Breaking News: Feb. 2001, Deere Acquires McGinnis Farms

ALPHARETTA, Ga. - John Deere’s acquisition of irrigation distributor and nursery supplier McGinnis Farms may be the most interesting industry acquisition of the last 10 years. This is not one manufacturer buying another or one company purchasing market share. Quite the contrary, in fact.

This is one of the biggest names in equipment manufacturing breaking loose from the shackles of conventional wisdom and building a new business paradigm. Coupled with its acquisition of mower manufacturer Great Dane Power Equipment (see Breaking News: Deere Makes Acquisitions, Lawn & Landscape, January 2001) and McGinnis Farms’ recent acquisitions of Jenco Wholesale Nursery and Pipe N’ Heads in the irrigation industry, this deal seems to be a clear and bold declaration that Deere is committing itself to the professional landscape industry.

“This is an expansion of our focus on the landscape industry,” confirmed Dave Werning, who was director of business development for John Deere and will function as president of McGinnis Farms, which had sales of $150 million in 2000. “This is a vibrant industry with all of the right demographics to signify continued strength, and we want to be part of it.

“John Deere’s history is as an engineering and manufacturing company, but this move is consistent with our plans and our chairman’s publicly stated goal for the company to double in size and then double again in 10 years time,” explained Werning. “We will do that by providing more services to our existing customers and expanding the products and services we can offer to new customers.”

Werning, who confirmed that the company considered acquiring a manufacturer to enter industries such as irrigation, said Deere decided that distribution presents greater long-term potential. “We believe these markets are being well served by the manufacturers and there isn’t a need for a new manufacturer,” he noted. “We want to participate more broadly in the industries we serve, and if we’re a manufacturer of irrigation, for example, then we’re limited as to how extensively we can participate on the nursery side. And how would we participate on the fertilizer, seed, bricks and timbers sides?

“Through this mechanism, we can participate in all elements of the product side of the industry,” Werning continued. “We believe that McGinnis Farms’ model has formed the basis of the final assembly of a diverse range of products that a landscape contractor needs. This model maximizes the contact with the contractor to make his job easier, and the multiple product lines and industries served by McGinnis Farms, in particular, made it an even more appealing company.”

The deal creates two obvious follow-up questions. First, will the company use these new 46 locations in 10 states from Georgia to Texas to sell green and yellow mowers? “We have no intent at all to move the equipment marketing and selling from the existing John Deere dealers,” emphasized Werning. “At the same time, we would like to leverage the relationship McGinnis Farms has with many landscape professionals to see if we can get an invitation into their businesses to sell them equipment.”

Secondly, what are Deere’s long-term plans for this initiative and how much of the country do they include? Werning confirmed that Deere will likely continue acquiring companies like McGinnis Farms, although he declined to comment on rumors of negotiations between Deere and at least one of the irrigation industry’s leading distributors. “What we would like to do is continue on the path that McGinnis Farms set,” he related. “Stan Walker (founder of McGinnis Farms who will remain with the company and work with Werning) and his team had visions for substantial growth, and we don’t see John Deere changing that vision.

“There is an interest within McGinnis Farms as well as John Deere to optimize the structure here,” he continued, adding that the Deere identity means there are six brand names now involved in the company. “McGinnis Farms had plans to consolidate to one name, and we’re interested in doing something that will make a connection to John Deere without creating any confusion.”

Sandy Zusmann, vice president of marketing for McGinnis Farms, said this deal makes a lot of sense for both parties. “What do we do?” he asked. “We try to provide one source for solutions for our contractor customers. We do a pretty good job in nursery, irrigation and some landscape supplies as well, but there are areas that we don’t even touch. Does that mean we’ll start selling John Deere equipment? No, but there are probably some synergies we can take advantage of.”

Neither Zusmann nor Werning thought this deal necessarily signaled the start of a trend of manufacturers moving into distribution. “The problem for any manufacturer that moves into dedicated distribution is that their philosophy is usually contrary to the idea of being the one source for all of your customers’ needs,” Zusmann observed. “We have customers out there who will use Rain Bird products forever, just as we do for Hunter and the other irrigation companies. If a manufacturer tries to move into distribution then it immediately puts itself in the position of not being able to serve the larger customer base.”

At the same time, Zusmann sees the benefits of John Deere participating in distributor’s relationship with customers. “Deere sees the contractors once every time they need a big equipment purchase, but we’re touching the customers much more regularly than that,” he pointed out.