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Merge, Right?
1 Oct, 2007 By: Norman Cooper Pest Management ProfessionalMergers and acquisitions are in full force in the pest management industry.
Author's note: In the interest of full disclosure, I have been, and still am, involved with the firms mentioned in the article, as well as with many other companies in mergers and acquisitions.
Acquisitions in the pest management field have always been directly affected, in part, by prevailing economic conditions. This season in particular has produced many a furrowed brow and an upturn in the sale of Maalox as a result of the sub-prime mortgage-induced rollercoaster ride of financial markets.
Coupled with a comparatively weak termite swarming season and other factors, this might have signaled a downturn in pest management company acquisitions — yet acquisition fever continues unabated. In fact, several large firms have been busier than proverbial beavers:
- Rentokil/Ehrlich recently announced its acquisition of Presto-X, an Omaha, Neb.-based company founded in 1932 with offices in 17 Midwestern states and expected 2007 revenues of $30 million. This strategic acquisition underscores Rentokil's resolve to be a major national force in the U.S. pest management market.
"Acquisition is a good opportunity to review best practices," explains Vic Hammel, now CEO of Rentokil Pest Control North America. "We will be able to enter markets neither of us would have attempted before."
- Orkin has recently closed on several not-yet-announced acquisitions in various areas of the country, and is currently in negotiations with other potential acquisition prospects.
- Regional firms, including Arrow Exterminators, Massey Services, Middleton Pest Control and myriad other pest management firms of every size remain in the hunt for industry acquisitions that meet their criteria.
- Servicemaster, the parent company of Terminix, has recently consummated its $5.5 billion sale to buyout firm Clayton, Dubilier and Rice Inc. Although Newsweek magazine recently reported that CD&R was obliged to restructure its back-up, interim loans and scuttle its planned $1.15 billion bond offer in its acquisition of Servicemaster, Terminix remains a very active player.
"What are your future acquisition plans?" I asked Steve Howard, Terminix's senior vice president of strategy and business development.
"Terminix is committed to a growth strategy that includes acquisitions, both small tuck-ins and larger regional competitors," Howard said. "We have committed resources to this strategy and a designed budget for funding it."
"There is a correlation between the baby boomer generation and companies looking to sell," stated Bob Hines, director of acquisitions at Orkin. "Often, people are tired after 25 to 30 years in the business and want to retire, but don't have immediate family to assume the business. We've gained many key people via acquisitions, and continue to learn from them."
Glen Rollins, Orkin's president and chief operating officer, agreed. "We look for companies that earn loyalty from co-workers and customers," he said. "Lately, we've been doing a better job being good owners and co-workers, and the results have been encouraging."
THE BIG GET BIGGER?
In the past, the red-hot acquisition trend in pest management resulted in dire forebodings that in the near future the result would be a few mega-national companies and a mere handful of "mom and pop" companies. I believe that these concerns carry little validity.
True, Terminix and Orkin have added muscle, and multi-national Rentokil has entered the U.S. pest management market in a major way. However, even with continuing consolidation and, perhaps, even mergers of these giants absorbing other giants, I would wager that by 2010, excluding the "Big 3" already mentioned there will be more than two dozen privately held companies, each grossing more than $50 million annually.
To put that into perspective: Today there are only 10. A decade ago there were less than four firms in that rarified stratosphere.
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