Sell My Green Business

The Senate approved Saturday a bill extending the increase in the guaranteed portion of many SBA-guaranteed loans from 75% to 90% and waiving guaranty fees through February.  This provision is included in the Defense Appropriation bill.   An additional proposal to extend these incentives through September is pending in the House-passed Jobs for Main Street Act.

The incentives, originally included in the Recovery Act in February 2009, are generally credited with convincing banks to re-enter the small-business lending market.  After the SBA announced that the funds were running out in November, there was an avalanche of loan approvals by SBA-lenders.  Applications that came in after the cap had been reached were added to a large waiting list.  This extension is expected to allow the SBA to work through that waiting list.

SBA lending has historically been only a small portion of small business lending, but these provisions have allowed it to return to more normal levels more quickly than other forms of lending affected even more seriously by the credit crunch.

The State of the Union address had encouraging words for small business.  Obama’s renewed call for ending capital gains on small business investment  is positive (if vague).  As to small business credit, the community banks I know don’t want  to have anything to do with TARP money.  I hope he continues to support stimulating SBA lending.
From the text of the speech:

” …We should start where most new jobs do –- in small businesses, companies that begin when — (applause) — companies that begin when an entrepreneur — when an entrepreneur takes a chance on a dream, or a worker decides it’s time she became her own boss. Through sheer grit and determination, these companies have weathered the recession and they’re ready to grow. But when you talk to small business owners in places like Allentown, Pennsylvania, or Elyria, Ohio, you find out that even though banks on Wall Street are lending again, they’re mostly lending to bigger companies. Financing remains difficult for small business owners across the country, even those that are making a profit.
So tonight, I’m proposing that we take $30 billion of the money Wall Street banks have repaid and use it to help community banks give small businesses the credit they need to stay afloat. (Applause.) I’m also proposing a new small business tax credit -– one that will go to over one million small businesses who hire new workers or raise wages. (Applause.) While we’re at it, let’s also eliminate all capital gains taxes on small business investment, and provide a tax incentive for all large businesses and all small businesses to invest in new plants and equipment…”

Earlier this week, I was searching for some information on Lawn and Landscape Online and I noticed an article about Brad Johnson of LawnAmerica in Tulsa’s plans to hike the Appalachian Trail later this year.  It piqued my interest for a variety of reasons – I am originally from the Tulsa area and I am really jealous of the opportunity to spend four months hiking the Appalachian Trail, so I clicked through to the special website he has set up to blog while he is on the trail and soliciting sponsors who will contribute to select charities (and whose contributions will be matched by LawnAmerica).  The website can be found at www.at2010tulsa.com.

His story on the website is very interesting.  He attributes his decision to take on the Appalachian Trail to pondering what he would do if he sold his business (which he is not considering) after receiving an acquisition inquiry from a major lawn care company.

I really didn’t expect that story to have an acquisition angle.

Visit www.at2010tulsa.com to read Brad’s story – and consider supporting one of the charities he’s lined up.  He promises to sneak off the trail every few days and find an internet connection to report on the trip.

January 11 – Houston, Texas – On December 31, 2009, BIO Landscape & Maintenance, Inc. (BIO), a Yellowstone Landscape Group company, expanded its Texas presence through the acquisition of Texas Services, LTD. (Texas Services). Texas Services, a sustainable Tree Care focused Lawn Maintenance and Landscaping Company, is headquartered in Houston, Texas. They were founded in 1976 and currently provide services to Houston, Austin, San Antonio, Dallas and the surrounding areas. Texas Services will now become the Tree Care Department of BIO Landscape & Maintenance, Inc.

Robert Taylor, President of BIO, said, “Texas Services will further expand BIO’s geographic footprint by adding a stationed office in the growing Sugarland area while allowing us to offer an expanded portfolio of sustainable services, including Tree Care, to all of Texas. Jim Sivils, Jeff Hanawalt and Robert Jaynes, who were prior owners of Texas Services, will join BIO’s management staff in key roles. We welcome Jim, Jeff and Robert to the organization and are excited about this expansion. Texas Services brings a team of ISA certified professionals invested in the Tree Care business with a focus in customer service. BIO is honored to partner with this respected Houston icon.”

