A trio of major players made financial moves in the last quarter of 2013
ServiceMaster details TruGreen spin-off
MEMPHIS, Tenn. – Calling the division a distraction, ServiceMaster’s CEO, Rob Gillette, announced last month that the company would spin-off TruGreen LawnCare as a standalone company by the end of the year.
The separation of TruGreen LawnCare also positions ServiceMaster well for an IPO in the near future.
Effective Dec. 31, TruGreen LawnCare will be a separate company, Gillette said during a third-quarter earnings call in early November.
The remaining ServiceMaster – including the Terminix, American Home Shield, Merry Maids and ServiceMaster Clean brands – will stand as a separate company with revenue of $2.3 billion.
“We have significant opportunities to grow these businesses … into adjacent sectors and new markets,” Gillette said on the call. “TruGreen has been distracting.”
The announcement comes as no surprise – the green sides of ServiceMaster’s business have been performing poorly for several years.
In 2011, the company unloaded TruGreen LandCare, its commercial landscaping division, to another private equity group for $38 million, a fraction of the $250 ServiceMaster paid for it in 1999.
David Alexander, TruGreen LawnCare president, said the separation allows his division to focus on its core problems, namely a drop in customers of around 300,000 over two years, and an inability to retain new customers. He said the company’s goal is to return to 2012 customer levels by the end of next year.
“We still have some upward battles in terms of customer count,” Alexander said on the call.
“We’re not going to build customer count significantly for two or three more quarters. I believe we’re stabilizing customer count.
“We’re to a point we can stabilize, but we’re not at a point where we’re going to build for several quarters. We had some issues serving everyone. We have not provided all-star service to anyone this year.”
The spin-off also positions the new ServiceMaster well for a potential IPO.
“There’s always the idea of a liquidity event somewhere in ServiceMaster’s future,” said Alan Haughie, ServiceMaster’s CFO.
“This brings that liquidity event closer to us, clearly.” Ron Edmonds, an M&A consultant based in Memphis, said the news is promising if it means new ownership of TruGreen, but in the short-term means confusion in the market.
“The problem is that there’s a high level of uncertainty. That’s the worst thing for the industry,” Edmonds said.
“I don’t think anything is improved by what’s just happened.” – Chuck Bowen
Industry M&A experts see Brickman sale as good news
NEW YORK & GAITHERSBURG, Md. – In a move seen as a “game changer” by one industry M&A consultant, private equity firm KKR will acquire the Brickman Group for $1.6 billion from Leonard Green & Partners, L.P. and other shareholders.
“I think it’s great to bring new fresh equity money into the industry. This is a game changer for opening the eyes of private equity in general to the green industry,” said Tom Fochtman, the founder of Ceibass Venture Partners, an M&A consulting firm.
“KKR are professional buyers. This is what they do. They loved what they saw and they are going to make it in their eyes bigger and better. They aren’t going to buy it and just sit pat they are going to build that biz.”
The Wall Street Journal reported Leonard Green bought Brickman in 2007 for approximately $847 million, according to Standard & Poor’s Capital IQ.
More moves coming. While Fochtman says he wasn’t surprised at the amount Brickman sold for, Ron Edmonds, president of the M&A firm Principium, said the valuation is very good, and he expects KKR to acquire more companies sooner rather than later.
“I’d be surprised if acquisitions weren’t a part of their business plan going forward,” he said.
“And that’s something that’s been absent the last few years is we haven’t had the big-boy acquisitions going on, which drove perceptions about the acquisition marketplace. I think I expect them to get back in the acquisition game relatively soon – maybe on a broader scale than Brickman has in recent years.”
Edmonds said there have been significant regional companies making acquisitions, “and that’s really taken the focus away from the large companies, but I’m guessing that will change a bit.”
Contractors across the country should look at this move as a sign of confidence in the industry and the economy as a whole, Edmonds said.
“The industry is growing and there are opportunities to develop,” he said.
