The basics of private equity

Not all dogs are the same.

It’s easy to see the difference between a goldendoodle and a boxer. But Bryan Christiansen, the CEO of Mariani Premier Group, says landscapers — and the public in general —often fail to understand there are different “breeds” of private equity. All private equity companies have different investment philosophies and different objectives.

Christiansen was one of four panelists to join the final panel at the Lawn & Landscape Business Builders Summit, entitled “Private Equity 101.” Bob Grover, the president of Pacific Landscape Management; Kurt Bland, the CEO and president of Bland Landscaping; and Casey Taylor, the CEO of Senske Lawn & Tree Care, all spoke during the session.

Christiansen says it’s important to understand what private equity brings to the table for each respective business. While it may not be for everybody, he says Mariani — which has acquired 20 companies nationwide — would still be solely in Chicago without private equity support.

“There is not just one thing called private equity,” he says. “Finding the right one for you is very important.”

Why landscaping?

After more than 20 years in business, Grover started wondering about his exit strategy.

“I didn’t want to sell. I was proud of my brand,” he says. “I was ready to retire, but I had a horrible taste in my mouth about that.”

But Grover also found the landscaping industry is among the hottest for private equity folks looking to invest. He says it’s ripe for consolidation, which is why so many private equity firms are jumping into the green industry.

Taylor says private equity companies have found commercial lawn care because of its recurring, reliable revenue that’s relatively recession-proof. Even COVID-19’s market was still strong, he says.

“It’s pretty predictable and on a flat path,” he says.

Of course, the recent peak interest in buyers has also led to some natural hesitation from landscapers. Bland says he had a key employee come to him recently to say that when Bland had announced a sale to private equity seven years ago, the employee left work feeling mortified.

“I now want you to understand,” Bland recalls an employee saying, “that what you did…has changed the trajectory of my life in a manner that’s going to allow me to provide for my son in a way that my parents never could.”

What to expect

That’s not to suggest it’s all going to be a seamless transition. Christiansen says that being the CEO of a company is a very lonely place, but it’s just the opposite in private equity — for better and for worse.

“You’re now responsible for your peers and the other people who’ve joined the platform you’re a part of,” he says.

Taylor says the sale to private equity made things suddenly very real. Before selling, board meetings meant he’d spend some time with his dad and if they didn’t hit their goals, they shrugged it off and moved forward.

“That doesn’t work that way anymore,” Taylor says. “You won’t be a platform; you’ll be a platform with a 25-year-old Ivy Leaguer in your office every day running your business with a spreadsheet. If you miss, now you have to fire people.”

That’s because when private equity gives you tens or hundreds of millions of dollars, they’ve also got lenders they need to satisfy, too. Taylor says this intensifies goal setting and budget setting. “In good times, it’s not a problem at all,” he says. “As long as everything goes well, it’s easy.”

Grover says he found out quickly that he was no longer the boss — that he, too, now had a boss. He could no longer make a decision based on what feels good. Everything needed a financial justification.

“Most of you out there with entrepreneurs, you’ve got a good gut,” Grover says. “You can’t manage with equity partners because something feels good.”

Bland says he feels less beholden to the bank since he’s more liquid than before, but he also admits some concerns about private equity. Some of the downsides he admits are more tongue-in-cheek, like losing owner’s benefits of tickets to football games or nearby concerts. Some of the companies they’ve acquired had owners who were miffed they could no longer justify the fishing boat or race cars. “There was discretionary spending on a personal level that could be justified on the business,” he says.

“On a personal level,” he adds as a concern, “I do worry if we’re not careful, we can become a canopy that’s like a forest where we can shade out some of the younger trees. Private equity’s not going to push out the entrepreneur by any means, but we need to make sure that we’re encouraging younger generations to create their landscaping businesses.”

Beyond that concern, the panelists admitted that many of these issues can also be fixed with better business practices. Christiansen says companies should be budgeting anyway, especially if they plan to sell but regardless of their intentions, too.

And Grover says it’s been great to provide more benefits to his employees. “Most equity companies will give you a certain amount you can share with key managers,” he says, adding that they created a profit pool for most of our team.

“We wanted to give them a bonus in a way that they had upside potential. They can make $150,000 to $300,000 in this next turn,” he says. “There are days that are hard, but our team is freakin’ excited.”

The author is an associate editor with Lawn & Landscape.