Jim Sivils, the former majority partner of Texas Services, is the new Strategic Accounts Business Developer for BIO. Sivils commented on the acquisition, “We are excited to join an organization with the same culture and commitment to customer service, safety and employee development. When companies with the same objectives are integrated the opportunities for customer and employee success along with organic growth are a certainty. We are really impressed by the BIO/Yellowstone company structure and relationship, their team focused attitude, how most decisions are left in the operating company hands, the attention to customer needs versus company structure, and the additional benefits offered to Texas Services by becoming a wholly owned subsidiary of BIO. It is safe to say that the future of our company is much brighter and that our customers will continue to be placed first.”

With the addition of Texas Services, BIO now serves 15 counties with a combined workforce of 440 professionals throughout Central and Southeast Texas. The transaction marks the second addition to BIO in 2009. In October of 2009, BIO acquired Outdoor Environments; a Houston based commercial landscape maintenance company.

About BIO Landscape & Maintenance, Inc.

BIO, established in 1982, is a full service sustainable landscape contractor providing turnkey landscape services.  These services include landscape and irrigation installation, maintenance, tractor mowing, colorscaping, athletic fields, Tree Care and green programs.

A natural leader in the landscaping industry, BIO has established itself as a leading green advocate in the industry with its compost tea program, organic BIOLife fertilizer and propane powered maintenance equipment. BIO’s green capabilities were realized when it was chosen to install and maintain Shangri La Botanical Gardens, the first Platinum LEED certified job in the state of Texas.

BIO Landscape & Maintenance, Inc. is active in the community, with staff serving on a variety of philanthropic committees along with industry related groups including The Greater Houston Partnership and Texas Nursery and Landscape Association. Other industry affiliations are with Associated Builders & Contractors, Associated General Contractors, NAIOP, the Houston Apartment Association and the U.S. Green Building Council.

In April of 2008, BIO became a member of the Yellowstone Landscape Group, a national leading green and sustainable full service landscape management company.

About Yellowstone Landscape Group

Yellowstone Landscape Group, headquartered in Dallas, Texas, is a national landscape leader dedicated to serving the growing demands of the commercial, municipal, institutional, resort, multi-family and estate markets by offering a comprehensive service solution of green and sustainable practices with an emphasis on protecting, enhancing and increasing property values in a variety of geographic locations.  Yellowstone currently serves customers in Georgia, Texas, Virginia, Tennessee, South Carolina and Florida with expansion plans already in place to increase its geographic footprint.  By delivering best-in class horticultural and business practices, a highly skilled workforce, value-added pricing strategy and the scales of scope and efficiency, the Yellowstone Landscape Group provides its customers with a premium comprehensive service offering.

Now that we seem to have passed through the worst of the recession of the last two years, we believe there are some key trends to look for over the next year.

In this article, we will go on the line and make some predictions for 2010.   In our view, these are some of the key trends that will impact green industry mergers and acquisitions in 2010:

Strong players will move to take advantage of growth opportunities

This trend began in the latter part of 2009.  Many industry players expressed an interest in pursuing acquisitions during 2009.  Their efforts in this direction were limited by the lack of available quality sellers and limited access to financing.  Both of these limitations are becoming less significant as we move into 2010, so we expect strong industry players to aggressively seek out high quality opportunities.

Weaker industry players will seek exit opportunities

There will be a number of weaker industry players who delayed action in 2009, expecting (or hoping) for a quick turnaround, who will explore opportunities to sell or combine with stronger companies.

Sellers who deferred action in 2009 will make moves in 2010

Our theory is that many transactions are motivated by “life events” instead of  industry or economy-wide conditions.  Such life events include illness, death, divorce, retirement, etc.  Transactions resulting from “life events” can be deferred but not avoided entirely.  Many potential transactions of this kind were deferred in 2009 due to market conditions, but will be pursued in 2010, creating a potential “bubble” of available transactions.

New consolidation efforts will emerge

Rumors abounded in 2009 of private-equity backed consolidation efforts emerging in various sectors of the green industry.  At least some of these potential projects will likely emerge in 2010.

