Rentokil Rising

Features - COVER STORY

An aggressive acquisitions strategy has fueled the UK firm’s rapid expansion in North America, but deep pockets aren’t the only reason this global brand has become a force to be reckoned with in the U.S. and Canada.

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September 10, 2017

By Dan Moreland

Editor’s Note: In the second of our three-part series on the mergers and acquisitions market, PCT magazine examines how Rentokil Initial has altered the competitive landscape of the North American pest control market.

Since implementing an aggressive acquisitions strategy under the leadership of President and CEO John Myers, Rentokil North America has become a force to be reckoned with in the U.S. and Canada, rising to #3 on PCT’s Top 100 List with more than $600 million in annual sales.

In March of 2006, following its high-profile acquisition of J.C. Ehrlich — the largest family-owned pest control business in the U.S. at the time — PCT published a cover story titled, “The British Are Coming.” The article chronicled the global pest control giant’s desire to become a major player in North America, the most lucrative pest control market in the world, leveraging J.C. Ehrlich’s stellar business reputation and deep market relationships as a “platform” company to achieve its long-term goals.

Since that time, Rentokil Initial — unlike other companies expressing similar aspirations before them (think Waste Management) — has delivered on its strategic vision, embarking on an impressive buying spree that remains unabated to this day. In fact, the company’s list of high-profile acquisitions reads like the “Who’s Who” of the pest management industry, with such well-known names as Western Exterminator, Presto-X, Buffalo Exterminating, Eradico Pest Services, Anderson Pest Solutions, Isotech Pest Management, A-Active Termite & Pest Control, Watch-All Pest Control, and the Oliver Exterminating Group now under the Rentokil Steritech corporate umbrella.

And the company’s purchase of The Steritech Group in 2015 dramatically expanded the company’s commercial market footprint, providing access to the highly competitive auditing and brand protection business.

But if you think Rentokil Steritech’s success is only a result of its parent company’s deep pockets, you’d be wrong. Its success in North America, which is mirrored by its success in the 70 markets it serves around the globe, is a result of a strategic vision that includes: (1) technical expertise shared across all its markets; (2) digital leadership and web expertise designed to provide an enhanced customer experience; and (3) growth through mergers and acquisitions.

As evidence of its commitment to leverage technology to enhance its customers’ experience, the company’s Annual Report states: “We now have digital expertise at every stage of the customer journey from web searching through to e-billing. In addition, over the last three years we have been developing, testing, and deploying our range of remote monitoring sensors and connected devices.”

PestConnect, the company’s remote monitoring system for rodents, is now used in more than 1,200 accounts across 12 countries and has delivered more than three million individual messages relating to the presence of rodent activity and service productivity. Further, the company’s myRentokil online customer portal has been deployed in 20 countries with more than 60,000 customers registered.

On the M&A front, since 2016 the company has acquired 54 pest control companies around the globe, including 22 in North America. Just this past year, Allgood Pest Solutions, Heron Home & Outdoor, Connor’s Termite & Pest Control, Fischer Environmental Services, and Batzner Pest Management joined the fold. As evidence of just how important North America has become to Rentokil Initial, its North American business now accounts for more than 30 percent of the overall revenue of Rentokil Initial.

PCT recently had an opportunity to sit down with John Myers, president and CEO of Rentokil North America, for an exclusive interview to learn more about the man leading the company’s North American pest control operations, as well as his future plans for the company.

EXECUTIVE FORUM INTERVIEW: John Myers

A candid discussion with the man who has helped transform the competitive landscape of the North American pest control market.

As a young man attending high school in Westport, Conn., John Myers was a scrappy, unspectacular athlete who was easy to overlook. Five feet 6 inches tall and 140 pounds, he was sufficiently talented to earn a roster spot on the Westport Wreckers soccer team, but not physically gifted enough to crack the starting lineup.

“I was the classic 12th man. I wasn’t a star, but I knew how to contribute, and no one was going to outwork me. I was a lot like Rudy,” Myers says with a laugh, referencing the popular 1993 movie of the same name that chronicled the exploits of an under-sized “walk-on” who despite overwhelming odds earned a coveted spot on the Notre Dame Fighting Irish football team.

In the film’s final scene, Rudy Ruettiger is triumphantly carried off the field on the shoulders of his teammates after tackling the opposing team’s quarterback for a sack, prompting generations of movie-goers to chant “Rudy, Rudy” as the final credits roll.

While Myers may not have experienced such an inspirational ending to his high school soccer career, those character-building years as an “under-the-radar” athlete gave the longtime executive an appreciation for the key role individuals play in achieving team goals.

