What’s going on with M&A in the marketplace? Is Rollins really selling? Or is it all related to taxes? Here are my thoughts and what it all means to your business.
On June 4, I was sitting at my computer doing what every deprived sports fan has been doing during the sports vacuum caused by COVID-19. I was day trading. In addition to the fast-moving stocks I watch, I always keep an eye on pest control industry players because stock price is one of the many factors we use to gauge the market and determine maximum value for our M&A clients.
In mid-afternoon, Rollins stock popped to an all-time high and within a few minutes dropped 5 percent. Fortunes made and fortunes lost, all in a few minutes. With my curiosity piqued, I started to do a little research on what just happened, and over the news wire I found this Bloomberg article: “Rollins Considering ‘Strategic Options,’ Including Potential Sale.”
Now why would the Rollins family want to sell this fantastic empire? Well, I can’t confirm the story and I couldn’t even imagine what this would look like. When contacted by other media outlets, a company official said, “The company has a policy of not commenting on market rumors one way or the other.”
WHY WOULD THEY SELL? So, as of press time, we know nothing about a potential Rollins sale. But there a few things we do know. If the Rollins family, or any insider, tried to sell large blocks of stock on the New York Stock Exchange, alarms would go out and the investment community would smell a rat and the stock would plummet. A company with a $14 billion valuation, with more than half owned by the Rollins family, would immediately drop in value. So how would the family take some chips off the table without alarming investors? They would hire an investment banking firm to find institutional investors interested in taking an interest in the firm and sell a block of ownership outside of the public markets. With this type of strategy, we’d most likely see very little, if any, value degradation. This is how it would be done.
But why? Why would the Rollins family even consider selling shares? One reason would be to diversify their family fortune into other assets, thereby reducing their exposure to specific asset valuation risk. Another is there is tremendous risk in the overall economy due to business cycles and recent events. A major risk as I see it is that when all the government stimulus currently being pumped into the economy dries up, we go into a deep recession, and that scenario would have a negative impact on the stock market, and therefore the Rollins stock price drops along with all others.
Diversification in this case helps to mitigate valuation risk as the market falls and provides many options with respect to family estate planning. Sounds plausible, right? But with the government pumping trillions of dollars into the economy, who is going to pay for it? Without getting political here, we all will through increased taxes. It doesn’t matter who wins the election in November, taxes are going up. In fact, Joe Biden already has proposed eliminating capital gains taxes for anyone making more than $1 million. Sounds like a lot of money, right? But in the year of the sale of their company, many pest management professionals will far exceed that $1 million.
CAPITAL GAINS TAXES? Currently, the difference between the federal long-term capital gains rates (20 percent) and maximum marginal ordinary rates (37 percent) is 17 percent. What if long-term capital gains are eliminated, as suggested by Biden, and maximum ordinary income rates are increased to 40 percent — just 3 percent higher than current? The increase in taxes that the Rollins family or anyone else, including you, if you sell your company, would be 20 percent of the purchase price.
For example, let’s assume the Rollins family diversifies by selling $2 billion worth of stock (not even half their interest). Today, at a 20 percent capital gains rate, their federal capital gains taxes would be $400 million assuming that stock was owned personally. If they sell under the tax increase scenario above at 40 percent, they would pay $800 million in taxes. That’s a $400 million (100 percent) increase in taxes!
You see, if we sell at a high valuation at a very favorable tax rate, we leave the blackjack table with all the chips. If we stay and keep playing, we give back a lot of our winnings. If you take nothing else from this article understand this: We have no control over either the valuation risk if the economy tanks or the tax risk, which is almost certain. And in my opinion, my friends, this is the reason Rollins is or should be considering taking some chips off the table.
FUTURE M&A DEALS? You may be thinking, “Interesting stuff, Dan, but how does this affect me?” Well, it affects you the same way. If values decline due to the economy (or any other reason for that matter), that is valuation risk. Once the nation was introduced to COVID-19, the two largest strategic buyers of pest control firms left the market (Rentokil and Anticimex). While they will be back soon, expect valuations to be down from the top of the market. That said, there are still deals to be done now, but they are subject to valuation risk.
