forward

 

We are pleased to present our annual Year in Review issue of Green Industry Merger & Acquisition News.

While there were some surprises in 2011, including the slow pace of acquisitions by some of the larger companies in the industry who have frequently been major acquirors, we see the level of merger & acquisition activity within the industry as relatively strong and on an uptick.

We also see trends that suggest that merger & acquisition activity will be even stronger in 2012 despite the impact of an uncertain economy and an uncertain political climate.

As the new year begins, this is a good time for business owners to reconsider their strategic plans.  Some business owners will be considering acquisitions.  Others will have a reason to seriously consider the sale of their business now.  Even those who do not see themselves as acquirors or planning the near-term sale of their business would be well-advised to give some thought about their ultimate exit strategy.  Whatever your perspective, we’d welcome the opportunity to discuss your specific business situation.

Please call or email us to set up a time to talk.

Happy New Year!

—Ron Edmonds
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The Year in Review – 2011

 

Merger and acquisition activity within the green industry was mixed during 2011.  Although there were a few major transactions,  the larger companies in the industry were mostly on the sidelines in 2011.  On the other hand, there were definite signs of life, with many transactions being completed as well as several new private equity investments in the industry.

This article includes publicly announced transactions within the industry.

The largest transaction of the year was the acquisition from ServiceMaster of TruGreen Landcare by Los Angeles-based Aurora Resurgence.  On a standalone basis, TruGreen Landcare would rank as the seventh largest company in the lawn and landscape industry and the fifth largest landscape services company.  ServiceMaster had previously announced their intention to sell TruGreen Landcare, and the completion of this transaction concluded a period of uncertainty in the industry.

Among other industry leaders, The Brickman Group, Ltd. entered the Los Angeles market with its acquisition of Dworsky Services.  Los Angeles was one of the last major markets without a Brickman presence.  Brickman did not report any other acquisitions during 2011.

ValleyCrest Landscape Companies did not report any acquisitions in 2011, although they made several large acquisitions late in 2010.

Yellowstone Landscape Group, backed by GridIron Capital, acquired Port St. Lucie, Florida, based Acorn Landscaping through its Austin Outdoor unit, but reported no other acquisitions.

The Davey Tree Expert Company acquired Tree Health Professionals Inc. of Campbell, California; Complete Tree Service of Toronto, Ontario, Canada; Osborne Brothers Tree Service of Mentor, Ohio; and Marshall’s Tree Service of Orlando, Fla.

EMCOR Group, Inc. acquired USM Services Holdings, Inc. (“USM”), a leading provider of facilities maintenance solutions in North America.  Landscape services are a part of the portfolio of services offered by USM.  USM had revenues of approximately $375 million, of which approximately $133 million is landscape services-related.

In addition to the acquisition of TruGreen Landcare by Aurora Resurgence, several other new private equity platforms in the landscape space were initiated in 2011:

L2 Capital of Radnor, Pennsylvania, announced the launch of  a commercial landscaping and snow removal platform by acquiring New Jersey-based Lipinski Outdoor Services and Pennsylvania based R.E.I.T./M&H Services.

Birmingham-based McKinney Capital acquired Environmental Landscape of Memphis and indicated it is considering several additional acquisitions.

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.   DDR is now known as Tanenbaum Landscape & Design.

Among other private equity transactions, Denver-based Terracare Associates, Ltd. has acquired Cimarron Landscape of Sacramento, California.  Terracare’s financial partner is Progress Equity Partners, Ltd.

Nashua, New Hampshire, based Lawn Dawg, Inc. acquired Capital Green Lawn Care of Rochester, New York.  Lawn Dawg is backed by Brighton Partners.

In another example of a facilities management company adding landscape services, The Millard Group, based in Chicago, acquired Preferred Landscape and Lighting of San Antonio, Texas.

In the New York metro area, Blondie’s Treehouse  merged with J. Mendoza Gardens.  Blondie’s Treehouse is  one of the largest interior plantscapes businesses in the U.S.  It also provides exterior landscaping services.  J. Mendoza Gardens will continue to operate as a division of Blondie’s Treehouse, focusing on New York City terraces and rooftop gardens.

Also in New York City, Town & Garden, Ltd. was acquired by Connecticut-based Ultimate Services Professional Grounds Management, Inc.

Arrow Environmental Services of Sarasota, Florida, acquired Seminole-based Ultimate Pest & Termite Control and Tampa-based Young Pest Control.   Arrow offers lawn, tree and shrub services in addition to pest control.

Bartlett Tree Experts acquired Preservation Tree Care in Beaufort, South Carolina,  and Native Son Landscape & Tree Care in Wimberley, Texas.

Broccolo Tree & Lawn Care, of Rochester, New York, has acquired Country Way Garden Center, which will continue to operate under its existing name.

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

Clark Pest Control of Lodi, California, acquired 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.

Houston-based Econocuts acquired Hillview Landscaping.

Orlando-based Massey Services acquired American Pest Control Management.  Massey provides pest control and lawncare services throughout Florida, as well as in Georgia and Baton Rouge, Louisiana.

SavATree, Bedford, New York, expanded its operations into Illinois, merging first with  Autumn Tree Experts and then with the similarly-named Save A Tree.  SavATree also acquired Town & Country Tree Experts of Midland Park, New Jersey.

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

Swingle Lawn, Tree & Landscape Care, of Denver, Colorado, acquired Lawn Care Aeration Plus of Greeley.

