Green Merger News – July 2010


In this issue:
Report Shows Increased Business Sale Activity
Recent Transactions
Never Underestimate the Power of Free
Short Takes
Businesses We are Looking For
About The Principium Group



As the year progresses, we continue to be cautiously optimistic about the green
industry acquisition marketplace. There have been a number of completed
transactions with more in the works.

Although there is some nervousness about the strength and pace of the recovery
and about the availability of financing, we believe the market will continue to
improve and that good transactions will be completed. There are many signs
that stronger companies are seeking to improve their positions with strategic

This month, in addition to recent news about acquisitions in general and a
review of recent industry transactions, we have included a story that relates a
perspective on perceived value: “Never Underestimate the Value of Free.”
We have also enclosed a list of some of the businesses that we and our clients
are seeking. We hope you will take a look and contact us if you have an
interest or can make a referral.

As always, if you are contemplating the sale of your business, now or in the
future, please feel free to give us a call or email. Likewise, if you are
considering an acquisition, we’d be happy to discuss your situation.

—Ron Edmonds



Report Shows Increased Business Sale Activity


BizBuySell has released its second quarter 2010 Insight Report reflecting
increased business sales activity.

According to the report, the number of closed transactions in the second
quarter rose significantly, 6.3 percent, as compared with the same time period
in 2009 — from 1,040 transactions to 1,106.
The market is continuing to improve, making it a good time to list a business
for sale. “It’s encouraging to see ongoing recovery in the business-for-sale
marketplace,” commented Mike Handelsman, general manager of
“The market is continuing to improve, making it a good time to list a business
for sale.”

While transaction volume is up in comparison to 2009, the market remains down
compared to prior years. In Second Quarter 2008, business brokers reported
2,098 closed transactions. Relative to two years ago, the market is still down
47% versus its peak.

In addition to an increase in completed deals, the report notes slight changes
in the metrics that are used to value companies. Compared to the same quarter
last year, revenue multiples declined while cash flow multiples increased,
suggesting that sellers with cash flow positive businesses may be seeing more
qualified buyers bidding to buy companies. This puts upward pressure on
business sale prices, which is reflected in the higher cash flow multiples.
Sellers are clearly valuing cash flow more than revenue, as evidenced by the
decline in revenue multiples.



Recent Transactions



Yellowstone Landscape Group, Inc., has acquired Forest Hills Lawn Service, Inc.
of Dallas, Texas. Forest Hills provides landscape maintenance services
primarily focused on municipal and governmental accounts. Forest Hills will
become part of BIO Landscape & Maintenance, Inc. (BIO), a wholly-owned
subsidiary of Yellowstone. Yellowstone is a portfolio company of Gridiron
Capital, LLC.

The Davey Tree Expert Company has acquired Hartney Greymont, Inc., of Needham,
Massachusetts. Hertney is a leading tee-care business in the Metro Boston
region and also offers lawncare and landscaping services..

Hartney, a 72-year old business, had been owned by an employee stock ownership
plan since since 1988 and now joins Davey, the largest and oldest ESOP-owned
company in the industry.

Hartney will continue to operate as a division of Davey. Jim McGwire,
Hartney’s president, will serve as general manager of the new division of

In another major New England transaction, Rollins, Inc. has agreed to acquire
Waltham Services, Inc. of Waltham, Massachusetts. Waltham, with an estimated
$17 million in revenues, was ranked as the 33rd largest pest control company in
the United States. Following the acquisition, Waltham will continue to operate
independently, preserving its brand and customer base.

Rollins also announced that its Orkin subsidiary has acquired Redi-National
Pest Eliminators of Tyler, Texas, which will be integrated into Orkin’s Tyler



Never Underestimate the Power of Free

By Richard Helling


We sometimes hear surprising things when talking with clients and potential
clients, often involving insights into the green industry. One such instance
happened recently when we were meeting with a garden center client. Just in
passing, he mentioned that he had great sales of Christmas trees at that
location, but he had pretty serious trouble a couple of years before because of
a seemingly innocent change in his delivery policy.

He had noticed, quite accurately, that his Christmas trees were more expensive
than just about any other place in town. They were more expensive because he
had factored free delivery and free set-up into the list price of the trees on
his lot. Worried that he would lose business because his trees were more
expensive, he eliminated the free delivery and set-up to reduce cost and
instead offered those services for an additional fee.