The second shoe that will fall, in my opinion, is the risk of rising tax rates. The two combined risks will affect after-tax proceeds of deals in the future, likely starting after election season.
Let’s look at how this could play out with a one of our clients. The box here shows an M&A deal that my firm did before the COVID-19 crisis.
The difference in after-tax proceeds between Scenario 1 and Scenario 2 is $5,097,800 to the downside — just about 49 percent less.
Is this realistic? It depends on to what degree the valuations fall and how much taxes rise. But let’s say that I overestimated the downside by half. That’s still a total after-tax proceed degradation of more than $2.5 million.
FOOD FOR THOUGHT. Questions you should be asking yourself now include:
How much after-tax proceeds do you lose by waiting to sell if the economy falters and if tax rates increase?
How much do you have to grow your business just to get back to even using the lower valuations and higher tax rates?
Would now be the right time to sell given 1) and 2) above?
As you can see, if you’re thinking of taking advantage of the bull market that the pest control industry has experienced over the last several years, you may want to look at your options now.
Daniel S. Gordon is a CPA in New Jersey and owns an accounting firm that caters to PMPs throughout the U.S. as well as an M&A brokerage business. Learn more at www.sellmypcobusiness.com.
National Pest Management Association to Host Virtual PestWorld
FAIRFAX, Va. — The National Pest Management Association’s Board of Directors voted unanimously on July 22 to host PestWorld as a virtual convention instead of the previously scheduled in-person event in Nashville. NPMA said the virtual event still will include world-class keynote speakers, educational sessions and the industry’s largest trade show. Dates for V-PestWorld will remain Oct. 13-16.
NPMA conducted qualitative and quantitative market research with stakeholders, including NPMA members, past attendees, speakers and suppliers. NPMA said considerations included the fact that Nashville has limited group gatherings to a maximum of 25 people; the mayoral announcement that this phase would be in place for the foreseeable future; an infection rate for the COVID-19 virus trending higher in Nashville; quarantines imposed on people visiting from certain states; travel bans; and the health and safety concerns for all attendees.
“Many of our sponsors, exhibitors, speakers and pest control companies have a travel ban in place through the remainder of 2020 so they would not be able to attend any face-to-face events,” said Alexis Wirtz, senior vice president of meetings and conventions for NPMA.
“It’s not an easy path for any of us, and none of us have a roadmap to rely on. After several months of looking at multiple options on how to host PestWorld 2020, the board voted unanimously today to put into action what we feel is the best option for the industry,” said Scott Steckel, NPMA president. “We are really pleased that the PMP and supplier communities have expressed such overwhelming support of NPMA and this V-convention. We look forward to an exciting event.”
“With the decision of the board, our focus now shifts to planning and executing the best virtual convention possible for our industry. Although I’m disappointed we couldn’t all get together in Nashville this October, I’m hopeful that a virtual event will allow for an even greater participation from those in our industry,” said Justin McCauley, NPMA president-elect.
EPA Orders Amazon, eBay to Stop Sale of Certain Pesticide Products
WASHINGTON, D.C. — The U.S. Environmental Protection Agency (EPA) recently ordered Amazon Services and eBay to stop selling a wide range of pesticide products. EPA says these products are unregistered, misbranded or restricted-use pesticides, and/or pesticide devices that make false or misleading claims. As two of the largest e-commerce marketplaces, both companies oversee millions of product listings, either directly or via third-party sales. The products subject to EPA’s orders also include several products that are marketed with false or misleading claims of efficacy against the novel coronavirus, SARS-CoV-2, the cause of COVID-19.
