INSIDE THE INDUSTRY

Private Equity-Backed Bio, Piedmont Form New $50-Million Player

Yellowstone Landscape Group aims to be one of the top five revenue-generating companies in the industry.

Marisa Palmieri/Nicole Wisniewski

Ten years after the LandCare USA rollup, private equity firm Gridiron Capital announced its formation of Yellowstone Landscape Group, a new full-service landscape company with an aggressive growth plan.
 
Yellowstone, with headquarters in Dallas, entered the market in late April with the acquisitions of Houston-based BIO Landscape & Maintenance and Atlanta-based Piedmont Landscape Contractors. Amvest Financial Group advised Gridiron on the transaction, of which financial terms were not disclosed.
 
According to figures provided for Lawn & Landscape’s Top 100 list (see Top 100 section), BIO and Piedmont grossed $19 million and $30 million, respectively, in 2007, making Yellowstone an instant $50-million industry presence with a six-state footprint in the Southeast.
 
“Our target is to make Yellowstone a super regional in the short term and eventually be a strong national player,” says Eugene Conese Jr., Gridiron’s managing partner. Specifically, Yellowstone’s goal is to grow to be one of the top five firms in the industry in terms of revenue, Conese says.
 
Achieving that goal will come from helping BIO and Piedmont grow organically as well as through more acquisitions. These prospects include both “platform” purchases (multimillion-dollar, full-service companies) in the Southeast and South Central U.S., as well as “tuck-in” buys, says Executive Vice President and Chief Marketing Officer Judy Guido.
 
Though this is Gridiron’s first entry into the landscape industry as a firm, its partners have made investments here individually, Conese says. What attracted Gridiron to the green industry is its size, fragmentation and history of continual, consistent growth, says Owen Tharrington, a Gridiron principal.
 
That’s not surprising, says Brian Corbett, managing partner for CCG Advisors, an Atlanta-based firm that assists green industry businesses in mergers and acquisitions. Gridiron’s investment confirms what industry leaders have been saying for more than a year: A number of firms in the private-equity world have their eyes on this segment, including technology mogul Michael Dell’s investment firm MSD Capital, which bought majority ownership in ValleyCrest in late 2006.

RING A BELL? Yellowstone’s story sounds familiar to those who have spent more than a decade in the landscape business. In 1998, Houston-based Notre Capital Ventures Group merged seven multimillion-dollar landscape companies to form LandCare USA. After one year of heated bidding wars with TruGreen ChemLawn over acquisitions, LandCare was sold to TruGreen in March 1999, adding $450 million to its $820 million revenue at the time.
 
There are some parallels to LandCare, but the strategies aren’t exactly the same, insiders say. “There are similarities in the sense that we’re going after market-leading platform companies and tuck-ins for growth and we’re looking in growth areas and in areas that are underserved or ill-served,” says Guido, who was one of the four executives involved in taking LandCare public in June 1998 and is also a former executive at both Environmental Industries, now Valley Crest, and ServiceMaster, TruGreen’s parent company. 
 
“Where it is different is we’re starting with a smaller number of companies,” Guido says. “We’re actively engaged in conversations and we want to buy the best companies, but at the same time we don’t want to buy more than we can integrate. We want to grow smartly, cautiously and take the time to integrate.”
 
Integration is always a concern with mergers and acquisitions, business owners say. In a November 2003 Lawn & Landscape story, many of the landscape business owners and industry investors involved in LandCare and TruGreen acquisitions said they thought the lesson from the LandCare days was that rollups could not work in the green industry due to the closely held entrepreneurial nature of most landscape businesses.

ROLLUP? Yellowstone executives are quick to discount the use of the word “rollup,” a term that generally refers to venture capitalists forcing small firms to merge operations to reduce costs. “Nothing could be further from our strategic approach,” says CEO John Miller, a green industry newcomer who has held management and executive roles with GE Capital, FMC Finance Corp. and Bankers Trust Co. Instead, Yellowstone’s approach focuses on providing resources for the platform companies it acquires to grow organically and execute acquisitions that further their service offerings, he says.
 
This strategy is what made the deal right for Piedmont, says the company’s President Drew Watkins. “They wanted to partner with all that Piedmont has represented as a brand,” he says. “From our veteran staff, diverse customer base and state-of-the-art facilities, Piedmont provides Yellowstone a solid foundation on which to build in our markets.” Both Piedmont and BIO are considered “member” companies of the Yellowstone Landscape Group and both firms’ management teams will continue to run their businesses. BIO President Robert Taylor, Piedmont’s Watkins and Piedmont co-founder Phil Walters are equity partners in Yellowstone. Specific equity percentages were not disclosed; Gridiron has majority ownership.
 