The result has been greater success in the boardroom than he ever could have imagined on a playing field, laying the foundation for a distinguished business career that is not only transforming Rentokil Steritech, but the entire North American pest control market. PCT magazine recently traveled to Reading, Pa., to interview the president and CEO of Rentokil Steritech, a company that in a relatively short period of time has grown from a modest $220 million business to a $600+ million industry giant giving Rollins Inc. and Terminix a run for its money. Excerpts from PCT’s 90-minute interview with the self-deprecating industry executive, who Rentokil Initial CEO Andy Ransom has charged with growing the company’s footprint throughout North America, follows.

PCT: Your most significant business suc-cess prior to joining Rentokil Initial was with the uniform provider Cintas, but you also launched an unsuccessful start-up company early in your career. What did you learn from that experience?

Myers: I learned that start-ups are hard! I was on the ground floor of a water sanitizing business and I learned that when you work for a large company you think a lot about profit and loss, but when you work for a start-up, you’re singularly focused on cash flow. On occasion, I’d have to wait until Monday to cash my paycheck. I think that’s something a lot of companies in the pest control industry understand. Launching a start-up business was a great, great adventure. It was meant to be a “grand slam” so I would never have to work again, but that didn’t happen. It was more of a “ground-rule double” (laughs).

PCT: After experiencing such a significant business and personal setback, did you ever question your ability to lead?

Myers: No, not really. I’ve always had confidence in myself, understanding both my strengths and weaknesses as a person and as a manager. I worked hard in the business and we gave it our best shot; it just wasn’t meant to be.

PCT: You later joined Cintas, the world’s #1 uniform provider, as vice president of business strategy. How did that opportunity come about?

Myers: A friend was a headhunter who approached me about another potential job. After telling me about the company, he said, “You’d be a bad fit there, but you’d be perfect for one of my other clients who is looking to fill a key management position. Let me call the CEO right now and see if he can see you.” I visited Cintas CEO Bob Kohlhepp (now retired) and following several interviews landed the job. It ended up being one of the highlights of my career and it happened completely by chance. That’s a story I always tell young people who are interested in pursuing a career in business. You can plan a lot in your career, but some things just happen randomly. Your job is to be prepared when those unexpected opportunities arise.

PCT: How would you describe your years at Cintas?

Myers: What I remember most of that time is how much fun we had growing the business. Cintas was a company that had a reputation for employing really smart people, so I knew I was going to have to bring my “A game” every day. In my first job as vice president of business strategy, I was given the task of trying to figure out what new businesses Cintas should add in the future. I developed a complex business matrix to help give us the answers to that question and I investigated the best opportunities. Eventually, I was promoted to senior vice president of sales, where I ran a sales organization of 2,000 sales reps, 200 managers and 10 directors. It was a great job, and it was a huge undertaking. We were “Best-in-Class” in our industry and the marketplace responded, allowing us to grow significantly.

PCT: What was the most valuable lesson you learned during that time?

Myers: It’s probably the importance of front-line service delivery. If I went to visit a Cintas location, before I did anything else I would walk into the factory and shake the hand of every person working on the floor and ask them how they were doing. The worst thing you can do from a management perspective is visit a service location and walk directly into a meeting room. People in the office know you’re there, but if they never have a chance to interact with you, how do they know you care? That’s crazy to me. Maybe because I used to work in production early in my career, I know that the hour I spend saying hello and talking with everyone is really worthwhile.

PCT: After achieving success at Cintas, what prompted you to pursue a career in the pest management industry? To some, leaving an organization generating $3 billion in business that provides “Best-in-Class” service for a much more modest opportunity would seem like a step down. 

Myers: When the recruiter told me about Rentokil’s plans for the North American market, I said, “Wow, that sounds like an amazing opportunity.” I was running this huge entity at Cintas, so the chance to run something more manageable in the $220 million range with 60 locations (at the time) sounded really good. And I loved the pest sector. Early on in my tenure here, I was telling someone outside the office about the business and he got a frown on his face. I thought to myself, “If he only knew what the pest control industry was really all about. You show up like a knight in shining armor and people are happy when you leave because you’ve solved their pest problem. There aren’t many jobs like that anymore and it’s very gratifying.”

PCT: Was your transition to the pest control industry very difficult?

Myers: No, not really, particularly when you consider the two businesses have so much in common. First, they’re both route-based businesses. Second, they both provide an essential service to their customers. Third, they’re both relatively low-cost items on the P&L. If you’re in the manufacturing business, the cost of uniforms is way down on the list of company expenses. The same is true of pest control, but that doesn’t mean it’s not important. Victor Hammel, whose company we purchased in 2006, always says, “Pest control is a low-interest category until you have a problem. Then it’s not.” I agree with him.

PCT: While the two businesses have much in common, how are they dissimilar?