Government policies will encourage transactions

The Obama administration will continue to support initiatives to help small business, especially Small Business Administration loan programs.  However, there will be continued uncertainty on immigration reform, exasperating many green industry employers and causing some to throw in the towel.

Scheduled capital gains tax rate increases will motivate many sellers

Long-term capital gains rates for many taxpayers are scheduled to increase from 15% to 20% on January 1, 2010.  While there will likely be efforts to either eliminate or delay the increase, the specter of the federal deficit will make such efforts less likely to be successful.  As a result, many potential sellers considering a sale in 2010 or 2011 will seriously consider accelerating  potential transactions into 2010.

The focus on all things green will continue to create opportunities

The green industry naturally gets a boost from the trend toward green practices by both businesses and consumers.  Green industry firms that cater to businesses and individuals who are “going green” will become increasingly attractive buyers and sellers.

2009 was definitely a down year for mergers & acquisitions within the green industry – and for just about every other industry as well.  The twin specters of economic uncertainty and an often extremely challenging credit market caused the number of transactions to fall both out of necessity and out of caution.

That being said, many transactions did get completed.  In this article, we will recap many of the transactions that did take place as we try to make sense of what to expect in the coming year.

January

Yellowstone Landscape Group and its private equity sponsor, Gridiron Capital, announced their third platform acquisition, Austin Outdoor, based in Bunnell, Florida, with a number of other offices in Florida, plus the Bahamas.

The assets of Hines Horticultural were acquired by Black Diamond Capital Management, LLC.  Hines had filed for bankruptcy protection in August 2008.  The business is now known as Hines Nurseries, LLC.   Hines is one of the largest commercial nursery operators in North America, operating seven nurseries in four states.

February

March

Bartlett Tree Experts announced the acquisition of Empire Tree and Turf in Augusta, Georgia, and Top Notch Treecare in Plymouth, Minnesota.

April

Mission Landscape of Tustin, California, acquired Landarcwest, a landscape architecture firm based in Irvine, California.

San Jose-based Jensen Corporate Holdings, Inc. acquired Huppe Landscape Company, Inc. of Roseville, California.

Arizona-based Pathway Landscape, a landscape architecture firm, announced what it called a strategic partnership with Paradise Full Service Landscaping of Scottsdale, a full-service landscape maintenance business.  The combined company, operating under the name Pathway Landscape Maintenance & Design, serves Scottsdale, Tempe, Phoenix and nearly every other city in the Valley of the Sun.

May

Denver-based American Civil Constructors sold its landscape maintenance unit, ACC Landscape Services, LLC to Progress Equity Partners.  ACC Landscape Services operations are in Colorado and Northern California.

July

Noblesville, Indiana-based Custom Touch Irrigation acquired Indianapolis-based Perfect Property Services.

The Brickman Group announced it had “formed a partnership” with Pontiac, Michigan-based Torre & Brugglio.

August

Brighton Partners, LLC acquired a 70% interest in New England lawn care company, Lawn Dawg, Inc., in a recapitalization.  Lawn Dawg has operations in Nashua, New Hampshire, Boston, Massachusetts, Albany, New York, and Portland, Maine.  Lawn Dawg’s president, Jim Campanella,  continues in that role and as a major shareholder.  In announcing the recapitalization, Campanella, an industry veteran and former president of the Professional Lawn Care Association of America, also announced plans to launch an acquisition program.

Austin Outdoor, LLC, a unit of Gridiron Capital-backed Yellowstone Landscape Group, acquired Dolphin Landscape of West Palm Beach, with operations serving Martin, Palm Beach and St. Lucie Counties in Florida.

Sav-A-Tree announced the acquisition of H.R. Spooner Ornamental Care of East Falmouth, Massachusetts on Cape Cod.

October

The Brickman Group announced the acquisition of D. Foley Landscape, Inc. of Walpole, Massachusetts.

Also in October,  two Atlanta-area lawn care businesses, Crabapple Turf Management, Inc. and Unlimited Landscaping and Turf Management, Inc., merged their residential lawn care businesses.

