Scotts Makes Biggest Purchase to Date

When Mark Long, vice president of business development at Scotts Lawn Service, was quoted in the February 2001 issue of Lawn & Landscape saying the company could grow to $130 million in annual sales by 2004, many industry observers scoffed. But the company has accelerated an already aggressive acquisition plan, announcing the purchase of Massachusetts' leading lawn care firm, The Lawn Co.

This deal comes just weeks after Scotts LawnService acquired J.C. Ehrlich Co.'s multi-million-dollar lawn and tree care division in Reading, Pa. This deal gives Scotts LawnService company-owned operations in 35 markets, 30 of which are in the top 100 lawn care service markets in the country, according to the firm. And that's not including the 46 markets served by the company's franchises.

But that doesn't mean that Scotts LawnService is making acquisitions based solely on market area, and Long used The Lawn Co. as an example to explain this point. "We do have a list of cities we are targeting," he said, listing a few of the company's major city targets in the Midwest and East, including Columbus, Detroit, Chicago, Indianapolis, St. Louis, Baltimore, Washington, D.C., and Providence, R.I. "But if a good company calls from a different region, we will consider it as an acquisition. The Lawn Co. is the perfect example. Most of the business The Lawn Co. does is in Cape Cod, with a very small percentage of its business in Boston. We didn't have the company on our list because of the city it's in and Cape Cod wasn't a target market for us, but The Lawn Co. has a fantastic reputation for service and has a solid organization of people, so it worked out."

"The Lawn Co. transaction demonstrates our continued commitment to Scotts LawnService and our belief that this business is critical to our overall profitable growth," added James Hagedorn, president and chief executive officer of The Scotts Co. "Our recent acquisitions keep us on target with our long-term goal of having a substantial presence in the top 100 lawn service markets within the next several years."

Scotts LawnService, which nearly doubled its 2000 revenue when it reported 2001 revenue of $42 million, already moved into Memphis, Charlotte, Dayton and Milwaukee via acquisitions in 2002. And there's little reason to think Scotts LawnService plans on slowing down.

"By leveraging the strength of the Scotts brand, we are appealing to the increasing numbers of consumers who want great results in their yard, and to have the work done for them," explained Tony Colatrella, senior vice president of Scotts. "Our industry-leading customer satisfaction and retention levels are due to the high quality results produced by Scotts products and our ongoing commitment to customer service."

According to Long, Scotts LawnService is at the peak of the selling season and is adding 3,000 to 4,000 clients per week, in addition to making continued acquisitions. "At this point, if I took a snapshot of all the customers we have right now, our corporate operation is at $60 million," he said. By Sept. 30, the end of Scotts LawnService's fiscal year, Long projects that the company will have $80 million in corporate revenue and $15 million in franchise revenue, totaling more than $95 million.

When asked whether he worries about the company falling victim to the many challenges associated with rapid growth, Long said his biggest concern is employees. "If I take a look at our organizational chart - from branch managers to the top of the organizational chart - nearly one-third of those folks came to us through acquisition," Long said. "One of the more primary benefits of aquiring a company is acquiring the good group of employees that come along with it. And though people fear change somewhat, our first priority after acquisition is making these new people feel comfortable with Scotts. We show them the opportunities they have with us, and once the message is accepted, we typically don't have too much of a problem retaining these people."

Hiring enough people to support growth has been easier this year, Long said, attributing that partly to the high unemployment rate. "In some markets, we're 100 percent to where we want to be in terms of staffing - in others, we're still building," he said.

Scotts' stock closed Thursday, Mar. 14, at $46.81 a share, slightly below its 52-week-high of $48.99, which it achieved last month.