“These stop sale orders to Amazon and eBay demonstrate the Trump Administration’s continued commitment to protecting the health and safety of Americans,” said EPA Administrator Andrew Wheeler in a press release. “We remain vigilant against the claims of producers that falsely assert their efficacy and safety. Of particular concern are products that falsely claim to be effective against COVID-19. It is our duty to continue transparent communication with the public on unregistered products that may cause injury to consumers, and immediately remove them from commerce.”
“American consumers need to know that the pesticide products they purchase online are effective and safe for their use,” said EPA Assistant Administrator for Enforcement and Compliance Assurance Susan Bodine. “The orders we are issuing are two examples of EPA’s continuing commitment to stop unlawful sales of unregistered, mislabeled and restricted-use pesticides on retail websites.”
“The proliferation of unregistered pesticides in the e-commerce marketplace, especially during this unprecedented time, poses a significant and immediate health risk to consumers, children, pets and others exposed to the products,” said EPA Region 10 Administrator Chris Hladick.
In April, Administrator Wheeler held discussions with Amazon, eBay and other e-marketplaces on the availability of products that are unregistered, are registered but may be used only by trained applicators, or that make unsubstantiated and potentially dangerous claims. Despite those discussions, EPA said that Amazon and eBay have thus far failed to consistently keep unregistered, misbranded or restricted-use pesticides, and pesticide devices, off their websites.
EPA’s action prohibits Amazon and eBay from distributing, selling or offering for sale a specific list of products. (To view the stop sale orders, visit the “online extras” section of www.pctonline.com.)
None of the pesticides in the Amazon order are registered with EPA, which is a requirement for sale in the U.S. In addition to unregistered pesticides, the eBay order includes pesticides classified for restricted use. It is unlawful to sell these types of products to the general public because they have the potential to cause injury to human health and the environment without additional restrictions, EPA says.
NPMA Virtual Academy Kicked Off in July
FAIRFAX, Va. — NPMA Academy traditionally has been an in-person event with hands-on team-building activities for developing and emerging industry leaders. Due to the COVID-19 pandemic this year’s event is being held virtually, so while the venue has changed, NPMA says its Leadership Networking Community (LNC) and lead sponsor Corteva Agriscience have put together a program to deliver the “Academy experience” and those same relationship-building and business growth experiences in a different platform.
NPMA chose “Superheroes” as a theme for this year’s Academy and NPMA CEO Dominique Stumpf kicked off the July virtual event noting that “this theme could not be more fitting, because in the state of the current world, every single one of you are heroes. You are the protectors of public health and property. It is NPMA’s mission to support you and your efforts to be professional, knowledgeable and profitable.”
Stumpf then introduced Mark Neterer. business leader, pest management, Corteva Agriscience, who thanked attendees for participating. Neterer said although he misses the in-person event, he is excited that the virtual format gives attendees the opportunity to have “the Academy experience” throughout the year. Academy is about “getting to know a lot of people, learn from each other, develop some business skills and create networks for each other so that we can continue to do great things for this industry,” Neterer said.
Following the introductory comments, Academy attendees split off into breakout rooms where they got acquainted with their team members and received an overview of the event from team captains. Day one concluded with a team-building scavenger hunt. Each team chose a member who was given the task of finding five random items throughout their house. The Blue team took top honors thanks to the scavenger-hunting skills of Clint Sowle (Ecolab).
NPMA Academy continues through October with events taking place every other Thursday from 3 p.m. to 4:30 p.m. (EDT). Learn more at www.npmapestworld.org.
Industry Professional Cliff Mohrhaus Passes Away
Mohrhaus
ATLANTA — Cliff Mohrhaus, a professional in the chemical sales field for more than 40 years, passed away in hospice on June 19. He was 73.
Mohrhaus most recently worked as a consultant, forming Mohrhaus Consulting in 2006. In this position, he called on his industry experience in management, sales, marketing, research and purchasing.
Prior to becoming a consultant he served as vice president of professional products for Control Solutions from 2004-05, and as Verdicon’s business segments/strategic account manager from 2003-04. He also held sales and management positions at Dow Chemical for nearly 30 years.
