Subject: Green Merger News - A Look at Lawn Care Mergers & Acquisitions

Published by Principium Group              Subscribe 
Editor: Ron Edmonds

To our clients and friends:

In this edition of Green Industry M&A News,  we explore the current outlook for lawn care mergers & acquisitions.  There have been some interesting transactions recently and now is a good  time for lawn care business owners to consider updating their exit plans. 

Among recent acquisitions, we report on TruGreen making a couple of fairly large acquisitions in New England and BrightView making a Florida acquisition.

We will be at Landscapes 2017 and the GIE+Expo in Louisville from October 18 to 20.  We hope to see many of you there.  If you'd like to make an appointment to meet, just contact us.  We'll be staying at the Louisville Marriott downtown.

As always, if you are ready to discuss your exit or transition plans or an acquisition strategy, we would welcome the opportunity to speak with you.
Regards,

Ron Edmonds
888-229-5740 ext 101
901-3541-1510 (cell)
Contents
A  Look at Lawn Care Mergers & Acquisitions             Landscapes 2017/GIE+EXPO                      
Recent Transactions
Valuation Services
Do you know your ValueBuilder Score?
About The Principium Group
Contact Information



A Look at
Lawn Care Mergers & Acquisitions
Historically, the lawn care (fertilization and weed control) sector has been one of the most robust areas of the green industry when it comes to mergers & acquisitions. The market has evolved a good bit in the last few years and I thought it would make sense to summarize the market as we see it.
Over the last ten years, the lawn care M&A market has been dominated by major players. TruGreen has been the dominant national player through this period. Until a few years ago, even relatively small lawn care companies could often receive an offer from TruGreen and a competitive offer from Scotts LawnService.
That began to change when Scotts stepped back from active acquisition activity other than a handful of franchise transactions. Then TruGreen had some well-publicized service delivery and profitability issues that ultimately resulted in new leadership, a spin-off from ServiceMaster, a renewed focus on the basics and then, last year, the merger with Scotts Lawn Service.
TruGreen did no acquisitions in 2014 and a handful of acquisitions in 2015. The expectation had been that TruGreen would return to an aggressive acquisition program in 2016. Instead, they acquired the former Scotts LawnService from Scotts MiracleGro. That was a very large acquisition and was very complex integration since Scotts had a large number of franchise locations in addition to corporate locations. TruGreen had a much larger corporate footprint but also has some franchises. Many territorial and operational issues had to be worked through and that was much of TruGreen’s focuas in 2016. After the merger, there is a much larger gap between TruGreen as the industry leader and number two. In 2017, we have seen TruGreen make a few acquisitions of relatively large regional companies, such as Lawn Dawg in New England and New York and TurfMaster in Connecticut. We currently expect that TruGreen will continue to be very aggressive with acquisitions in 2018.
We have for some time expected that there would be another large player develop ion the industry. Ultimately, we think that is inevitable. There has been some notable activity, such as Colorado-based Swingle Tree acquiring Oklahoma-based LawnAmerica and other regional activity such as Senske Services’ multiple acquisitions. No really major player has developed thus far.
The closest thing to a new number two that has developed so far is SavATree/SavALawn. SavaTree has completed several acquisitions this year and itself was acquired by private equity firm CI Capital Partners a few months ago. We expect them to be a player in industry consolidation, but it is hard to predict exactly how that will play out.
So why hasn’t a new large lawn care company developed? Lawn care certainly seems like the kind of business that would attract large-scale private equity investment. It is primarily recurring revenue and potentially highly profitable. The industry includes many relatively small companies as potential acquisition targets. It would seem a prime candidate for investment.
Ultimately, the issue seems to be the availability of platform investments at a reasonable price that makes sense to investors. The typical price for a lawn care acquisition seems to have peaked when TruGreen and Scotts were both bidding on most every small acquisition that came along. Pricing has moderated some since those peak years. Most buyers in the marketplace have more discipline than they did a few years ago.
However, TruGreen continues to be an aggressive strategic buyer. The details of these transactions have not been announced, but iit seems to us that in the current market, an acquisition is just worth more, sometimes much more, to TruGreen as a strategic buyer than it is to a financial buyer such as a private equity firm. TruGreen has the benefit of synergies and increased route density with nearly every deal they do. That is hard for a financial buyer to match.
We can’t predict TruGreen’s future acquisition activity with any certainty. However, TruGreen has been private equity owned for an extended period and we expect that theiur primary private equity owner will be seeking an exit some time in the relatively near future. TruGreen was acquired by Clayton, Dubilier & Rice (CD&R) as a subsidiary of ServiceMaster. Since the TruGreen spin-off, CD&R has exited its investment in ServiceMaster, partly through an initial public offering. The most likely exit strategy for TruGreen would be an initial public offering or, perhaps, a sale to another private equity firm. With either if those possibilities in front of them, we would expect TruGreen to continue to be highly focused in growth. At their size, it seems like acquisitions will need to be a part of their strategy to sustain growth.
While we continue to believe that a new relatively large number two will develop, it may take longer than we had expected. What does that mean for lawn care business owners? Right now TruGreen remains the primary option for sellers. TruGreen is fairly regimented in their acquisition approach. While there are exceptions, they try to line up their next year’s acquisitions in the fall. Other major regional players will follow somewhat similar processes.
If a lawn care business owner is interested in selling a lawn care business in 2018, now is the time to start taking concrete action.
.