Myers: The uniform business is much more like UPS than pest control. It’s a delivery and pick-up service. Pest control is much more complex. We have trained technicians that have to diagnose a situation in a complex environment and respond accordingly. As a result, we’re much more dependent on the technician providing high-quality service delivery than Cintas. That makes this business much harder to run because your front-line service personnel must perform at a very high level in a decentralized work environment. The fact of the matter is in the pest control industry, the company with the best technicians win.

PCT: Why do you think you were chosen to lead Rentokil Initial’s North American business?

Myers: I think I was chosen for two reasons. First, I demonstrated that I knew the position was about tactical execution first and strategy second. Successful pest control is about our front-line colleagues doing a lot of things unsupervised the right way every time. A lot of companies work strategically far ahead of their ability to tactically execute. My father used to say, “This country is littered with great ideas poorly executed.” But if you get people in the right place and they do the right thing, not just some of the time but all of the time, you’ll be successful.

PCT: Since being named president and CEO, what has surprised you most about the position?

Myers: How well educated and passionate our technicians are about the services they provide every day. If you’re from outside this industry you think they walk around and simply spray baseboards, but the exact opposite is true. They’re assessing and evaluating insect behavior, taking into account various environmental conditions and applying different treatment options. They have a passion for what they do; they’re not simply interested in delivering a service.

PCT: Since joining the company, Rento-kil Initial has been a major player in the M&A marketplace. What lessons have you learned from those experiences?

Myers: I learned that companies are a reflection of their leaders. We do a lot of acquisition work and I never get to meet a single technician or top-line manager prior to buying a company. Which raises the question, “How do you bridge such a big gap?” when deciding to purchase a company or not. You do it by talking in an in-depth fashion with the owner because the leadership team is a reflection of the owner.

The first time I talked to Victor Hammel, John Whitley, Michael Katz and many others, I knew these were good men who led good companies. Rather than talking about profit margins, they talked about what quality pest control looks like; how they compensated their people; and the role quality service played in their high customer retention rates.

PCT: In addition to quality leadership, what else is Rentokil looking for in an acquisition?

Myers: We look for companies that have the following three attributes. First, they must be a cultural fit for our company. Second, they must provide high-quality pest control services. And third, they must charge a premium price for those services. If they have those three attributes, they’re likely a good fit for our company.

PCT: Is organic growth also a part of Rentokil’s long-term strategy?

Myers: Yes, it is. We’ve always been interested in growing via green fields. We’ll go into a new market and put a sales rep and two techs into that location, along with an energetic young manager, and direct them to grow the market. We know we’ll lose some money the first couple of years, but eventually it will pay off. During the past five years, we’ve probably done 10 of those market launches. Personally, as an ex sales and marketing guy, I love that approach to business. Starting something 100 percent organically is exciting.

PCT: Is that another reason for Rentokil’s aggressive M&A strategy? To acquire the necessary talent to support the company’s rapid growth?

Myers: That’s my job in a nutshell, to expand our footprint through acquisitions and organic start-ups. And the only thing currently limiting us in fully implementing that strategy is our access to human capital. We need two to three energetic managers to come off the bench every year to achieve our green fields strategy. If you do it with the wrong person, you’ll fail and take a step backward. But if you identify the proper people and successfully recruit and acquire talent, you’ll be successful.

PCT: Rentokil made headlines in 2015 with its high-profile acquisition of Steritech. What made Steritech such an attractive acquisition target, prompting Rentokil to pay a premium price for the business?

Myers: There were a number of characteristics that made Steritech attractive to us. First, there was a very clear cultural fit between the two companies. Second, they had a high-caliber management team with a sophisticated service delivery model in place. Third, they charged a premium price for their service. Fourth, we really liked the markets they served, high-dependency commercial accounts and restaurants. Fifth, their geographic footprint was a great infill for us. The markets we were strong in, they were weak in, and vice-versa. When you put it all together, the fit was unbelievable. Finally, we really liked their brand-standards business. We know we paid a premium price for the company, but we did so because it was a transformational purchase for us.

PCT: Some say Rentokil overpaid for the Steritech business. Would you agree?

Myers: I’ll readily admit we paid a significant premium for the business, but we’re not unsophisticated buyers. Steritech was a scarce asset of scale and a premium business. We do know what we’re doing. By the way, we’ve realized the synergies ahead of our plan and the market has validated the decision in a higher stock price for the company. They understood the transformational nature of the acquisition.

PCT: What is Rentokil Steritech’s budget for acquiring additional pest control companies in 2017-2018 and beyond?

