Is 2012 the time for you to make a strategic purchase (or sale)? Read on to find out.
The right acquisition can strengthen your landscape company and help buoy it through a still-stormy economy. And a well-timed sale can position you for future success in another arena. We caught up with owners from around the country who have recently closed successful purchases to ask them how – and why – they did it. Read on to see if a purchase (or sale) is right for you.
Do I or Don't I? Whatever side of the table you’re sitting on, you’re likely to have a lot of questions: What are the benefits? How did the transaction process unfold? What all did the participants get out of the deal?
These were just some of the questions Kris Ashby, owner of Elite Landscaping in Pleasant Grove, Utah, began asking himself before his very first transactions in 1999 and 2003.
“I sold my company to a larger one back, then bought back their maintenance division a few years later,” he says. “Through the years, I’ve looked at plenty of options which I thought might help my business grow. But that process really helps you identify what your needs are.
Ashby recently purchased Spectrum Landscaping in the Park City, Utah, area. But it had little to do with the fact that he was good friends with the former owner and more to do with how he felt the company identities were as complimentary as the geographic areas were different.
“I bought at the backside of our mountain range with some thought that (residents there) didn’t think folks from the front side of the mountains could service their needs correctly,” Ashby says.
Spectrum Landscaping now has 10 full-time employees; Ashby works out of a Park City office two days a week. With an eye on market share, “acquisitions make sense for harder markets to break into,” Ashby added. When asked about the economic impact, he adds, “I can tell you it has paid off big time. I’m glad I did it. It has made a big difference in our business.”
All natural. Dean Burhoe, principal and COO of Connecticut-based Burhoe Landscaping & Yard Service – now part of the Yard Group through a partnership acquisition – agreed that doing all of the legwork to see what a company is buying into can bring growth and stabilization in a difficult economy.
Growth opportunities can be difficult if you’re starting from scratch with expanding existing business or growing new offerings on your own, he says. Acquisitions offer a lot in a deal: more customers, new territory, new markets, and reduced competition are often among the benefits.
“Acquisition is great to expand the customer base, fortify your operations and sell your services to a wider range of clients,” Burhoe says. “Any company brings with it a new customer base. Growth and stabilization is not going to come from status quo.”
“Growing a business when the good, old-fashioned marketing route isn’t working, and there’s limited cash flow to aim at your existing customer base – when it may not necessarily spend any more with you than they are already-marketing not working – well, that’s a great way to acquire new footholds in the marketplace.”
“There are always transition issues,” Burhoe says. “Always personality differences, slightly different business cultures and business philosophies to sync up, but if you’ve done your homework, you usually find out way before the contract stage if they’re a compatible fit or not.”
Be ready for a rollercoaster. Jeremy Durgan, co-owner of Green Earth Landscape Services in the Florida panhandle has been a part of a number of acquisitions, recently acquiring the LandOpt license rights for the Santa Rosa market.
Broadening the customer base was the goal, but the assimilation of cultures helped with ease of operations at other Green Earth locations because their processes and systems were identical.
“What I’ve gotten out of (acquisitions) is experienced knowledge,” he says. “It really is priceless information and there’s really no book you can buy to do this sort of thing.”
To a first-time buyer or seller, the amount of information can be “overwhelming” according to Durgan.
“And it’s overwhelming because of the number of ways it can be done – the codes, tax laws and rules are endless but so are the possibilities,” he says. “And the ways it can be done are, too.”
Durgan says that he and Green Earth worked through a $2.5 million transaction and “quickly realized that for what needs to be done, it is sometimes more complicated to get one of those deals done than a $100 million deal.”
Durgan advises other potential buyers and sellers to wear a seatbelt and safety harness when they’re ready to neogtiate.
“It can be a real rollercoaster ride from day one to the end, with plenty of ups and downs unless you have every last dime of cash ready to pay out,” he says.
“Financing makes it more difficult, as do tax laws – there is a lot of tax law to know – but it is definitely worthwhile. … My advice is to make sure you have a very smart accountant and a great business attorney to help you through the process and make it work so you don’t get killed financially. Your first acquisition is a bit like having kids,” Durgan says. “After that first one you’re going to be so much smarter going into the next one.”
One-on-one connection. Ashby says the key for successful purchases has been a consistent team, and clear communication with the seller. “With each one of the purchases I’ve done, I’ve used same attorney for the transaction so he understands me, my history and that level of comfort between us is there. It might cost a little more that way, but it’s so worth it.”
“With the last purchase, it took us about six months to get it all together. That first two months was just really feeling the owner out about why he was selling,” Ashby says.
“I wanted to know how it would affect the price, the future of the organization… talking every day for two months leading into the purchase helped immensely with putting the deal and contract together. You want to make sure someone is selling for the right reasons and that there’s not trouble brewing behind it – financial difficulties and so on.”
Ashby says it’s just as important to get familiar with the company history as that “informal personal connection” is when you’re buying.
“It takes a little while before people start opening up to you when you’re buying,” he says. “And they’re not going to come out and tell you they’re in trouble (financially), so building trust is essential.”
The author is a freelance writer based in Cleveland.