6 reasons why private equity (PE) buyers are worth a look

If you currently own a pest control company, you’re well aware of the attention our industry is getting from private equity (PE) firms.

Chances are, you receive numerous phone calls and emails each week asking whether you’re interested in selling. PE-backed companies and strategic buyers are extremely active in acquiring pest control businesses across the U.S., Canada and Europe. These companies are growing quickly through acquisitions and are leveraging technology to become more efficient and profitable.

Key takeaways

• Private equity (PE) has become a major buyer in the pest control M&A market, competing directly with traditional strategic buyers.
• PE buyers often pay a premium, offering higher valuations than strategic buyers because they are building a new platform, not just adding routes.
• PE can offer a “second bite of the apple,” allowing owners to sell a majority stake, retain equity, and profit again on a future sale.
• Selling to PE may offer more flexibility for the existing team and brand, as the PE firm’s goal is to grow the company, not just absorb it.

1. They offer competitive valuations

PE firms are often “building a platform,” which means they are buying their first pest control company to build upon. Because they don’t have an existing infrastructure, they can’t achieve the same synergies as a strategic buyer who is just adding “tuck-in” routes. To compete, PE firms often have to pay a premium, which can mean a higher valuation and more cash at closing for the seller.

2. They create a new path for growth

PE firms are not buying your business to dismantle it; they are buying it to grow it. They bring sophisticated management, marketing, and sales expertise. For an owner who wants to see their company reach the next level but doesn’t have the capital or resources to do it alone, PE can be an ideal partner.

3. You can get a “Second Bite of the Apple”

This is one of the most attractive options PE offers. An owner can sell a majority stake (say, 80 percent) to the PE firm, take cash off the table to secure their family’s future, but retain a 20 percent stake in the new, larger company. They then partner with the PE firm to grow the business over the next 5-7 years, after which the PE firm sells the entire company for a much larger valuation. That 20 percent stake is now worth significantly more — this is the “second bite of the apple.”

4. Protect your team and legacy

A strategic buyer often absorbs a new company, folding its brand, trucks, and people into their existing operation. A PE firm, on the other hand, is buying your brand and your team as the foundation for their new platform. They often want the existing owner and management team to stay on, and they are investing in the brand you built, not erasing it.

5. They understand your business

Pest control is no longer a secret. PE firms have done their homework and are drawn to the industry’s recurring revenue, high profit margins, and non-discretionary service model. When you talk to a PE buyer today, they understand the business and speak the language of pest control.

6. They are plentiful

There are now dozens of PE firms actively looking to buy pest control companies, from the very largest to mid-sized regional players. This creates a competitive market for sellers, which drives up valuations and gives PMP owners more options than ever before.

Conclusion

Selling your business is the biggest financial decision you will ever make. While strategic buyers will always be a critical part of the M&A landscape, they are no longer the only option. For PMP owners looking for a premium valuation, a path for growth, and the opportunity for a “second bite of the apple,” private equity buyers are absolutely worth a look.