Myers: We don’t have a specific budget in place. We can’t control when companies decide to sell, so you have to be opportunistic and ready to move when owners are interested in selling. As a public company, we told the capital markets we plan to spend c£150m across the globe. It really comes down to how many acquisitions the organization can effectively integrate over a particular period of time. We could buy 100 companies and if only 10 are integrated successfully, we wouldn’t accomplish our goals. Buying companies is the easy part; integrating them is the hard part. The Harvard Business Review indicates that 65 to 70 percent of acquisitions fail to deliver on their business case. Fortunately, our success rate is much higher as we know how to integrate businesses effectively. We target and purchase high-performing companies that we know fit with our culture so we can integrate them successfully, and that’s what we plan to continue to do in the future.

PCT: The M&A market shows no signs of slowing down; how long do you expect this “bull market” to continue?

Myers: I think the window is closing on the current bull market. Companies have made a lot of acquisitions and solved some problems, including filling holes in their geographic footprint. As interest rates creep up, making the cost of capital higher, M&A activity should slow. I don’t think it will shut down completely but it should slow, returning to more historical levels in the next 12 months.

PCT: Given its recent acquisition activity, is Rentokil Steritech’s goal to be the largest pest control company in North America?

Myers: The short answer is no. That’s because becoming #1 in a particular market is not a strategy. If that’s the ultimate outcome of our long-term strategy, that’s fine, but it’s not our goal. Doing what it would take to be #1 might change us in ways we don’t want to change, so we’re okay being #3 and simply being the best.

PCT: Tell us about Rentokil Initial CEO Andy Ransom. How much oversight do you receive from him and the global operations team?

Myers: Andy Ransom is a wonderful leader. Although educated as a lawyer, he’s a very intuitive, blue-collar guy, with a keen intellect who has worked his way up through the organization. In terms of his oversight of me, it’s pretty light. We talk on a regular basis, touching base frequently. Our global business operations are very supportive of Rentokil Steritech from a financial perspective. If we want to make an acquisition, we have the money to do it. Access to capital is one of the pros of working for a public company. The M&A, finance and global sales support I get are all very positive. Rentokil Initial is headquartered in Great Britain, so Andy’s management style is more like benevolent parenting. He’s not hovering over me and my management team. However, if you start getting bad grades or acting up, he becomes much more involved.

PCT: As president and CEO Rentokil North America, you’re required to look 5 to 10 years down the road, perhaps more. Given that responsibility, what do you see on the horizon for the industry?

Myers: We don’t really look 10 years down the road. The furthest we look is five years out. I know that may sound like we’re not very strategic, but I don’t think we need to look more than five years in the future. All of our decisions are based on three drivers. First, our customers want a more transactional type service. How people buy today has changed dramatically. Therefore, we need to make purchasing our pest control services easier and more transactional. Second, the green/organic requests are undoubtedly going to grow and we think that’s a good thing. That’s why an IPM approach to the business is so important. It’s all about exclusion and identifying what is causing the pest pressure rather than simply treating the symptoms of a pest problem. Pest control is complicated and customers want more from PMPs today than ever before. However, with complexity comes challenges. But I like the higher levels of complexity of today’s pest management services because it means not everyone can do what we do. Third, the technology plays we’re investing in will allow our front-line colleagues to be more successful in the future. We’re investing heavily in technology to reduce the variability of our service delivery model. The result of focusing on these three drivers is happier customers, greater customer retention, and lower costs, which we believe is a winning strategy.

PCT: In the nine years you’ve been employed by the company, what letter grade would you give yourself?

Myers: I’d give myself a B+. That’s because I believe in a philosophy of positive discontent. While we’ve been successful, we can always do better, so I think it’s important to always push yourself. I joined the company in 2008; those were tough times to run a business. We had to put a lot of things in place during one of the toughest economic times in our nation’s history. Despite the odds, I think we did more things right than we did wrong.

PCT: How do you measure success?

Myers: Obviously, we must perform financially, exceeding our financial goals every year. We also conduct an engagement and enablement survey every two years to better understand how “happy” our colleagues are. Ironically, many high-performing companies have slightly lower engagement and enablement scores than lower-performing companies. The reason is high-performing companies are constantly implementing change and change is scary and it affects your scores. But the reason those companies are high performing is they’re consistently implementing change to reflect what is going on in the marketplace. You need to find that sweet spot of change — not too much to disrupt the organization and negatively impact the quality of your service — but just enough to constantly evolve and remain ahead of the competition in addressing customer needs. Part of your culture must include a positive-change culture and I think we’ve done that successfully at Rentokil North America.

PCT: When it comes time to hand off your responsibilities to somebody else, what would you like people to say about your tenure at Rentokil Steritech?

Myers: It would probably center around this whole concept of collaboration and the front-line orientation of the business. No doubt, I will have missed something strategically during my tenure as president, but I would like my colleagues to say that I really did care about them and was truly interested in their success.