Dr. Barry Pittendrigh Hired as Purdue University Osmun Endowed Chair
WEST LAFAYETTE, Ind. — In July, Purdue University announced that Dr. Barry Pittendrigh, a Michigan State University Foundation Professor, accepted the position as the Osmun Endowed Chair in Urban Entomology at Purdue University.
In the early 2000s, members of the pest control industry formed the Purdue University Endowed Chair Committee to raise funds for the creation of the John V. Osmun Endowed Chair. In addition to the Osmun endowed chair, the university also is home to the O. Wayne Rollins/Orkin Chair in Urban Entomology. A named endowed professorship is one of the highest honors a university can bestow on a member — or past member — of its faculty. It is an academic position permanently supported with the revenue from an endowment fund specifically set up for that purpose.
Pittendrigh
In a communication to the entomology community, Stephen Cameron, head of Purdue’s Entomology Department, wrote: “I am delighted to announce that Dr. Barry Pittendrigh has agreed to accept the position as the Osmun Endowed Chair in Urban Entomology. The Osmun Endowment honors Dr. John Osmun, former department head in entomology, a specialist in urban entomology and pest management who was responsible for building the reputation and scope of many of the signature urban programs within our department including the Pest Management Conference and the correspondence courses for pest management professionals. It was funded by a long-running campaign of our alumni and industry partners, finally vesting due to an untargeted bequest in 2016.
“Dr. Pittendrigh, currently an MSU Foundation Professor at Michigan State University, is a specialist in insect genetics and genomics with a magnificent research track record focusing on the genetics of pesticide resistance, with over 180 publications, and has received over $30 million in career competitive funding. He is both a graduate of our department (MS 1994) and a former faculty member (assistant professor 2000-04, associate professor 2004-08) and was honored with the John V. Osmun Award for Professional Achievement in 2016, our department’s highest alumni award. He leads an innovative program in outreach and public education (SAWBo) focused on multi-lingual tools, and a strong track record as an educator and a student mentor. Most recently, he has developed significant experience directing large collaborative projects and most recently led the USAID Feed the Future, Legume Innovation Lab. Dr. Pittendrigh has an expansive and compelling vision for taking the Center for Urban & Industrial Pest Management (CUIPM) into the future, and continuing our leadership in urban research, education and public engagement.
“I would like to thank everyone who contributed to the search for the Osmun Endowed Chair, particularly the tireless work of the search committee, Mr. Matt Dittman, Dr. Ashley Leach, Dr. Laramy Enders, Dr. Ameya Gondhalekar, Dr. Linda Mason and Dr. Doug Richmond (chair). Additionally, I would like to thank Judy Dold, Dave Mueller and Joe Long, who as representatives of the Osmun Donors group, and leaders in the pest management industry, played crucial roles both in raising funds to make the endowment a reality and in conducting the interviews for this position. Finally, I would like to thank Dean Plaut and Dr. Russell, Department Head in Agricultural Science Education & Communication, for their work towards a partner faculty hire for Dr. Pittendrigh’s wife Dr. Bello-Bravo, an impressive social scientist in her own right.
“Please join me in welcoming Dr. Pittendrigh back to Purdue, and in thanking everyone who contributed towards this great outcome.”
Now Available from PCT: Fly Field Guide, 2nd Edition
VALLEY VIEW, Ohio — Now available from PCT is the PCT Field Guide for the Management of Structure-Infesting Flies, 2nd edition. Edited by leading entomologist Stoy Hedges, the completely revised and updated second edition is nearly double the size of the original, offering valuable insights about fly identification, biology and control.
“This new edition contains many new photographs better illustrating identification characteristics among structure-infesting flies,” said Hedges. “The 4-color ID section is greatly enhanced with good photos of most every fly group or species included in the guide.”
Hedges added, “The fly field guide is designed to assist pest professionals in the field at the point of customer contact to better to be able to identify the pest on-site and to provide recommendations as to where to find the source of the target fly and for measures to remediate and control the infestation.”
