L&L Insider

KKR in talks to buy ValleyCrest

The merger would create an industry giant with revenues of nearly $2 billion and more than 22,000 employees. Here’s what it means for you.

By Chuck Bowen

The Brickman Group’s new owners are in advanced talks to purchase ValleyCrest Landscape Cos., Lawn & Landscape has confirmed. If the deal goes through, it would be the largest merger in landscape industry history, forming a $2 billion industry giant doing business in all major U.S. markets.

Brickman ranks second on the 2014 L&L Top 100 List, with $900,000,000 in total revenue, and ValleyCrest ranks first, with $992,000,000 in 2013 revenue. Combined, the companies have 22,700 employees. Brickman grew by 9.6 percent last year, and ValleyCrest grew 12.7 percent.

News of the proposed acquisition comes just a few months after Brickman was acquired by the private equity group KKR for $1.6 billion.

Terms of the deal had not been finalized at press time on April 25, but Lawn & Landscape confirmed reports with reliable industry sources with knowledge of the deal. Officials at both Brickman and ValleyCrest did not return calls or emails seeking comment.
 

A new national company. The acquisition would create a truly national landscape company. Brickman would gain a presence in such markets as the Pacific Northwest, Arizona and Northern California, while strengthening its longtime positions in the Midwest and Northeast.

“Looking for a place (in the map) that would need pins is pretty hard,” says Ron Edmonds, landscape industry M&A consultant and president at the Principium Group. “If you sit down and try to find a significant market the combined companies wouldn’t be in, I’d be hard pressed to give you one.”

ValleyCrest also operates in several other green industry segments, including golf course maintenance and construction, nursery operations. Its national maintenance business, U.S. Lawns, is ranked 9th on the Top 100 list with revenue of $195,295,000.
 

More attention from equity. The move is another example of the increasing interest from private equity in the landscape market.

Michael Dell’s MSD fund bought ValleyCrest in 2007. It has been reported that Dell’s focus on his computer business prompted the proposed sale of ValleyCrest.

Since MSD’s initial investment, the equity markets have paid more attention to the growth and recurring revenue of the landscape and lawn care markets, making investments in other national and regional industry players such as TruGreen LawnCare, TruGreen LandCare, Lawn Doctor, Terracare Associates, Landscape Workshop and the Yellowstone Landscape Group.

The biggest deal in history. The next-closest merger in size and scope to the proposed Brickman-ValleyCrest deal was a flop, and it was a fraction of the size.

In 1999, ServiceMaster purchased LandCare USA for $250 million amid a period of heavy mergers and acquisition activity for the green industry, and less than a year after LandCare had gone public.

When combined, TruGreen and LandCare USA had revenue of more than $400 million, but ServiceMaster struggled to integrate its many acquisitions into a cohesive business, and the LandCare division has in recent years lost value. From 2008 to 2010, revenue dropped $78 million, to $238 million.

The effort was ultimately a failure, culminating the sale of LandCare in 2011 to Aurora Resurgence Capital for just shy of $38 million.

Not a repeat of the past. “I think there’s plenty of evidence that the acquisition process that Brickman has used over the last few years has been vastly more successful than the LandCare deal,” Edmonds says. “Their execution of their acquisition strategy as a company … got them a (very good) price from KKR. It’s pretty clear their execution and discipline – they didn’t go crazy paying high prices to anybody. They did better diligence on what they’re buying and better process after they were bought.”

And, Edmonds says, KKR and Brickman have the right kind of discipline to make a deal of this magnitude and scope work.

“The whole industry has learned from the LandCare issues. It’s not an easy process and you have to maintain discipline and integration is more important than any other step in the process,” Edmonds says. “Without an integration plan … your chances for success are a lot lower.”

And that integration plan – how KKR would combine the two largest companies in the world – would take several years, Edmonds says, and keep the new Brickman from making any other major acquisitions in the short term.

“This is a giant opportunity for regional companies – the Rupperts and Gothics and those kinds of companies,” Edmonds says. “I think they’re going to want to get bigger and stronger in the face of this kind of situation. They’re going to have less competition on buying up new deals. I think it’s a big opportunity for those kinds of companies. There clearly will be people available.”

Those people amount to more than 22,000 employees in many overlapping markets.

“There’s going to be a lot of attrition here,” says Brian Corbett, president of the CCG Group in Atlanta, who has been involved in several sales to both ValleyCrest and Brickman. “You can’t pull together two companies with 20,000 employees and think there’s not a lot of redundancy.”

For example: The sale of Metheny Landscape in the Dallas market, which Corbett helped facilitate, brought Brickman in for about $30 million. ValleyCrest’s presence in Dallas is about $20 million, Corbett says.

“You don’t need everything in every one of those branches anymore,” Corbett says. “You just don’t.”
 

What it means for you. The proposed merger of these two industry giants could have a big impact on the average landscaper. A deal of this size means neither company will likely look for any other major acquisitions in the near term and that smaller private equity groups might be first to the table for other deals, Corbett says.

“This is such a large deal, it will be hard for ValleyCrest to make any purchases. Brickman will have its hands full integrating and sorting through the deal,” he says. “It’s a huge opportunity for PE guys. The opportunity for the average contractor is in PE, not ValleyCrest or Brickman for the short term.”

The author is editor and associate publisher of Lawn & Landscape. Email him at cbowen@gie.net.
 

Student Career Days sees record participation

Companies at the Career Fair increased by 44 percent while industry sponsorship nearly doubled.

HERNDON, Va. – Approximately 800 students attended the 38th annual PLANET Student Career Days – The National Collegiate Landscape Competition – at Colorado State University in Fort Collins, Colo., in late March.

The number of companies who participated in the Career Fair increased by 44 percent compared to last year and the number of industry sponsors nearly doubled this year.

“The industry was out in full force to support Student Career Days,” says PLANET SCD Subcommittee Chair, Ed Furner. “There were many more recruiting companies as well as sponsors this year. The economy has picked up and that is evident in the number of companies who want to recruit these students.”

Sixty-five teams, including two FFA high school teams, participated in 28 individual and team competitions. Tree climbing, hardscape installation, plant identification and sales presentation were just a few of the events.

Awards were given to the top-placing students, as well as to the winning teams. The individual winners were, in first place, Hayden Angelotta, Cuyahoga Community College (Highland Hills, Ohio); in second place, Matt Case of Alamance Community College (Graham, N.C.); and in third place, Jeff Elshoff of Michigan State University (Lansing, Mich.). The top three students received scholarships from PLANET AEF.

Brigham Young University – Provo took first place in the overall competitive events, followed by Brigham Young University – Idaho in second place, and Michigan State University in third. BYU – Provo took home $5,000 from STIHL for winning first place. For a complete list of winners, visit the Student Career Days website at bit.ly/scd2014.

In addition to the competitive events, students met with company recruiters at the Career Fair, interacted with supplier companies and got to test drive industry equipment throughout the event.
 

 
Research

Cutting edge

Below is a snippet of the results from a survey asking contractors their thoughts on trimmers and edgers. Turn to our story on page 30 to find out how contractors use hand-helds and for more from our research.

Source: Lawn & Landscape research