After making 20 acquisitions between 2010 and 2014, Davey Tree took a breath in 2015 and 2016, but will again be looking to grow through M&A in 2017.
“We had to take a step back and make sure everything was functioning correctly,” says Pat Covey, president and COO of the company, which ranks third on lawn & Landscape’s Top 100 list with 2015 revenue of more than $820 million. “It’s good to take a little pause.”
Covey says one word to describe the company’s approach to M&A for the end of this year and into 2017 is “prospecting,” with deals expected.
Lawn & Landscape caught up with Covey during a visit to Davey Tree’s headquarters in Kent, Ohio last week and learned some tips on how to approach M&A.
Form a relationship. Aside from looking at the nuts and bolts of a deal like financials, Covey says the first action executives take when investigating an acquisition is meeting with the owner. Getting to know the owner on a personal level gives good insight into how the company is run and how the employees approach the job, Covey says. “Nine times out of 10, the company follows the seller,” he says. Some acquisitions take more than three years, and a good chunk of that time is the two parties becoming comfortable with each other. “Every seller has different reasons they’re selling,” Covey says. “Getting to why they want to sell the business is important.”
Do the simple research. Doing something as easy as looking at a company’s website or driving by after they have completed jobs can give you a good idea on the company culture and how employees serve customers. Pay attention to how the uniforms are maintained, if employees even have uniforms, and keep an eye on how the trucks are maintained.
Ask for referrals. Being the president of a company that employs more than 8,000 people, Covey can't be intimately involved in every transaction. He will reach out to local managers and ask who is a good competitor in their area. Covey then will send a letter to the competitor to gauge their interest on selling. Even if he doesn’t hear back, he’s at least planted a seed for when the competitor is ready to sell.
Don’t kill the brand. A company doesn’t always have to change branding to Davey, and it usually doesn't, especially if the brand is doing well. “We’re maintaining the name for as long as it makes sense,” he says. Coveys says Davey tends to let the acquired company keep its branding with the addition of “A Davey Company” added to it. He adds that there is no set time to know when the acquired company should change completely to the Davey brand.
Don’t look for the perfect match. Covey says it’s rare that a company will knock off every box on your checklist, which isn’t a bad thing. Sometimes if the seller is weak in areas where Davey is strong, it’s almost better because Davey can mold them to fit with Davey. However, safety record is a prime concern of Davey when considering an acquisition, and if the seller’s approach to the issue is different than Davey’s, Covey says that’s tough to overlook. “It’s hard to change a poor safety culture,” he says.
Keep it quiet. Covey says it’s always best if the seller keeps the sales talk quiet with maybe only a few key employees knowing. Any word leaking could cause a stir among employees, which might delay or stop the deal.