NEW CANAAN, Conn. – 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 yesterday 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 (to be published in June), BIO and Piedmont grossed $19 million and $30 million, respectively, in 2007, making Yellowstone an instant $50-million industry presence with a footprint that covers Georgia, Texas, Virginia, Tennessee, South Carolina and Florida.
"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. "We're actively engaged in talks with a lot of companies," says Judy Guido, Yellowstone's executive vice president and chief marketing officer. These prospects include both "platform" purchases (multimillion-dollar, full-service companies), as well as "tuck-in" buys, which Guido describes as smaller full-service companies and/or single-service companies (irrigation, lawn care) that can bolster the larger acquisitions' businesses. Yellowstone will focus on acquisitions in the Southeast and South Central United States as well as targets that are green and sustainable companies.
SOUND FAMILIAR? 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
While there are some similarities to LandCare, the strategies aren't exactly the same, insiders explain. "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."
| RELATED LINKS |
March 1998 cover story: Lightning Strikes Twice - Exclusive report on consolidation November 2003 cover story: Consolidation Shake Out - Five years after the mega deals, the winners and losers share what they learned. |
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 entreprenurial nature of most landscape businesses.
Brian Corbett, managing partner for CCG Advisors, an Atlanta-based firm that assists green industry businesses in mergers and acquisitions, sees the Yellowstone deal as a "buy and build" strategy rather than a true rollup. "The typical MO for a private equity firm like Gridiron would be to start with larger companies in big metro areas and help them grow organically or through traditional acquisitions," Corbett says.
Corbett doesn't expect Gridiron to be operating under a "buy and flip" private-equity mentality, but he says 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.
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 mismanagment and poor integration," he says. "If they have that in order, it could survive."
Whether Yellowstone will successfully integrate BIO, Piedmont and additional companies it acquires is yet to be determined, but Guido, who has been involved in more than 80 acquisitions of all sizes, says Yellowstone has a "very specific and carefully thought out strategy" based on her and the other Yellowstone executives' extensive experience. Keys for executing a successful integration, she says, include being open and honest with employees, getting their buy-in and input on operations and ensuring all employees can communicate the company's vision to their customers and suppliers.
In Yellowstone’s case, both BIO and Piedmont will retain their names and become member companies of the Yellowstone Landscape Group. In addition, both firms' management teams will continue to run their businesses. BIO president Robert Taylor and Piedmont co-founders Drew Watkins and Phil Walters are equity partners in Yellowstone. Specific equity percentages were not disclosed, but Gridiron has majority ownership.
LEADING THE WAY. In addition to tapping Guido for her market knowledge, Gridiron selected CEO John Miller and CFO Cork Van Den Handel, both non-green industry hires. Both men have experience in corporate management, with acquisitions and most recently with consulting, Guido says.
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, Corbett says, adding that 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 (PDF).
What this means for the industry is simply more buyers, Corbett says. "It never hurts for a seller to have more buyers," he says, adding that acquisition atmosphere certainly has increased over the last year or so.
Calabases, Calif.-based ValleyCrest, the second largest company in the industry after The TruGreen Cos., has acquired six firms since last May. The Brickman Group, the Gaithersburg, Md.-based third-largest landscape firm, acquired five firms in 2007.
Buyers, especially private equity firms, are looking at maintenance-driven organizations in Sunbelt states, Corbett says. He expects that activity to continue despite a weak economy and drought concerns. The only potential hang-up may be the tight credit market, which could make it difficult for private-equity players to get the financing they need. "Money is tight on the lending side, and that can affect the ability to make deals," Corbett says. "But it's as bad as it can get right now, and Gridiron just closed this deal yesterday, so there are obviously some lenders out there who think it's a good idea for them to be doing what they're doing."