Landscape Industry Mergers & Acquisitions 2014
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Landscape Industry
Mergers & Acquisitions
2014
Ron Edmonds
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$50 Plus Billion Industry is
Highly Fragmented
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Top Four Companies Have
Only a 6% Market Share
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Top Four Companies
• The Brickman Group
• ValleyCrest
• Davey Tree
• TruGreen Landcare
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Top Four - Ownership
• Brickman - KKR
• ValleyCrest - MSD Capital
• Davey Tree - Employees & ESOP
• TruGreen Landcare - Aurora
Resurgence
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Regional/Inter-Regional
Players
• $50-150 million
• Usually in one region
• Some have operations in
multiple regions
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Regional/Inter-Regional
Players - Examples
• Ruppert (Mid-Atlantic, Southeast)
• Gothic (CA, TX, West)
• The Groundskeeper (AZ, NV, NM, TX)
• Yellowstone (GA, FL, TX)
• Others
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Local & Regional
• $7.5 - $50 million
• Estimated 200 plus companies
• Varying ownership
• Some "below the radar"
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Local• $1 - $7.5 million
• Usually founder owner
• 100s of companies
• Significant number of underperforming
and/or plateaued businesses
• Significant acquisition opportunities
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Small Local
• Under $1 million
• Usually highly dependent on
owner/operator
• 1000s of companies
• Usually poor acquisition targets
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Valuation • Typical range of 2 to 5 times
adjusted EBITDA, mostly 3-4
• Depends on size, business
mix, systems, working
capital, capex
requirements, profitability and
growth prospects, synergies
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Valuation
• Mostly pretty disciplined
• Valuations are often not
exciting to sellers (Example:
$400 annual cash flow
produces $800k to $2 million
valuation pretax)
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Best Opportunities
• Sellers with a reason to sell
• Age, health, family issues, just
sick of it
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Current M&A Activity
• Highest activity in the last six
years
• Buyers seeking opportunities
as the economy &
construction revives
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Current M&A Activity• Brickman transaction has
brought the industry attention (If KKR thinks it is a good
investment…).
• Significant private equity
interest
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Current M&A Activity
• Backlog of potential sellers
due to low level of activity
during recession
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Current M&A Activity
• Still neither a buyers' or
sellers' market.
• Buyers are generally highly
disciplined, especially as it
relates to valuation
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Industry Headwinds
• Immigration reform
• Minimum wage increase
• Obamacare
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Industry Headwinds
• Rising interest rates
• Political gridlock
• Risk of economic downturn
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Minimum Wage Increase
0
2
4
6
8
10
12
Current President Obama's Proposal
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Immigration Reform
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Building Value
• Grow profits
• Move the multiple
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Growing Revenue & Profits
• Organic growth
• Acquisitions
• Not a simple decision which is
best
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Why Acquisitions Fail
• Overpaying due to competitive
issues or pressure to grow
• Inadequate due diligence
• Inadequate integration plan
• Poor execution
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Our Forecast
• Continued industry growth at
reasonably strong levels in
most markets for the next 3-4
years.
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Our Forecast
• Strong M&A activity for at least
the next two years.
• Multiple private equity
investments in the industry.
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Our Forecast
• Large industry players will be
aggressive buyers again.
• Some regional/inter-regional
players will grow significantly
and rival the national players.
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“This is a very interesting
time for green industry
mergers and acquisitions.”