In the market for some M&A

It seems as though there’s no end in sight for private equity’s heavy interest in the green industry. More and more, mergers and acquisitions are announced daily and companies seem to be eager to cash in on their value.

Because it’s such a hot topic, this year’s Lawn & Landscape Top 100 Executive Summit featured a panel where some of the major players in the industry’s M&A game gave their advice to companies looking to sell and buy. Panelists included: Robbie Bliar, vice president of M&A and corporate development with Yardnique; Stephanie Blanco, SVP/ head of integration with Mariani Premier Group; Brad Cox, senior vice president of operations at LMC Landscape Partners; and Patrick Quinlan, director of mergers & acquisitions with Schill Grounds Management.

All four panelists agree that the market is ripe with M&A activity, and they don’t see that changing anytime soon.

HEATING UP. “I do think it is highly active,” Quinlan says. “Both buyers and sellers have become more sophisticated in terms of M&A. A few years ago, there was hesitation… but the market has significantly warmed up to that.”

Blair agrees, saying that originally, private equity’s involvement in the industry was with a handful of companies that were all relatively the same. But nowadays, companies of all sizes and service offerings are receiving offers.

“A lot of buyers and sellers are starting to really know their strengths and weaknesses,” Blair says. “I’m seeing a lot of diverse sellers. They look very different in terms of their revenue mix and customer bases… it’s a very competitive market right now.”

Blanco adds that originally, she felt the spike in M&A activity would slow down once the “COVID Boom” most companies experienced subsided.

“In the residential side we saw a sugar high right after COVID,” Blanco say, adding that it caused a catalyst in activity for the residential portion of the market.

Blair says there’s no slowdown in sight.

“I think the green industry is in a healthy market right now; frankly I’m not sure how much more active it could get,” Blair says. “I expect it to stay like this for a while.”

Quinlan agrees, adding things will only get more competitive — which will benefit the best companies.

“There’s going to be a large number of deals that get done over the next few years,” Quinlan says. “Deals will get more competitive, and more scrutiny will happen in the due diligence process… The cream will rise to the top.”

Cox says that while he agrees private equity money will be around for the long haul, he is concerned that too much involvement could have a negative impact.

“M&A in the landscape industry is here to stay,” he says. “They like the buzzword of recurring revenue, so some of them are almost looking to go overboard in the industry.

“Make sure they love this industry because they could destroy it real quickly,” Cox warns.

RED AND GREEN FLAGS TO FIND. When it comes to finding a good fit — whether that’s a private equity partner to back you or a company you’re looking to acquire — there are some notable benefits and concerns everyone should keep an eye out for.

Blanco says when Mariani is aiming to acquire companies, they start by easily checking off two boxes.

“You want stability in terms of your labor source and to make sure the company is as profitable as we believe it to be,” Blanco says. “Those are the two big hurdles we tackle sooner rather than later.”

Cox agrees that a good labor supply is a huge green flag for acquiring a company.

“Labor supply is a good point to look at,” he adds. “If the majority is H 2-B, and you don’t get that one year — it’s hard.”

Cox adds that a company’s brand recognition can also be a good determining factor.

“Look for someone with a great existing brand,” he says.

Going hand-in-hand with branding is culture — Blair says that’s one thing that can’t be taught, so it’s important a good culture is in place before any sale.

“We look for companies with really great culture,” Blair says. “We can get in there and find ways to improve labor statistics and strategies, but we need to make sure it’s a well-cultured business.”

Quinlan acknowledges that when Schill Grounds Management is looking at companies to acquire, one of the first things they do is compare services and revenue mix.

“For us, it’s all about the right fit and we define fit by revenue mix,” Quinlan says. “The revenue mix needs to align with Schill’s existing strategy.”

Blair notes that knowing your numbers and being completely accountable and transparent are some of the biggest things to help make a deal happen swiftly and effortlessly.

“If you can tell a potential buyer the number that you’ll hit in the next 12 months, you can start to negotiate and get some additional value,” Blair says.

In terms of “red flags” or things that might seem like they’d cause hesitancies in the buying process, Blair says recognize those before going to the negotiating table and be ready to tackle those problems head-on.

“Every company has its weaknesses,” Blair says. “Go in with a plan around those weaknesses and be upfront about them.”

Blanco agrees, saying no company is perfect or has nothing to hide.

“Even some of the best companies have a few ‘holy cows’ that are difficult to change,” Blanco adds.

CHANGE IS INEVITABLE. And speaking of change — implementing change effectively can be the biggest hurdle for newly acquired companies.

“Change management is probably the biggest pain point we deal with,” Quinlan says. “What’s hard to do is make sure you’re growing the business post-closing and improve on the business. It requires developing a lot of trust with the employees.”

Cox suggests finding someone within the company to be the point person for future changes post-sale.

“You need a change champion in the business,” Cox says. “Someone who wants to learn the new software, someone who wants to see things improve. Find someone in that organization that people trust — someone who has been there for a while. Find that person and explain the situation to them… If they get on board, the people will follow.”

Blanco adds that these discussions should begin even before the sale is finalized if at all possible, as the sellers will be the best ones at identifying who will embrace change and who will hinder it.

“Sellers know best who those people are likely to be, and we start having those conversations early on,” Blanco says.

Blair adds it all harkens back to transparency — and the more transparent you are with the staff, the more you’ll get them on board.

“We communicate with sellers about how we’re going to announce the change to the team,” Blair says. “We bring our full team and open up the floor to any questions. Everyone is there to make them all comfortable.”

Ideally, the seller will be staying onboard post-sale to help transition any changes, Quinlan says. He adds it’s the way Schill Grounds Management prefers to handle acquisitions.

“We like to see an ownership group with a plan,” he says. “We’ve retained quite a few of the former owners we’ve partnered with and having them remain involved in the business increases the likelihood of success.”

In all, there’s numerous things that go into potentially buying another company or selling your own. The panelists all say that time and due diligence will always lead to the best deals.

“You never know when you’re going to sell but you need to always be prepared to sell,” Cox says.