This latest edition features all-new profiles of the following fly species:
Freeloader Flies
Little House Fly
Biting Midges
Ked Flies
Non-Biting Midges
Tachinid Flies
•obber Flies
Bot Flies
ICUP Announces New Website With Searchable Proceedings
BARCELONA — A new permanent website with searchable access to all papers and posters published in the International Conference on Urban Pests (ICUP) Proceedings has been released by the ICUP executive committee. The site acts as a focal point for the nine previous conferences along with a link to the forthcoming 10th ICUP in Barcelona to be held on the rescheduled dates of Sept. 13-15, 2021.
All papers and posters published in the ICUP Proceedings can be accessed on the site. Documents are keyword searchable and can be downloaded, in full, free-of-charge.
Almost 30 years of international urban pest science are chronicled, ranging from the advent of insecticide gel baits, the bed bug resurgence, the rise of rodenticide resistance, termite baiting techniques, invasive species, along with the development of natural products and biological agents.
Rollins Acquires Largest Independent Pest Control Provider in Australia
ATLANTA — Rollins announced that one of its Australian subsidiaries has acquired Adams Pest Control Pty Ltd, the largest independent pest control provider in Australia. The company says this acquisition solidifies Rollins’ national coverage in Australia. Adams Pest Control will join the Orkin Australia portfolio of brands alongside Allpest, Murray Pest Control, Scientific Pest Management and Statewide Pest Control.
Adams Pest Control has a long- established history in Australia, beginning in 1944. Not only does the company have more than 75 years of experience in all aspects of general pest control and wildlife control, Rollins said Adams is a market leader in the greater Melbourne and Adelaide areas. Peter Taylor, director and general manager of Adams Pest Control, will be joining the Orkin Australia team with the acquisition.
Matt Turek, division president of Orkin Canada, Australia and Asia, said, “I am thrilled to have Adams Pest Control join our family of brands in Australia. Their long history of exceptional customer service is a great complement to Orkin’s growing portfolio of business throughout Australia.”
PestWeb Podcast Launched by Veseris
AUSTIN, Texas — Launched earlier this year by Veseris, the PestWeb Podcast gives PMPs a unique view on national and local trends in pest management technology and services, the company says. Pulling together insights and advice from hosts Erin Monteagudo and Andrew Assir, along with an array of industry pest and product experts, Veseris says the podcast is giving professionals a growing library of ideas for boosting their business efficiency in a changing market.
Each month, PestWeb says its podcast provides access to new business tips, market trends and in-depth product advice. From suggestions on how to grow your business with T&O services to a close look at must-have mosquito control products, the PestWeb Podcast is connecting technicians and managers to tips on upselling, entering new markets, increasing customer satisfaction and more.
Episodes range from 30 minutes to an hour, making them an ideal choice for listening on the road or in the office, Veseris says.
PMPs can access the latest episodes of the PestWeb Podcast on multiple desktop and mobile platforms, including iTunes, Spotify, Soundcloud and Google Play. All episodes are also available at PestWeb by Veseris.
Education Made Easy: Commercial Virtual Conference in September
Features - PCT Event
PCT’s Commercial Pest Control Virtual Conference will be held in September. Attend from your home or office!
Of all the markets served by the structural pest control industry, the commercial segment has been the most severely impacted by the COVID-19 pandemic. PMPs serving the restaurant and hospitality industry, in particular, have felt the greatest pain, but no one is immune to the financial fallout from one of the worst public health crises in our nation’s history.
Yet despite the recent downturn in the commercial market, there is still significant opportunity for PMPs interested in servicing food-processing plants, health-care facilities, commercial kitchens, multi-family housing, senior living communities, food warehouse and distribution facilities, and other commercial clients.
If you’re considering entering this important field, or simply would like to learn more about the most effective treatment options and sales techniques for growing your commercial business, you’ll want to attend PCT’s Commercial Pest Control Virtual Conference on Wed., Sept. 23.
