An industry insider’s perspective on what the Brickman – ValleyCrest merger means for the industry.
It is indeed a new day in the commercial landscape industry. While there have been a multitude of acquisitions over the last several decades, there has never been anything nearly as important as the recent announcement that The Brickman Group and ValleyCrest will soon be one company. Their merger will create a company with nearly $2 Billion in revenue, in excess of 20,000 employees and a truly national footprint.
Before we leap forward, let's reflect on these two great companies and a bit of their history as independently owned and operated family businesses.
ValleyCrest, the iconic company headquartered on the hill in Calabasas, Calif., was founded in 1949 and led by the Sperber family for 65 years. Burt Sperber, the founder and active chairman of the board until his passing in 2011, is by far the most recognized personality in the landscape business and was truly a pioneer in developing the modern day landscape service business. For anyone fortunate enough to have spent time with Burt, you knew you were in the company of a great man whose passion for the landscape business and the people in his company knew no bounds. ValleyCrest has always had the feel of a true family business, with Burt's son Richard working so closely with him at the helm and influencing a tight-knit culture throughout the company. In 2006, the year the company first reached $1 Billion in annual revenue, ValleyCrest partnered with MSD Capital, Michael Dell's private equity firm, in order to diversify family holdings and secure growth capital to fund the company's continued growth. Richard became chairman of the board and Roger Zino was named as chief executive officer and continued to directly oversee the company's maintenance business. Following the merger, according to statements by the companies, Roger will stay on as vice chairman while Richard will leave the board yet retain some ownership.
The Brickman Group was founded in 1939 by Ted Brickman, Sr. in Chicago, Ill. and like ValleyCrest has been very much a family business. Following in his father's footsteps, Dick Brickman grew the company from a small local business to a multi-regional company with $100 Million in annual revenue by the time he handed the reins to his son Scott. Bucking the trend in many family businesses, Scott took the company through its most rapid phase of growth. Fueled by significant acquisition activity in the latter part of last century and the first decade of this one, Brickman reached approximately $800 Million in revenue before bringing in the first non-family CEO. In 2012, Andrew Kerin was recruited to run the business and Scott Brickman moved to chairman of the board. As to ownership, Brickman has had equity partners for decades, allowing them to provide liquidity to family and other shareholders while also investing in the growth of the company. Most recently KKR acquired controlling interest of Brickman for $1.6 billion from Leonard Green who had held a large stake in the business since their investment some eight years earlier.
Present day. It is hard to fathom no Sperber at ValleyCrest and – presuming the post-merger name of the combined companies will be Brickman – no ValleyCrest landscape business. (Editor's note: Both companies have said the name of the combined companies has not yet been determined.) Anyone who is even a casual observer to the industry, let alone those of us who make their living in it, would know this is a game changer. The fact that these two family businesses will now be one, that there are no members of either family active in the daily operations of the combined entity and that the control lies in the hands of one of the five largest private equity firms in the world, signals that things are changing for the industry as a whole.
So, what does this mean for the rest of the industry, especially those of you who own and operate privately-held competing businesses? In a word, opportunity. Think back to the TruGreen acquisition of LandCare. Prior to the deal, both companies had gobbled up many of the local competitors and once they combined, there was a great deal of fallout, with both employees and customers. This will happen again and likely on a larger scale due to the combined size of the parties this time around. In some markets where ValleyCrest and Brickman are not dominant players, you may see little effect. In most major markets, the effect and opportunities will be many. The combination will create redundancies in these larger markets and cuts will be made. In addition, there will likely be some number of employees and customers who vote with their feet; attrition is always factored into large transactions. The local landscape leaders and the owners who are focused on picking up top talent and new customers will stand to benefit the most from this fallout.
Another opportunity is private equity investment in local leaders nationwide. With some $2.6 billion invested, KKR has shined a beaming light on the green industry and private equity interest in the sector has already increased dramatically. If you want an overview on private equity in the green industry, refer to L&L's March issue for the article entitled, "Wrecking Stereotypes: Private Equity in the Green Industry." Needless to say, there are equity firms already in the space and others looking for a new investment in the green industry. If your business has all the attributes of a platform investment, you will be in high demand.
Now this is purely speculation, but there is no higher rung on the private equity ladder to which KKR could sell Brickman. Therefore, it is entirely possible and even probable that the company will be taken public at some point. Normally, following integration of the two companies and repayment of debt used to finance the acquisitions which enhances equity returns, an initial public offering will occur, resulting in broad public ownership and the spotlight of the public markets. This would result in a level of interest and analysis that has not existed in the space other than when ServiceMaster, one-time parent company of TruGreen LandCare, was publicly traded. Once public, companies have to respond to the demand of Wall Street's desire for growth in revenue and earnings per share. A public player in the green industry could mean an increase in overall acquisition activity industry-wide.
On the other side of the coin, the merger could bring risks for other landscape companies – or in a more positive light, opportunities to improve your business practices. A post-closing Brickman will have unparalleled resources of capital, professional management and experienced talent from which to glean best practices and scale for bargaining power with vendors and customers. If you don’t raise your company's game in all aspects, you will be left behind by this ever- and quickly-evolving industry. While you will certainly be able to leverage your local ownership and relationships, your ability to move and change quickly and deliver world-class service, in order to compete, you will need to learn from what made these two powerhouses so successful. Brickman and ValleyCrest have grown to the top of the industry based on excellent management of people, systems, data, financial reporting and key metrics to name a few.
When Brickman was acquired by KKR, they said their goal was to double their business over the next six years. Once the deal is sealed, they will have done it in just over six months. The new day is here and should prove to be an exciting one for all players in the landscape service industry.
Brian D. Corbett is a managing partner for CCG Advisors.