December

Massey Services, Inc. completed the acquisition of Sunair Services, Inc. and its Middleton Pest Control subsidiary.  The merger, the final chapter in a well-publicized take-over battle, combined cross-town, Orlando-area rivals and formed a very strong statewide network in the key state of Florida.

Other

In May, Lawn and Landscape quoted newly-named TruGreen Lawncare president Steven Donly as saying, “Strategic acquisitions have always been a fundamental component of TruGreen’s growth strategy. We believe we can bring owners a compelling business case for growth and create a winning combination for customers looking for outstanding service from a brand they can trust.”  TruGreen does not normally announce individual acquisitions, but in August it announced the acquisition of Nutri-Turf in Michigan and Easy Chair Lawn Care in Ohio.

An analysis of the public filings of The ServiceMaster Company, TruGreen’s parent company, suggest that TruGreen completed acquisitions totaling approximnately $15  million during the first nine months of 2009, compared to approximately $20   million during the first nine months of 2008.   Two major acquirors in years past, Scott’s Lawn Service, a unit of The Scott’s Miracle-Gro Company and The ValleyCrest Companies reported no acquisition activity during the year.

I recently called a green industry businessman about a business opportunity  – a business for sale in a complementary segment of the green industry.  It wasn’t an obviously  perfect fit, but I thought there was a chance he might be interested enough to take a look.  After hearing that I was calling about a potential acquisition, he almost dismissed it without even hearing about the opportunity.  As we talked, his tone changed a bit and we agreed to meet after the holidays to discuss this and other opportunities down the road.

During the conversation, he reflected a bit and said, “You know, these are the times that great companies are made in.”

I think he’s right.                                                           —Ron Edmonds

The months after the holiday rush can be some of the most tedious and boring of the year. Winter has truly set in, and most people are not thinking of landscaping their yards.  Buying plants is counter-intuitive with a foot of snow on the ground, and the push to buy Christmas trees and poinsettias seems like a distant memory. While this is a great time to take a break and recover from the hectic summer months and mid-winter push, it is also an important time to think about where you stand with your business. Even if you have no current plans to sell your business, it is wise to develop a coherent and practical exit strategy. Every business owner has a need to consider his or her options under a variety of foreseen or unforeseen circumstances. While the period after the holidays is generally considered off-season for most of the green industries, it is quite the opposite for us. During this period we usually see an increase in inquiries about buying and selling businesses. The diminished demand for lawn and landscape services during the winter months allows buyers and sellers to focus more exclusively on the details of acquisitions and sales that can be time consuming and, therefore, almost impossible during busier times of the year.

If you are considering selling your business, it is a good time to think about listing your business because owners considering expanding their current operations often use this time to review potential opportunities. Additionally, sellers can take this time to do a few things that can improve both the value and marketability of their company. We have additional resources on our website listing in more detail some of the steps that can increase the value of your business, but here are just a few suggestions.

First, clean up the physical business. Selling your business is similar to selling a house in this circumstance. A clean and professional physical appearance can make a big difference. This is true whether you plan to sell right now or not. A well-kept place of business instills confidence in ownership as well as a sense of pride among employees. Second, line up your advisors. Know who you are going to talk to about the details.  Tax planning, employee relations, state laws, legal ramifications and loan requirements are just a few of the details that will likely need to be addressed. Lawyers, accountants and financial advisors are important resources. Finally, make sure that your books are up-to-date and that you have clear and accurate financial information. Having timely and clean financial statements is usually a prerequisite to completing a business sale. The inability of sellers to produce timely, accurate financial statements is one of the biggest challenges we face with the sale of businesses.

Buying or selling a business is an important decision that can be complex and challenging. There is no magic solution, but spending a little time and effort in planning your next business step is a move that always step is a move that always pays dividends. The Principium Group is one of the few mergers & acquisitions firms specializing in the green industries. We welcome a chance to talk with you about your plans, whether they include buying or selling a business or planning an exit strategy that you will use in the future. The winter months are a good time to plan your next step. Give us a call, and we’ll help you get started.