Sessions and speakers include:
IPM and Proper Documentation for Commercial Accounts. Speaker: Dan Baldwin, Director of Technical, Training and Regulatory Services, Terminix Commercial
How to Overcome Customer Service Challenges in Commercial Accounts. Speaker: Brad Baker, Director of Technical Services, Gregory Pest Solutions
How to Sell Profitable & Successful Commercial Services. Speaker: Patrick Quigley, President, Sales Training by Design
Fly Management in Commercial Accounts. Speaker: Stoy Hedges, Owner/President, Stoy Pest Consulting
In July, PCT announced the launch of our second annual Vehicle Wrap Contest, sponsored by Oldham Chemicals Company. Send PCT a photo of your company’s vehicle wrap for a chance to win $500.
Many innovative, marketing-focused PCOs have taken advantage of the fact that their service vehicles are constantly on the road, thus providing an opportunity to be a moving billboard. In recent years, PCOs have taken vehicle graphic design to a new level with creative, eye-catching service vehicle wraps. Now is your chance to win $500 from PCT and to be recognized among your peers for having the best service vehicle wrap in the pest control industry in our second annual “PCT Vehicle Wrap Contest.” PCT received a great response to last year’s contest and we look forward to your participation. (Watch a slideshow of last year’s winning wrap and finalists).
Simply fill out the brief entry form and upload a photo of one of your service vehicles for your chance to win $500. Entry deadline is Aug. 25. Wraps will be judged on the following:
If you have a standout vehicle wrap, like the one created by Kickcharge for Wingman Pest Control Owner Buck Hempel, send your entry to PCT for a chance to win $500.
Webinars On-Demand
PCT Online hosts informative webinars throughout the year. These webinars have been archived on PCT’s website, www.pctonline.com, and can be downloaded at any time. In early July, PCT hosted the “Inspection and Control Tips for Effective Mosquito Control” Business Booster webinar, featuring Stoy Hedges, PCO Gerry Marsh, and BASF’s Luke Barnett and Jason Myers. In mid-July, PCT hosted the Business Booster webinar, “Under Siege: Perimeter Pest Control in the Midst of a Pandemic” also headlined by Hedges and featuring Bayer’s Joe Barile. Download these and other webinars for free at any time at www.pctonline.com/videos/category/webinars.
Mosquitoes Sense Repellent Through Their Legs
Features - Mosquito Control
New research finds that mosquitoes’ legs play a central role in sensing and avoiding DEET.
For decades, people have fended off mosquitoes by slathering themselves with DEET, the active ingredient in many insect repellents. This chemical has long assumed to turn off bloodsuckers with its smell or taste, but new research reveals that this repellent has an additional and unexpected dimension that explains why it works so well.
Rockefeller University’s Leslie Vosshall and her colleagues discovered that insects sense DEET through their legs — and that their displeasure for touching the repellent is what keeps them away from DEET-covered skin.
Previously, Vosshall developed mutant mosquitoes that lose some of their sense of smell. These mutants remained attracted to people covered in DEET, although they did refrain from landing on their skin and biting. Emily Dennis, a graduate student in the Vosshall lab, set up a series of behavioral experiments to figure out how the repellent works. Together with fellow student Olivia Goldman, they found that bitter-tasting chemicals slathered on human skin do not deter mosquitoes from biting people, suggesting that their typical avoidance of DEET isn’t due simply to its flavor.
Next, Dennis applied special glue to the insects’ legs, which are covered with tiny hairs that can sense molecules. With their limbs desensitized, the mosquitoes devoured DEET-covered skin as if it were bare — making it clear that their legs play a central role in sensing and avoiding the chemical.
The findings, published in Current Biology (https://buff.ly/2T36oYK), are the first to tease apart the sensory systems through which the insects detect DEET, and the scientists hope they might help in the design of more effective and longer-lasting alternatives. Source: The Rockefeller University
