Rollins Inc. recently conducted its quarterly conference call with analysts. The call, which featured Gary Rollins, Rollins, Inc.’s chief executive office and Harry Cynkus, its chief financial officer, included a number of interesting comments which addressed matters related to acquisitions. Most importantly, they consider acquisitions to be their number one priority.
The following are highlights of acquisition-related comments on the call:
- Rollins is very pleased with the results of their acquisition of HomeTeam Pest Defense, which was completed in April 2008. They say the acquisition was acretive in its first year.
- HomeTeam is pursuing small acquisitions to improve route density and margins.
- The current economic environment appears to be providing a pickup in acquisition prospects.
· Fuel costs (during 2008) and the economic environment are driving more inquiries from potential sellers.
· Prices have gone down. Some of the people that were spending money — in our determination, fairly loosely — are really no longer pursuing acquisitions. We pretty much held to our guns and didn’t feel like we could chase some of the amounts that were being paid. So I really think that we pretty much are in a good position to really buy some of these businesses that are very good value.
· They commented on the multiples they have seen. The emphasized that their pricing is based on more complex modeling of expected cash flows from an acquisition, but that it had amounted to $.80 to $1.10 as a multiple of revenue and six to seven times restated EBITDA (restated for expenses that will not apply after the acquisition).