Landscape Industry

Mergers & Acquisitions

2014

Ron Edmonds

$50 Plus Billion Industry is

Highly Fragmented

Top Four Companies Have

Only a 6% Market Share

Top Four Companies

• The Brickman Group

• ValleyCrest

• Davey Tree

• TruGreen Landcare

Top Four - Ownership

• Brickman - KKR

• ValleyCrest - MSD Capital

• Davey Tree - Employees & ESOP

• TruGreen Landcare - Aurora

Resurgence

Regional/Inter-Regional

Players

• $50-150 million

• Usually in one region

• Some have operations in

multiple regions

Regional/Inter-Regional

Players - Examples

• Ruppert (Mid-Atlantic, Southeast)

• Gothic (CA, TX, West)

• The Groundskeeper (AZ, NV, NM, TX)

• Yellowstone (GA, FL, TX)

• Others

Local & Regional

• $7.5 - $50 million

• Estimated 200 plus companies

• Varying ownership

• Some "below the radar"

Local• $1 - $7.5 million

• Usually founder owner

• 100s of companies

• Significant number of underperforming

and/or plateaued businesses

• Significant acquisition opportunities

Small Local

• Under $1 million

• Usually highly dependent on

owner/operator

• 1000s of companies

• Usually poor acquisition targets

Valuation • Typical range of 2 to 5 times

adjusted EBITDA, mostly 3-4

• Depends on size, business

mix, systems, working

capital, capex

requirements, profitability and

growth prospects, synergies

Valuation

• Mostly pretty disciplined

• Valuations are often not

exciting to sellers (Example:

$400 annual cash flow

produces $800k to $2 million

valuation pretax)

Best Opportunities

• Sellers with a reason to sell

• Age, health, family issues, just

sick of it

Current M&A Activity

• Highest activity in the last six

years

• Buyers seeking opportunities

as the economy &

construction revives

Current M&A Activity• Brickman transaction has

brought the industry attention (If KKR thinks it is a good

investment…).

• Significant private equity

interest

Current M&A Activity

• Backlog of potential sellers

due to low level of activity

during recession

Current M&A Activity

• Still neither a buyers' or

sellers' market.

• Buyers are generally highly

disciplined, especially as it

relates to valuation

Industry Headwinds

• Immigration reform

• Minimum wage increase

• Obamacare

Industry Headwinds

• Rising interest rates

• Political gridlock

• Risk of economic downturn

Minimum Wage Increase

0

2

4

6

8

10

12

Current President Obama's Proposal

Immigration Reform

Building Value

• Grow profits

• Move the multiple

Growing Revenue & Profits

• Organic growth

• Acquisitions

• Not a simple decision which is

best

Why Acquisitions Fail

• Overpaying due to competitive

issues or pressure to grow

• Inadequate due diligence

• Inadequate integration plan

• Poor execution

Our Forecast

• Continued industry growth at

reasonably strong levels in

most markets for the next 3-4

years.

Our Forecast

• Strong M&A activity for at least

the next two years.

• Multiple private equity

investments in the industry.

Our Forecast

• Large industry players will be

aggressive buyers again.

• Some regional/inter-regional

players will grow significantly

and rival the national players.

“This is a very interesting

time for green industry

mergers and acquisitions.”

Ron Edmonds

888-229-5740

ron@principiumgroup.com