Among transactions in industries related to lawn and landscape, Horizon Distributors, Inc. (Horizon), a full-service distributor of landscape and irrigation products, expanded into the Florida market with the acquisition of certain assets of the Kilpatrick Companies.  Horizon also expanded into the Mid-Atlantic region with the acquisition of Gaithersburg, Maryland-based G.L. Cornell Company.

New Hampshire-based Natural Technologies, Inc. acquired  Fire Belly, Inc. and its Fire Belly® Organics, a unique six-step, natural, organic lawn care program.

Hines Growers, LLC sold  assets from its Fresno, California; Chino Valley, Arizona; and Fulshear, Texas, nurseries to California-based Colorspot, Inc.  Colorspot has growing facilities in California and Texas.

In highlights from SEC reports, ServiceMaster, parent company of TruGreen Lawncare and Terminix, reported expenditures for acquisitions, mostly related to TruGreen and Terminix, of $24.7 million through September 30, 2011, down 53% from the $52.5 million reported for the same period in 2010.  ServiceMaster does not typically report individual TruGreen and Terminix acquisitions.  ServiceMaster, although a privately-held, private equity- backed company, voluntarily files SEC reports.

Davey Tree, which also files reports with the SEC, reported cash expenditures for acquisitions of $.9 million for the nine months ended September 30, 2011 compared with $5.8 million for the same period in the prior year.

In a measure of the level of activity within the industry including transactions that were not publicly reported, the BizBuySell.com database of transactions completed within the lawn and landscape industry includes 89 transactions in 2011, a 27% increase from the 70 completed transactions in the database for 2009.

Key Trends for 2012
Here are our thoughts about key trends that will impact green industry mergers and acquisitions in 2012:

· The political climate will contribute to some uncertainty in the marketplace, but as the economy continues to strengthen, the level of merger & acquisition activity will continue to increase.

· No matter which party controls the White House and Congress after the elections, the outlook for small business will improve.  Both parties will see strengthening small business as an important part of strengthening the overall economy.

· Immigration policy will continue to be a hot potato issue affecting the industry.

· Future tax policy for capital gains and estate taxes will be uncertain, leaving exit planning a confusing process for many.

· Major industry players will be moderately aggressive in seeking strategic acquisitions to strengthen their networks and competitive position.

· Price competition will continue to negatively impact the profitability of the industry.

· Progressive companies will look for acquisitions that strengthen their competitive advantage.

· Landscape companies will look for acquisitions that expand their markets, including outdoor living products, other exterior maintenance services, swimming pool construction and maintenance, fencing, lighting and similar services.

· Many facilities management companies will seek to bring landscape services in-house, often by acquisitions.

· Franchising and similar programs will continue the growth they experienced in 2011.    Independent operators will continue to see value in being able to access marketing and operational support and reduce risks.

· Financing will be more accessible for acquisitions, but will continue to be a challenge for some potential buyers.

· Buyers will continue to be very disciplined in their approach to acquisitions, partly in response to the requirements of their financing sources.  The days of easy transactions at high multiples are over for the foreseeable future.

· Valuations will remain soft and will not return to pre-recession levels anytime soon.  The best opportunities can command premium valuations, but this will be rare.

· Sustainability will continue to be in the forefront.  Organic lawn care and water-efficient landscaping will command premiums.

 

Green Exit by Ron Edmonds

 

Ron Edmonds’ latest book is Green Exit—Exit Planning for Lawn and Landscape Business Owners.
Green Exit introduces lawn and landscape business owners to the basic concepts of exit planning, including defining your objectives, understanding the value of your business, improving and preserving the value of your business and developing a plan for exiting the business.  The book discusses a variety of strategies, including third-party sales, private equity, transfers to family members or key employees and employee stock ownership plans.  Green Exit targets all green industry business owners who either are or should be considering their business exit plans.
Green Exit is available now in print and e-book formats directly from The Principium Group or from the publisher, FastPencil.com.  It is also available through Amazon.comBN.com, the iBook Store and other online retailers.

 

What’s Your Sellability Score?
Have you wondered just how sellable your business is?  Here’s a chance to find out.  Take this quiz and find out your business’s sellability score.  You’ll receive your Sellability Score immediately, and then we will send you a 24-page report that provides additional feedback and  schedule a complementary phone call to discuss the results.

The Sellability Score is a system designed by John Warrillow, author of Built to Sell: Creating a Business That Can Thrive Without You, which offers a confidential way for business owners to evaluate the sellability of their businesses and get feedback on concrete steps they can take to improve their business’s sellability.  Principium has partnered with Built to Sell to offer this service to our clients and friends, including readers of Green Industry Merger & Acquisition News.  There is no cost and the service is entirely confidential.

 

Take the Sellability Score quiz and you will receive the following things, totally without cost:

  • You will immediately receive your Sellability Score with a basic analysis.
  • Within two days, you will receive a 24 page report via email that further analyzes your Sellability Score along with suggestions for improving your business’s sellability.
  • You will also be able to schedule a  30 minute phone call with a Principium professional to help interpret the Sellability Score for your green industry business.

Click here to take the Sellability Score Quiz today.

 

As an added benefit, business owners who complete the Sellability Score Quiz using a link from this email will receive a digital PDF copy of Ron Edmonds’ new book, Green Exit.

Our Travel Calendar
We’d like to meet with you

We plan to attend the following industry events:

National Green Centre, Kansas City, January 8-9
We’ll be speaking at 8:00 am on January 9 and will also be available for appointments.
Green Industry Great Escape, Nassau, March 1-4
If you are attending either of these events and would like to meet, please give us a call or send us an email to schedule a time.

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