BIO’s Taylor agrees with Watkins’ assessment about why this deal was “right.” He adds: “It wasn’t the timing of this transaction – we get calls all the time. It’s the nature of this transaction. I wanted to remain an owner, and they allowed me to have ownership in Yellowstone. The other part is, I’d like to grow, but our company is successful enough now that there’s no reason for me to take a lot of risk by leveraging myself or our company or putting a lot of money into acquisitions. And Gridiron will be putting up money for those types of things.”

EXIT STRATEGIES. Gridiron will likely operate under a “buy and build” strategy rather than “buy and flip” model, Corbett says, noting the private-equity playbook says firms typically hold on to companies for four to seven years before selling them. “They will look to realize their investment through selling at some point,” he says.
 
Gridiron considers itself a “long-term investor,”  Tharrington says.
 
“We’ve held companies for as short as three years to as long as 10 years – it really varies by situation,” he says.
 
The prospect of an investor exit like LandCare’s – an initial public offering – is not currently something Gridiron is considering, Tharrington says. “To be a public company these days is cost prohibitive unless you have significant scale to make it worthwhile.” Gridiron’s exit will more likely be a sale to a financial or strategic (inside the industry) investor, he says. “Our plan is not to acquire companies for the sake of making an acquisition or to meet growth projections. Any acquisition we pursue will need to have strategic value to the overall vision for Yellowstone. We are not looking for a quick flip; we’re building something of value over the long term.”
 
Ed Laflamme, a Connecticut-based industry consultant who sold his business to LandCare in 1999 believes Yellowstone has the potential to be successful. “What failed some of the companies in the past was the mismanagement and poor integration,” he says. “If they have that in order, it could survive.” LL

Proposed Blower Ordinance Abandoned

Elected officials in Stamford, Conn., tabled legislation that would have required landscape contractors to purchase quieter leaf blowers with labels certifying their noise output was 65 decibels or less, according to reports.
 
At a public hearing, local landscape contractors voiced their concerns about the proposed ordinance.
 
“I agree it would be nice if we had a quieter solution (for leaf blowers,” Stamford landscape contractor Steve McDermott told The Stamford (Conn.) Times. “But I don’t know why landscapers are being singled out.”
 
The proposed ordinance did not require homeowners to use quieter equipment, and was part of the reason why local officials tabled it, according to reports. Officials do not expect the noise ordinance regulating leaf blowers to come before them again in the near future.

GIE+EXPO Announces Concert Lineup 

Get ready for a rocking good time as 38 Special, LoneStar, The Briggs Bluesbusters and Candy Coburn hit the stagevat the 2008 GIE+EXPO (Green Industry & Equipment Expo). These free concerts will be held at 4th Street Live! in downtown Louisville.

The GIE+EXPO is set for Thursday, Oct. 23 – Saturday, Oct. 25 in Louisville, Ky. It is sponsored by the Outdoor Power Equipment Institute, (OPEI); Professional Landcare Network (PLANET) and the Professional Grounds Management Society (PGMS).

On Oct. 23, The Briggs Bluesbusters will open the concert at 6:30 p.m. This Briggs & Stratton house band has 11 members (eight are company employees) including John Shiely, chairman, president and CEO, as rhythm guitarist. For the main event, 38 Special takes the stage at 8 p.m., presented by
Briggs & Stratton.

On Oct. 24, up-and-comer Candy Coburn will open the show at 7 p.m. with what has been called her “Southern Soul Rockin Country” sound. LoneStar will headline the Friday night concert starting at 8:30 p.m., presented by Ariens/Gravely/Stens.

L&L Staff Wins Writing, Design Awards

Lawn & Landscape, the leader in business management coverage of the professional lawn and landscape industry, is pleased to recognize our staff members who recently received writing and design awards from the Turf & Ornamental Communicators Association, a national green industry association for editors, designers and professional communicators based in New Prague, Minn.
 
Nicole Wisniewski, deputy editor, received a merit award for her operations profile on Yard Apes of New Milford, Conn. The article was the January 2007 cover story.
 
Marisa Palmieri, senior editor and Heather Wood, Web editor, received a merit award for their online coverage of the H-2B quandary.
 
Mark Rook, creative director, received a merit award for his two-plus page design, “Blown into Proportion” appearing in May 2007.
 
Karen Angus, art direct, received a merit award for the Fall 2007 cover design of Lawn Care Professional, sister publication to Lawn & Landscape.
 
Congratulations to our team. – Cindy Code