In his words, “The response was staggering.” Virtually every customer wanted to
speak with him personally because his business had always delivered and set-up
the Christmas trees for free, and they just couldn’t understand why he was now
charging for the service. Of course, the customers couldn’t remember how much
they paid for their tree last year, but they absolutely remembered that there
was free delivery and set-up. Even after explaining that there was virtually no
cost difference between the two, he still had to deal with irritated customers
who just couldn’t imagine why he had removed the free delivery and set-up.
Naturally, free delivery and set-up made a healthy come back the following
Christmas season.

There are several interesting insights that we took away from this encounter.
First and foremost, never underestimate the power of “free”. Even if it’s
already factored into the price, customers love feeling like they are getting
something extra for no additional cost. This could cover just about every
aspect of every business from a buy one get one free sale to free planting of
any tree above a certain dollar value to a free lawn cut if you pay for a
specific number of cuts in advance.

The other insight we gained from this story is to never underestimate the value
of tradition. Customers like continuity and predictability. If they liked how
you cut their lawn last week, then cut it the same way this week. If they like
the way you fertilized their yard last month, make sure you do it the same way
this month. It may sound odd and very rudimentary, but loyal customers are the
cornerstone of every successful business in every industry in every area.



Short Takes

In the June issue of Pest Control Technology, industry veteran Harvey Massey,
CEO of Orlando-based Massey Services, discusses Massey’s acquisition of its
Orlando rival, Middleton Pest Control late last year. Massey comments on the
internal considerations that went into their extended pursuit of Middleton and
also discusses at length the detailed integration plan that they believe will
make the acquisition successful. Both Massey Services and Middleton Pest
Control were active in both pest control and lawn care. The combined business
is a strong competitor throughout Florida.

[6]Here is a link to the Pest Control Technology article.

SBA lending to small business dropped sharply in June after stimulus act
incentives, which include an expansion of the guarantee and a waiver of most
fees to borrowers, ran out of funding again. Efforts to extend the incentives
seem stalled in Congress right now.

Our thoughts are with Brad Johnson of Tulsa’s LawnAmerica (and my fellow
Oklahoma State University alum). His mother passed away a few days ago as Brad
neared the half-way point of his Appalachian Trail hike. I understand he will
be back on the trail soon. Updates on his summer’s adventure are available at



Some Businesses We Are Looking For


This is a list of some of the businesses that we and our clients are presently
looking for. If this triggers an interest or you know of a business to refer
us to, please call us or send us an email.

Commercial landscape maintenance business– New England, Mid-Atlantic, Mid-West,
Chicago, Houston, Dallas-Fort Worth, Memphis, Nashville, Atlanta
Residential and commercial landscape maintenance – Houston, Naples, Florida
Lawncare – New England, Chicago, Cleveland, Columbus, Dallas-Fort Worth,
Mid-Atlantic, Rocky Mountains, Nashville, Memphis, Southeast, Texas and major
cities throughout the United States
Garden Centers – Cincinnati, Dayton



About The Principium Group


The Principium Group provides mergers & acquisitions and business brokerage
services to a variety of middle market and small businesses, with a focus on
the green industry. Put more simply: We help people buy and sell green
industry businesses.

Our professionals have assisted buyers and sellers in hundreds of transactions.
For buyers, Principium provides assistance and counsel in strategic planning,
identifying potential acquisition targets, due diligence and planning for
successful integration of acquisitions.

For sellers, Principium provides assistance and counsel in evaluating strategic
alternatives, identifying and negotiating with potential acquirers and
assisting with transactions from due diligence through the closing process.
We understand that the decision to buy or sell your business is a profound one,
and we pledge to work with you in a professional and confidential manner while
we help you navigate this often confusing process.

Whether you have immediate plans to buy or sell a business or may sometime in
the future, we would welcome the opportunity to talk with you about your

Leaders in Green Industry Mergers & Acquisitions
Ron Edmonds / Richard Helling / Chris Martin

If you are thinking about buying or selling a green industry business, we can

The Principium Group, Inc.

P.O. Box 414 Cordova, TN 38088