The move could make private equity firms more interested in the industry.
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 around $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 what Edmonds and Fochtman said about what the deal means.
“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, said, "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 private equity firms usually start looking to move a company between five and seven 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. 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 said, adding that economists are predicting a recession in 2018, so KKR may hold on to it through that possible economic downturn.
Fochtman 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 $821 million.