Valuation Services
Many landscape industry business owners do not have a clear view of the value of their business - even though their ownership interest may be their largest asset and a crucial part of their retirement strategy.
The Principium Group offers cost-effective valuation services to business owners seeking an understanding of the value of their business in connection with planning the sale or transfer of the business or to assist in longer-term exit planning.
We offer a market value assessment, the purpose of which is to estimate the value at which the business is likely to sell in a third-party transaction. We use a combination of established valuation methodology, including discounted cash flows, capitalization of earnings and the market approach using industry data. We provide a detailed report, along with a narrative discussion of the business’s valuation, how key value drivers affect the valuation and opportunities for value enhancement. We also prepare a comparison of the company to industry benchmarks.
For more information about valuation services, please contact us.

About The Principium Group

The Principium Group provides advisory services related to mergers & acquisitions and exit planning to lawn, landscape, pest control and facilities services businesses. Our professionals have assisted business owners 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. In order to provide the highest quality service, we maintain relationships with other professionals serving the green industry and can access those professionals to supplement our internal resources. No matter how large or small your business may be, we have the resources to serve you well. 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 as part of an exit planning strategy, we would welcome the opportunity to talk with you about your business.
Landscapes 2017/GIE+EXPO

We will be attending Landscapes 2017 and the GIE+EXPO in Louisville from October 18-20.  We will be at m,any events during the conference, including Breakfast with Champions both days.  We will presenting a session entitled "Finish on Top: Make a Game Plan for the Sale of Your Business" at 1:30 pm on Friday at the Expo Center.  We hope to see you there.


Recent Transactions
The following merger & acquisition transactions among lawn and landscape companies have been recently reported:

TruGreen has acquired Lawn Dawg in New England and New York and Turfmasters in Connecticut.  More information

Coast Landscape Management, based in Napa, California, and Signature Landscapes, based in Reno, Nevada, have received a private equity investment and plan to merge  More information

Brightview Landscapes has acquired Gurard Environmental, based in Florida.  More information

Kellermeyer Bergensons has acquired Varsity Facility Services  More information

Sweeping Corporation of America has acquired Reilly Sweeping More information

SiteOne Landscape Supply has acquired South Coast Supply in California.  More information

International Transactions

Advancer Global has agreed to acquire Envirocare in Singapore.  More information

Gristwood & Tom has acquired Foremost Tree Surgeons in the United Kingdom. More information

Advancer Global has agreed to acquire Envirocare in Singapore.  More information.

Nurture Landscapes has acquired The Frost Group's Landscape Maintenance Operations in the U.K.  More information.

Do You Know Your Value Builder Score?
Do you know if you have a business that is both valuable and sellable?  Find out now by getting your Value Builder Score.  Click here for more information and to get your score.

Notice: 
The information included in this newsletter is derived from publicly available sources. Our intent is to give a perspective on the industry taken as a whole. The inclusion of a transaction in this newsletter does not imply that The Principium Group acted as an advisor to either of the parties to the transaction. It is the policy of The Principium Group always to maintain the confidentiality of its client relationships. For those transactions in which The Principium Group did play a role, the information included herein is still limited to that available through public sources.
It's time to register for Landscapes 2017 and the GIE+EXPO in Louisville, KY October 18-20, 2017. We'll be there.

Notice: 
The information included in this newsletter is derived from publicly available sources. Our intent is to give a perspective on the industry taken as a whole. The inclusion of a transaction in this newsletter does not imply that The Principium Group acted as an advisor to either of the parties to the transaction. It is the policy of The Principium Group always to maintain the confidentiality of its client relationships. For those transactions in which The Principium Group did play a role, the information included herein is still limited to that available through public sources.
Principium Group, 763 Walnut Knoll, Suite 6, 38018, Cordova, United States
You may unsubscribe or change your contact details at any time.