PEOPLE SMARTS How Independent Are You?

With the announcement of a few blockbuster deals in the last half of 2006, the acquisition frenzy seems to have picked up slightly, but the lingering question of whether a successful business owner should consider selling the business to an acquiring company remains.  

To put this industry trend in perspective, lets look at some facts. For every landscape company that is acquired, almost 1,000 companies continue to remain independent. What this means is that the large acquirers represent less than 5 percent of the market, while approximately 95 percent of the remaining players are independents.

The high level of fragmentation in our industry, as well as the huge diversity of revenue volumes and market segments, makes the landscape industry a very difficult market to successfully consolidate. There will always be niches into which a larger company will neither have the inclination nor the ability to penetrate. That is good news for the quality, service-driven regional/local company. Much like the banking industry in recent years, local community banks have emerged and are thriving.
 
In speaking with some landscape contractors recently, I was interested in the thoughts a number of them had and their decisions to remain independent despite the fact their companies’ prior history of success made them prime targets for an acquisition. Here are some of the reasons:

• I am deeply involved in my business and don’t want to work in a different culture.
• Right now it’s not part of my agenda to turn over control of my life’s work.
• I do not want to join someone who will set the agenda for me.
• I discussed it with my kids, who will be taking over the business from me, and left the decision to them.
• The way Wall Street or one of these private equity firms runs a business is different from my agenda.
• We can do better on our own.
  Another curiosity I dealt with was the impact recent consolidations have had on their markets and here’s what they had to say:
• We see a real advantage in local ownership. The customer likes to be able to talk to the owner.
• We can change direction quicker.
• We have done pretty well competing against companies that were bought.
• We see people leaving acquired companies because they were close to the previous owner who is no longer there. Obviously, these people need to work in another company and we might be their choice.

I also inquired about the relative strengths of being independent and their strategies for surviving. They said:

• Independents are able to build strong, close-to-the-market relationships.
• We have vested interests in our communities.
• We are able to create strong, successful cultures in our companies.
• We can develop alliances with other independent companies.
• We can position ourselves as alternatives to “brand” names.

Well, there you have it. Each one of them has a slightly different reason for wanting to remain an independent. Each was supremely confident they could continue to compete successfully based on the strengths of their current practices.

Our industry’s sales volume was estimated to be near $90 billion in 2006. If 95 percent of that volume was produced by independent companies, there appears to be a bright future for organizations that are well managed, focused and constantly improving what they do.

Larry Fish is president of GreenSearch, a human resource consulting organization. He can be reached at 888/375-7787, peoplesmarts@gie.net or via www.greensearch.com. PeopleSmarts® is a registered trademark of GreenSearch.