We tapped green industry mergers and acquisitions expert Ron Edmonds to get an update on the consolidation activity in the landscape market.
LM: How would you characterize the level of interest and activity among all buyers when it comes to the landscape industry?
Ron Edmonds (RE): The level of interest among buyers is at a very high level. This phenomenon is mostly across the board, including private equity, regional companies and local companies. The only missing thing right now is serious activity from BrightView, as the largest commercial landscape company. I expect that will develop soon. I know they are looking at opportunities.
LM: How about private equity buyers, specifically?
RE: There is a high level of interest among private equity buyers, both those with existing investments seeking add-on acquisitions and companies seeking platform investments.
LM: Do you see this level increasing or decreasing over the next year?
RE: I see it likely to increase somewhat as new players begin an active acquisition program. This will probably stimulate activity from companies wanting to take advantage of acquisitions and those that will need to do some acquisitions to protect their turf, avoiding losing out on desirable acquisitions or losing ground to larger competitors.
LM: What types of companies are they looking for?
RE: The interest is probably strongest in the Southeast, South Central and Western states right now. There is emerging interest in the Midwest. The interest is strongest with the larger companies. For most private equity companies, a platform investment would need to be $15 million to $20 million or higher in revenue. That limits the playing field a lot, so companies that meet their size and business parameters are going to be well received. I see there being some improvement in market sectors that haven’t had much action in the past. The market for maintenance businesses in the $5 million range is pretty good. For smaller businesses, residential and design/build oriented, the market is weaker. I think residential services could become very attractive. The market for design/build will remain limited for the most part, but there is some activity in that sector. The biggest challenge that business buyers face is a lack of businesses of any size for sale with realistic price expectations. Valuations are not exciting and most actual sellers are pursuing a sale because they have a reason to.
LM: Is this a trend people should pay attention to, even if they aren’t thinking of exiting anytime soon? Why or why not?
RE: Certainly, business owners should pay attention. For one thing, the business sales market is cyclical. It’s pretty good right now, and I think it’s likely to stay strong for the next two to three years, but it’s very hard to predict the future. An economic downturn would have a serious impact. Rising interest rates may have some impact. The biggest issue right now is the availability of cost-effective labor. If minimum wages rise significantly or the immigration scenario is even more hostile, the impact on business sales could be significant. Many business owners considering selling their business cite the availability of labor as a big motivator for them. Buyers definitely are paying attention to that issue and at some level, it may discourage them. Sellers whose plans involve exiting in the next five years or so should pay close attention now and consider their options carefully.
LM: Are there any other types of buyers we should be paying attention to, such as facility management companies or others?
RE: Facility management companies are active in the market, including both companies that were born from the landscape industry (like Merit Service Solutions) and others that have always been an intermediary. That’s not likely to be an enormous part of the market, but it will continue to be a factor. Snow removal is a hot topic today and is getting more interest from buyers than in the past. I think that’s partly because of the way Brickman touted its snow business in connection with its sale a couple of years ago. That glow may wear off if we have a couple of poor snow years in a row.
Private Equity Investment in the Landscape Industry
| Target | Sector | Investor | Type | Status | Original Date | Exit Date |
| The Brickman Group | Landscape Services | Leonard Green & Partners | Private Equity | Exited | 2006 | 2014 |
| The Brickman Group | Landscape Services | CIVC Partners | Private Equity | Exited | 1998 | 2006 |
| The Brickman Group | Landscape Services | Banc One Investment Management | Private Equity | Exited | 1998 | 2002 |
| The Brickman Group | Landscape Services | KKR | Private Equity | Active | 2014 | |
| The Brickman Group | Landscape Services | MSD Capital | Family Office | Active | 2014 | |
| The Dwyer Group (The Grounds Guys) | Landscape Franchise | Landscape Franchise | Private Equity | Active | 2014 | 2014 |
| Environmental Pest Service | Lawn Care + Pest Control | Concentric Equity Partners | Private Equity | Active | 2010 | 2010 |
| Girard Environmental Services | Landscape Services | NorthCreek Mezzanine | Mezzanine | Active | 2011 | |
| Green Leaf Landscaping & Irrigation | Landscape Services | SCG Partners | Family Office | Active | 2015 | 2015 |
| Intermountain Total Facility Services (Turf-It Landscaping) | Landscape Services | Succession Capital | Private Equity | Active | 2015 | |
| LandCare | Landscape Services | Aurora Resurgence | Private Equity | Active | 2011 | |
| Landscape Workshop | Landscape Services | McKinney Capital | Family Office | Active | 2012 | |
| Lawn Doctor | Lawn Care Franchise | Levine Leichtman | Private Equity | Active | 2012 | |
| Lawn Dawg | Lawn Care | Brighton Partners | Private Equity | Active | 2009 | |
| Lawn Dawg | Lawn Care | Tenth Street Capital | Mezzanine | Active | 2009 | |
| Massey Services | Lawn Care + Pest Control | AEA Investor | Mezzanine | Active | 2012 | 2012 |
| Merit Service Solutions | Landscape Services | L2 Capital | Family Office | Active | 2011 | |
| Reliable Property Management | Landscape Services | Private Capital Management | Private Equity | Exited | 2002 | 2015 |
| Rotolo Consultants | Landscape Services | Triangle Capital | Mezzanine | Active | 2015 | |
| Signature Landscape Services | Landscape Services | One Rock Capital Partners | Private Equity | Active | 2015 | |
| Somerset Landscape | Landscape Services | Tregaron Capital | Private Equity | Active | 2014 | |
| Terracare Associates | Landscape Services | Progress Equity | Private Equity | Active | 2009 | |
| Terracare Associates | Landscape Services | Patriot Capital | Private Equity | Active | 2009 | |
| Terracare Associates | Landscape Services | Harbert Mezzanine Partners | Mezzanine | Active | 2009 | |
| TruGreen | Lawn Care | Clayton Dubilier & Rice | Private Equity | Active | 2007 | |
| ValleyCrest | Landscape Services | MSD Capital | Family Office | Exited | 2006 | 2014 |
| Yellowstone Landscape Group | Landscape Services | Gridiron Capital | Private Equity | Exited | 2008 | 2015 |
| Yellowstone Landscape Group | Landscape Services | Brookside Mezzanine Partners | Mezzanine | Exited | 2013 | 2015 |
| Yellowstone Landscape Group | Landscape Services | CIVC Partners | Private Equity | Active | 2015 |