“It’s a vote of confidence in the economy as a whole; the construction services sector and landscape services in particular.”
Lanella Hooper-Williams, Brickman spokesperson, said she does not expect to see any changes in the core leadership team, and the sale process went on for a few months.
Brickman CEO Andrew Kerin echoed in a statement what Edmonds and Fochtman said about the deal meaning growth for the company.
“With our partner, we are well positioned to accelerate our growth, further enhance the quality of services we provide to our clients and extend our industry leadership,” he said.
Simon Brown, member of KKR, also said in a statement, “We are excited to invest in the company and look forward to working closely with the Brickman leadership team to continue to build on the company’s market-leading position and grow the business over time.”
Why now? Fochtman said the timing of the sale could be based on the fact that private equity firms usually start looking to move a company after owning it for a certain number of years.
“The thing with equity is that they want to be in five to seven years so this is going to get flipped again down the road,” Fochtman said.
“KKR isn’t staying in it for the long haul. There will be another group in our industry in another 5-7 years from now.”
Fochtman added that economists are predicting a recession in 2018, so KKR may hold on to it through that possible economic downturn.
Fochtman also added that this move will shine a positive light on the industry.
“Having a group like KKR invest at this level tells the business world that we are an industry, not just a – who knows what all everyone thinks of landscape contractors, he said.
“But at a minimum it helps spread the word that mowing lawns is a ‘for real’ way to earn a good living.
“We fight perceptions issues all the time. Enrollments are declining at the horticulture universities and we are being challenged to bring in new, young leaders. The Brickman/KKR transaction can only be positive from that perspective.”
With nearly 10,000 employees nationwide, Brickman serves more than 10,000 clients. The company was ranked third on L&L’s 2013 Top 100 list with revenue of more than $800 million. – Brian Horn
John Deere Landscapes CEO says company expected to grow after sale
MOLINE, Ill. – While John Deere’s sale of its majority interest in the company’s landscapes business to a private equity investment firm means no short-term changes, the move could mean growth for John Deere Landscapes in the future.
“We will have the same people behind the counters and making deliveries to (landscapers) that they had yesterday,” John Deere Landscapes CEO David Werning told Lawn & Landscape. “Long term, we very much hope to add services that we provide them with.”
Deere & Co. agreed to sell a majority interest in its landscapes business in October to private equity investment firm of Clayton, Dubilier & Rice, which also owns TruGreen LawnCare.
“CD&R is clearly interested in growing the business. That’s why they have invested in John Deere landscapes,” Werning said. He added that the business will grow geographically through opening up new stores or through acquisitions.
As a result of the transaction, Deere will receive approximately $300 million in cash and will initially retain a 40 percent equity interest in the business.
“This partial sale allows Deere an opportunity to remain as part of a successful landscapes distribution business,” said James Field, president of Deere’s Worldwide Agriculture & Turf Division.
“At the same time, Deere will continue to increase its own strategic focus on the global growth businesses in agriculture and construction and the complementary businesses in turf and forestry.”
Deere formed the landscapes business in 2001 when it purchased and merged two companies that sold wholesale landscape supplies and irrigation products. Two other acquisitions were later added and now John Deere Landscapes is one of the largest U.S. wholesale suppliers of turf and ornamental agronomics, irrigation, outdoor lighting, nursery and landscape materials.
“For CD&R, it’s wonderful timing because there’s an anticipated improvement in the market place as just the general economy improves,” Werning said.
“For Deere, this is just a continuation of a strategy that they announced a while ago where their focus is core growth of ag and construction. And this allows them to sharpen that focus.”
Werning added there will be no short-term personnel changes because of the move, but said adding employees in the future is a possibility.
“There are definitely no cutbacks,” he said. “This is a change in ownership. This is not a change in management of the company and it’s not a change in direction.
“So what I mentioned before, the customers will see the same employees behind the counter making deliveries that we did before.
