MEMPHIS, Tenn. – The green industry’s first national landscape firm, created 12 years ago in an unprecedented and high-value merger, will be sold later this week at a fire-sale price to a private equity firm.
Aurora Resurgence, part of a $2 billion Los Angeles-based investment firm, should close on its purchase of TruGreen LandCare by April 30. The deal has Aurora buying ServiceMaster’s landscape division for $38 million – a fraction of the $250 million ServiceMaster paid for it in 1999.
ServiceMaster, TruGreen LandCare’s parent company, bought LandCare USA amid a period of heavy mergers and acquisition activity for the green industry, and less than a year after the newly formed company went public.
During that timeframe, TruGreen – which had seen major success in turning around underperforming lawn care companies – acquired a dozen landscape firms, but never realized the same gains on the maintenance and construction side of the business.
When combined, TruGreen and LandCare USA had revenue of more than $400 million, but ServiceMaster struggled to integrate its many acquisitions into a cohesive business, and the LandCare division has in recent years lost value. From 2008 to 2010, revenue dropped $78 million, to $238 million.
In 2010, TruGreen LandCare reported a 9 percent drop in revenue, to approximately $238 million. In 2009, the company posted revenue of $262 million and $316 million in 2008. The landscape division makes up about 7 percent of ServiceMaster’s total revenue. TruGreen LandCare employs 4,200 people in 60 branches across 38 states.
ServiceMaster said the deal would have no impact on its lawn care division, TruGreen LawnCare. The TruGreen Cos., which include both the lawn care and landscape divisions, was listed as the largest company in the green industry on Lawn & Landscape’s 2010 Top 100 list with revenues of $1.3 billion.
Stephen Donly, president of TruGreen, said the sale will create significant opportunities for his company.
"In the past, certain important customers may have viewed TruGreen as a competitor since LandCare was a sister company," Donly said. "This is no longer an issue for us. We are more focused than ever on building our commercial fertilization and pest control business, and we look forward to growing our commercial services dynamically for a long time to come."
NEW INVESTMENT. The sale, which had been hinted at since last November, brings another private equity player into the mature landscape industry.
The Memphis Daily News quotes Aurora managing partner Anthony DiSimone as saying TruGreen LandCare’s executive team – including Mac McIlvried, acting president – will remain in place for now.
“We are pleased to partner with TruGreen LandCare and its experienced management team, led by Mac McIlvried,” DiSimone said in a release. “We are very excited about the company’s growth prospects as well as its ability to continue to deliver outstanding service to its customers and provide great opportunities for its employees.”
Aurora declined further comment.
Ron Edmonds, president of the M&A firm Principium, said the move by Aurora could bode well for the industry at large.
“We have a new player in the market that may be an acquirer. Certainly, TruGreen LandCare hasn’t made any acquisitions in years. I see that as a positive to the market,” Edmonds said. “It’s also another vote from the private equity community, indicating that they believe there’s strength in the industry.”
Brian Corbett, principal at CCG Advisors, echoed Edmonds’ comments.
“Owners of landscape maintenance companies of all sizes should be encouraged by Aurora’s vote of confidence in TruGreen – a company that despite considerable struggles has remained one of our industry’s most recognizable brands,” he said. “While private equity firms have been invested in the landscape industry for many years, we expect that this significant expansion of institutional capital in the landscape sector will invigorate M&A activity over the long term.”
In recent years, private investment firms have pumped cash into some of the industry’s largest companies. ValleyCrest, Calabasas, Calif., listed at No. 2 on Lawn & Landscape’s Top 100 list at $940 million, the Brickman Group, Gaithersburg, Md., $687 million, and Yellowstone Landscape Group, listed at No. 11, $81 million, are all backed by private capital.
Robert Taylor, president, Yellowstone Landscape Group South Central said he expected many large regional companies would be interested in purchasing parts of TruGreen LandCare if Aurora would part it out.
“For our industry, it’s nothing but good. Any private equity play In the green industry is positive for our industry,” Taylor said. “I’m interested to see if Aurora keeps it together, or pulls it apart. … I’m extremely interested to see how it goes.”
He wouldn’t confirm if Yellowstone was included in that group, or that the company had been among those bidding for the whole thing.
HISTORY. The company that became TruGreen LandCare grew out of a then-unprecedented merger of seven multi-million dollar regional landscape companies in 1997. When it formed, Houston-based LandCare USA had revenue of approximately $120 million and was the largest national landscape maintenance firm in the industry.
Before buying LandCare USA, TruGreen-ChemLawn acquired a dozen landscape firms, including The Ruppert Landscape Co., Northwest Landscape Industries, Minor’s Landscape Services and Lifescapes. In the nine months between its IPO and sale to ServiceMaster, LandCare USA acquired 20 companies and grew to an estimated $237 million in revenue.
“It really validated our industry for a lot of people. Wall Streeters didn’t know up until then the opportunity and value of the green industry,” said Judy Guido, who served as chief marketing officer for LandCare USA and was involved in the IPO. “That said a lot. It validated our space to the financial community. It validated our industry.”
The sale of its landscape division allows TruGreen to focus on lawn care, which has historically been a stronger segment for the company. “Our decision to sell to Aurora Resurgence allows us to concentrate on our core residential and commercial businesses,” Hank Mullany, chief executive officer of ServiceMaster, said in a release.
According to filings with the SEC, LandCare’s drop in revenue included a 9.7 percent decrease in base contract maintenance revenue and a 10 percent decrease in enhancement revenue. The company cited “contract cancellations and pricing concessions in 2009 and 2010 in response to the impacts of a difficult economic environment” as the causes.
The filings go on to cite “labor inefficiencies created by labor shortages in certain markets and key executive separation charges, offset, in part, by reduced fuel and health care costs and the favorable impact of acquiring assets in connection with exiting certain fleet leases.”
ServiceMaster announced in November of 2010 that it was considering a sale of TruGreen LandCare. According to SEC filings, the company determined in the first quarter that “TruGreen LandCare did not fit within the long-term strategic plans” of its parent company.
The author is editor and associate publisher of Lawn & Landscape magazine. Email him at email@example.com.
TruGreen LandCare by the numbers:
Locations: 60 branches in 38 states and Washington, D.C.
2010 revenue: $238,508,000