Landscape Management, June 2010

M A Group in May 2008 giving it an instant 50 million industry presence And as a result the past 18 to 24 months have brought additional private equity interest in the landscape industry Long points out An example is Progress Equity Partners recent carving of ACC Landscape out of Denver based American Civil Constructors Even though Yellowstone is the furthest down the private equity path I think there will be one or two more new private equity buyers that will be acquiring landscape companies pretty soon Corbett predicts Edmonds agrees I think there are some players that have visions of getting a lot bigger and this might be their time to make a move he says The landscape industry will probably evolve a bit over the next year I THINK THERE WILL BE ONE OR TWO MORE PRIVATE EQUITY BUYERS THAT WILL BE ACQUIRING LANDSCAPE COMPANIES PRETTY SOON BRIAN CORBETT CCG Consultants 2010 M A double time In 2009 there werent as many sales of Green Industry businesses as Edmonds expected Last year was a slow year which was a huge surprise to me he shares I thought there would be an enormous number of people trying to exit the business coming off of a year where we had the rationing effect of commodity prices combined with gasoline prices rising so much and then the uncertainty of the economy But that didnt materialize at all There are two reasons 2009 didnt turn into a banner M A year Edmonds believes First the world was in a state of inertia he says People were hesitant to do anything They werent buying new houses or new cars they werent taking vacations Also business sales happen for many more reasons than just an owner deciding to sell his company Sometimes its a marriage issue a confl ict with a spouses career a need to relocate disability retirement etc All of those things happened last year at the same pace they ususally do Edmonds says but fewer deals got done mainly because of the poor credit market LANDSCAPEMANAGEMENT NET JUNE 2010 S22 In a typical deal structure a private equity fi rm is looking to invest very little of its own money it borrows several times the size of its investments Long adds Easy credit makes this work But todays credit market is certainly not easy The credit market is not perfect but it has already improved a great deal Edmonds says And the stimulation of the Small Business Administration SBA lending program was the most successful part of this provisions introduced did cause SBA lending to take off and some deals that were in discussion became viable in the fourth quarter of 2009 when deals increased What does this mean for 2010 Were going to see a doubling up effect Edmonds predicts PE squared One can pretty quickly conduct an online search of the private equity fi rms interested in the landscape and lawn care business Edmonds says These fi rms raise funds from investors that are used for the equity portion of acquisitions But those are always leveraged with other fi nancing that is arranged deal by deal particularly for platform acquisitions the initial industry deal a private equity fi rm makes Edmonds explains Then after the platform acquisition there is usually a series of follow on acquisitions that happen much quicker and involve less complication and fewer steps because the company has established a credit agreement These larger private equity fi rms seek out 20 million plus companies for their platform acquisitions From there size still matters for the majority of acquisitions usually top 150 companies Corbett says But the trend to buy good smaller companies also is growing by private equity fi rms operating on a smaller scale Brighton Partners recent acquisition of a 70 stake in 5 million to 6 million Lawn Dawg Nashua NH is a good example of this Then there is a third world of private equity interested in the landscape market one backed by family wealth They operate the same but are using their own money vs raising funds Edmonds explains pointing to Michael Dells MSD Capital as a good example of this type of business They are making the same kinds of deals but dont put out press releases like the tradi