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