With the news breaking that industry leaders The Brickman Group and the ValleyCrest Companies are nearing a tie-up, it is time to reflect on what this may mean for the landscape services industry. Here are seven first thoughts.
Number One: The commitment of capital to the industry is a huge vote of confidence in the industry’s vitality and prospects. Some of the biggest players in the financial community are building the biggest player in the landscape industry.
Number Two: It will take some time to see what the new Brickman-ValleyCrest will really look like and what their priorities will be. Integrating these two companies will be challenging, but you can expect them to devote the time and resources to do it right.
Number Three: A combined Brickman-ValleyCrest will be highly focused on profitability and cash flow. There will be a mountain of debt to service. While it is certainly hard to predict their strategies, aggressive price competition will not likely be their top strategy.
Number Four: It is hard to imagine the combined Brickman-ValleyCrest making many additional acquisitions in the foreseeable future. Much of the acquisition activity in the past few years has been either to “add pins on the map” (completing a national network) or strengthening locations where a company’s operations are weak. There are few significant markets in the US where a combined Brickman-ValleyCrest would not have a strong operation. Of course, they will be all about exploiting exceptional opportunities if and when they arise.
Number Five: Employees of a combined Brickman/ValleyCrest will be facing uncertainties, especially in the many markets where there is a substantial overlap. This may produce a recruiting opportunity.
Number Six: This will be a very interesting time for larger regional players. Many will have the desire to grow larger and stronger to be able to more effectively compete with the likes of a Brickman-ValleyCrest. There will be many good acquisition opportunities and many will be sold to larger regional players.
Number Seven: Private equity firms will be very interested in the industry, seeking out good opportunities among regional players. The biggest concern will be exit strategy because a sale to the likes of a Brickman-ValleyCrest may not be as likely as they may have thought.
These are just some first impressions. We will share more thoughts as this news is digested through the market.