From Where I Stand

I was recently talking to a contractor about Bell. This was the end of his road. A business that stood proud in the moment landscape businesses were having with mergers, a community for 40 years simply vanished because he needed out acquisitions, private equity, and co-op groups. We marveled at seven years too soon. how landscape businesses during the pandemic had become the As the Director of the ILCA, I am always the first and the last belle of the ball. It seemed that every equity to know about mergers and acquisitions. I hear group was taking a long look at landscape the very first whispers as companies ask me for legal companies as a way to diversify portfolios of and valuation referrals. After that, absolute silence service related trades. as management operates under an NDA. Details are

This contractor had children in the business- hammered out over weeks, months, and even years. es and therefore had an exit plan that fewer and Finally, I get a jubilant call from the owner telling fewer ILCA members have. He joked, “I want me he’s selling. The last person anyone involved in a to put a sign at the entrance to my shop for all merger wants to tell is the guy who has a bullhorn for the private equity guys that reads ‘Keep Out: I the entire industry. I respect that. Have Kids in My Business’, hopefully, that will With that said, I do wish I had a few moments scare them away.” to speak with each owner considering a change.

I have never seen an environment like this I have now seen dozens of these happen over the before. Another contractor joked with me, past few years. The conversations that used to “If you aren’t talking about electric equip- happen late at night at the bar at iLandscape now ment or selling your company, you are doing can be had by picking up the phone and speak2022 wrong.” In just a few years, a brand new ing to the right acquisition specialist. The act of offramp has been provided to landscape busi- considering a sale has been normalized…for the ness owners that did not exist for decades. There was now a hungry audience of inves- Merge moment. Once the owner gets past the excitement and tors waiting to buy companies that years ago would’ve gone bankrupt or been stripped for parts. Ahead pride of courtship, the real work begins. Frankly, there are some owners who just want to be loved.

The old way to transition out a business was They just want to know that companies are interto give it to your kids. The problem was that ested in them. They are the happily married man many owners did not have children who were having a harmless flirt with the waitress. It just interested in a second or third generation of small business own- feels good to know they still have it. They have no real plans to ership. Let’s face it. Times have changed when it comes to rais- sell the business, but it’s fun to talk about the business with those ing kids. It is an American cultural ideal to allow our children to who see the same level of value in it as the owner. forge their own paths and to have them live better lives than we If owners are willing to take the plunge, they need to consider do. Those parameters don’t necessarily lead back to a life run- what an exit plan looks like. Owners have to consider if they want ning a landscape business. to be free and clear or will need to work in the business. Unless

In lieu of that, finding an internal employee to buy the busi- the business is very, very large, the final payout will not be “smell ness is even more of a longshot. Management level employees, ya later, I’m moving to the Keys” money. This may be 3-7 years even those paid well, will rarely have the equity to buy out an of salary + profit in normal years. That will be a big check for owner for millions of dollars. We simply don’t pay employees many owners, but not reasonable to think that money can last a that way in the landscape industry. Also, our employees aren’t 55-year old owner for the rest of his or her life. That money can our kids. These employees have their own problems and obli- be invested wisely, but it’s also likely that same owner would gations. It isn’t logical or fair to a manager to expect them to be faced with a choice of having to find a new job or start a new behave like offspring and stand with an owner even when it company just five years later. This decision is much easier for a doesn’t make financial or professional sense. 70 year old owner who can just walk away.

I remember working with a contractor who was trying to Some owners are totally content to stay employed by the new sell his business at the height of the recession. This was back ownership group. Afterall, it’s the management, not the craft that when terms like “private equity” and “mergers and acquisitions” usually burns out owners. The owner still wants to design and were used by rich guys with yachts. It was time for him to sell build or maintain landscapes. They want to meet with clients they his business. He had no kids that were interested. He had “an like. They want to be around the crews and see the business sucemployee in mind” that didn’t pan out after years of grooming ceed. They want to be an advocate for tradition and the old ways. him to take over. He was stuck. I referred him to the scant busi- They also like the steady paycheck and no more fear that the business development agents that operated in our space. ness lacks the capital to weather bad patches. Those are someone

Due to his more rural location, the business was not valued else’s problems now. An infusion of cash and resources provides at anything close to what he anticipated. He was a dead end. the safety net that reduces stress while letting the previous owner He called me, almost in tears that his equipment would now be focus on the fun parts of the business. sold at auction. His design-build clients were good for memories There needs to be a discussion on identity. It seems that each and photos, but did not posses real value. His maintenance was sector of the landscape industry is handling this differently. Lawn decent, but would be quickly soaked up by his competitors. His care, tree care, and suppliers like rebranding. This makes sense. property would be leased and turned into a dry cleaner or a Taco There is more consistency of service and less of a boutique feel

The Landscape Contractor December 2022

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with these types of businesses. Consumers know the basic services and the size of the market share is attractive. Consumers like knowing they are working with the biggest lawn care or tree care company in their market. They like seeing those trucks everywhere and reinforces they are using the industry leader.

Design-build is totally different. Those consumers want the art and expertise. They want the experience to be customized and personal. They want to find the right fit for a landscape project and they love being able to refer this hidden gem to a friend or neighbor. I will not be surprised if design-build landscape companies don’t rebrand and other types of service providers end up opting for a rebrand if we look at this from the lens of a consumer.

Rebrands also can upset the apple cart based on the demographics of the workforce. Americans understand how impersonal and cold business can be. We don’t bristle at the idea of coming to work one day and seeing a new work shirt with a new logo. Latinos are entirely different. The workplace is the most stable organization many Latinos interact with. It can feel like a betrayal to many field staff that the business is changing hands, especially if those hands belong to a competitor that crews had negative interactions with in the field. Great care should be taken if considering a rebrand. Speaking to the most seasoned employees first is the best play. Those employees were a lucrative part of the deal and if they bolt, the rebranded firm just lost significant value.

Owners have to understand, this is business. Even if they remain employed, they simply cannot make promises to their current employees that how it is today will match how it is tomorrow. If private equity is involved, there will be lofty performance metrics that may be well above industry standard. Additionally, ownership at the private equity level can change in a heartbeat. The business can be sold from one group to another and the business starts all over again. For an owner to stand up at a companywide meeting and say “nothing will change” is naïve at best, dishonest at worst.

In the end, let me say on record, this new interest in purchasing successful landscape businesses is good for the industry. It’s great, actually. If an owner has a business worth selling, is at an age where it makes sense, and the business will achieve new heights under new ownership than everyone wins. It is not quitting because an owner wants to enjoy his or her later years free from the stress of small business ownership. Not everyone has kids or a solid #2 or the desire to work until they are 80. Some of us signed up for a career, not a life sentence.

Our Education Committee jokes that we can never offer classes on this topic at iLandscape. It will be the most sought-after session no one attends. We would need to provide black hoods or fake mustaches. Everyone needs to better understand what to consider if selling the business becomes a reality at some point. In lieu of a class, columns, articles, and anonymous webinars will need to be the starting point. Having an exit plan is great now that there are more doors than ever marked “Exit.” If you decide to take it, just realize there is more behind that door than you think.

Sincerely,

Scott Grams, Executive Director November 23, 2022