New market mentality

Terracare Associates is growing strong. Two years ago, the $48-million company moved into one of the fastest growing markets in the country with the acquisition of VMC Landscape in Dallas. And it has no plans to stop.

Terracare President Dean Murphy says VMC was the perfect fit for an acquisition. The strong economy in the Dallas-Forth Worth area coupled with the sheer size of the population made it attractive to the growing company.

“When you think about it, diversification in different geographic areas is an advantage in many cases. So we’re sure we’re taking advantage of that,” he says.

Terracare now has branches in California, Colorado, Utah and Texas, and Murphy says there are a few more deals in the works.

Deciding how to grow.

Terracare is looking to grow both organically and through acquisitions, Murphy says. Starting from scratch is more challenging since companies need to make sure there’s enough work in an area to support a branch when it first starts out.

“It takes a lot of time, so if you can find somebody that’s a good fit, a good work mix, has a good margin, a good team – then it makes sense in buying that rather than spending all the time and money and waiting to grow the organic side of that,” Murphy says.

That’s not to say that acquisitions aren’t time consuming, but VMC made sense for Terracare, Murphy says. “The challenge with acquisitions is the vast majority are not good fits for one reason or another,” he says. “You have to do a lot of vetting to find one that makes sense with the business model and the culture, and this one did.”

“You have to do a lot of vetting to find one that makes sense with the business model and the culture, and this one did.” Dean Murphy, president, Terracare

There are other options, however, if you’re looking to move into a new market. Strategic buyers who have a strong footing in the industry will sometimes purchase an average company knowing that they’ll have to invest money to fix it.

Ceibass Venture Partners CEO Tom Fochtman, who handles mergers and acquisitions for green industry businesses, says that sometimes you can identify an average company with a typical yard in a good location and purchase at a discount – if the right team is in place.

Moving forward.

Terracare and VMC had a comparable work mix, and since VMC was almost entirely a maintenance company, there was no construction or other extra work connected to its maintenance contracts. Terracare now employs more than 650 people, including most of VMC’s 160 employees, which made the transition easier.

“The thing you worry about is how are customers going to react and all that stuff there, but as long as it’s the same guys doing the work, they’re fine,” Murphy says.

And since Terracare bought VMC as a freestanding company, starting the transition to the Terracare name was a joint decision between the two businesses. Murphy says that while there was no hurry to make the switch, “We do get some more leverage with the Terracare brand because of the size of it.”

Murphy says the transition was “uneventful” and that the company didn’t lose many customers.

He visited with larger customers himself to explain the change, had lunch meetings with mid-level clients and sent letter to smaller customers, sometimes following up with phone calls.

And Terracare learned a lot in the process. “Just because we’re the acquirer doesn’t mean that we have it all figured out,” Murphy says. “We’ll learn from each other so we want to acquire companies that are thinking about getting better every day. That’s our company culture – to try to improve all the time. There’s never an end to that.”