“It’s our intentions to grow. It’s our intention to grow and we will add personnel accordingly to match our expansion.”
The deal is expected to be completed this month.
John Deere Landscapes has more than 2,000 employees at approximately 400 locations in 41 states across the country. – Brian Horn
New trade show debuts in February
SCHAUMBURG, Ill. – iLandscape: the illinois +wisconsin Landscape Show is the new trade show and educational experience serving the Illinois, Wisconsin, and Northwest Indiana landscape markets. The show debuts this February 5-7, 2014 at the Schaumburg Convention Center in Schaumburg, Ill.
Along with educational programs, there will be a career fair on Friday, Feb. 7 from 9 a.m.-1 p.m. Prospective employers can take part in the career fair with a reserved table. College and university students are admitted to iLandscape for free if registered through their college or university. To register, visit www.ilandscapeshow.com.
Lambert’s receives national landscape awards of excellence
DALLAS – Lambert Landscape Co. of Dallas is among the Grand Award winners of the 2013 National Landscape Awards of Excellence. Lambert’s received PLANET’s Grand awards for two residential gardens.
Both homes are in Dallas and were undergoing extensive renovations, said Paul Fields, Lambert’s president and senior landscape architect. Below are the photo descriptions from Lambert’s.
A Garden Room (top photo). The spirited, fun-loving owner of the project had a vision for transforming an existing traditional zero lot line garden into an intrinsic modern space for relaxation and entertaining,” Fields said.
To enlarge the outdoor space, the intent was to create a seamless transition between the interior and exterior.
Working closely with the interior designer, Lambert’s was able to carry the vision of a clean, modern style that reflected elements of the client’s favorite vacation destination.
An improper foundation on the stone terrace that was discovered led to the use of materials more appropriate to the new design aesthetic.
A split-face native stone fountain wall with copper scuppers became the focal point from the main living room.
Custom-designed Ipe wood benches helped maximize space, the owner’s swim spa was lowered so that it was flush with the finished grade, and the neighbor’s bare brick wall was transformed by layered evergreen and hardscape walls and custom raised planter beds.
Classic Contemporary Retreat (bottom photo). The clients enjoyed their outdoor spaces daily with family and friends.
“Unfortunately, the existing small loggia terrace, the curvilinear pool and the water feature did not reflect the architecture of the home and were awkwardly located too closely to the home and were out of scale,” Fields said.
The challenges were to build an outdoor space that extended the home’s interior into the outdoors and to create spaces for entertainment of groups as small as friends and family swim parties to large corporate events of 150 people.
The intent of the landscape design was to integrate the new landscape seamlessly into the architecture of the house.
The role of landscape architect evolved into that of an architectural designer in designing everything from the steel structure down to the wood trim of the coffered ceilings in the new loggia.
New incentives for propane
AUSTIN, Texas –The Propane Council of Texas (ProCOT) and the Propane Education and Research Council (PERC) are offering national and statewide incentives for commercial mowers that run on greener, domestically-produced propane autogas.
The Propane Education and Research Council (PERC) offers incentives nationwide for propane mower end-users on select mowers that are 36 to 72 inches in deck size.
Mower operators can receive $1,000 per factory-built mower and $500 per EPA-certified propane conversion.
There is a perpetual cap of 25 incentives per end-user. On the state level, the Propane Council of Texas (ProCOT) offers incentives for commercial propane mower users.
Statewide incentives include $1,000 per factory-built propane mower and $1,000 per EPA-certified conversion, with a perpetual cap of five incentives per entity.
Both the national and the state program offer the incentives in exchange for data on the mowers.
“The statewide and national incentive programs are a great way for landscapers and other commercial mower end-users to experience the benefits of propane autogas,” said Jackie Mason, education and marketing director for the Propane Council of Texas.
“At the same time, we are able to learn more about the performance of the propane units in the marketplace.”
Climbing the ladder