|To see the full Top 100 List, click the image above.|
About this year's list:
- The 2015 PCT Top 100 list is based on 2014 revenues. Firms submitted revenues online or via a form included in January PCT.
- The abbreviations on the list are as follows: * = estimated figure; n/a = no answer/unknown; NC = no change; % GPC = general pest control; % TC = termite control; % Other = other services (see next bullet point); % RES = residential; % COM = commercial; EMP = employees.
- In the “other” category, services may include structural fumigation, construction repair, nuisance wildlife control, irrigation repair and maintenance, insulation, bird control, pool services, lawn care, lawn maintenance, snow removal, tree care, heating and air conditioning, gutter work, handyman services and more. Also, some firms classify their bed bug work as “other.”
- Companies on the list earned revenues of $6,089,462,235. That’s an increase of $311 million over 2013’s numbers. There are 30 states and three Canadian provinces represented. Florida has 11 firms on the list; California has 10. PCT estimated the revenues for several companies on the list.
- PCT staff interviewed state association executives, industry consultants and others, as well as reviewed previously published figures, to arrive at these estimates.
- Other notes:
- On this year’s list, Allgood Pest Solutions, Duluth, Ga., (#30) and Allgood Services dba Allgood Pest Solutions, Dublin, Ga., (#71) are listed as two separate companies. In previous years revenues had been combined because there was an overlap of ownership. That situation has changed so the companies are now listed separately.
- Environmental Pest Service (EPS), #22, is the parent company for Bug Out Service (#43 last year), and Arrow Environmental Services (#49 last year), so this year’s EPS listing replaces both.
- It has always been PCT’s policy that if a company were purchased mid-year of the previous year that it would be included on the current Top 100 list. That means the following companies won’t be on next year’s list: Eradico Services (#57), PermaTreat (#58), Action Pest Control (#59), Alpha Ecological (#63) and Buffalo Exterminating (#76).
- Visit PCT magazine’s interactive map (http://bit.ly/1G0hMJH) to see company information and view live links to each of the Top 100 firms’ websites.
- This list was compiled by the PCT staff throughout the spring of 2015. E-mail PCT Editor Jodi Dorsch at firstname.lastname@example.org with comments about the list.
U.S. Structural Pest Control Market Approaches $7.5 Billion
PCT Top 100 companies generated $6.1 billion last year.
The U.S. structural pest control industry generated an estimated $7.466 billion in total service revenue in 2014, a 3.5 percent increase from the $7.213 billion measured in 2013. (Firms in the PCT Top 100 generated a total of $6.089 billion.) Since the Great Recession ended in 2009, the five-year compound annual growth rate (CAGR) for total service revenue is 3.4 percent.
An estimated 8.75 million residential accounts were serviced either under an annual contract or as a “one-time cleanout” for household pests this past year. That represents slightly more than 25 percent of the “target market” for professional pest control services in the U.S. (The “target market” is defined as households with annual income of $75,000 or more.) There were another 3.75 million accounts serviced for control of termites, including those serviced under an annual renewal contract. “Assuming no overlap of services, that would bring the total residential accounts serviced to 36.3 percent of the ‘target market.’ The percentage of all U.S. households (2013 = 122,952,000) receiving professional pest control was slightly more than 10 percent,” said Gary Curl, president of Specialty Products Consultants, the research firm that publishes the report.
Professional treatments to control bed bugs continued to expand in the United States. Nationwide, 87.0 percent of respondents said their company treated for bed bugs. Six of ten respondents primarily relied on insecticide treatments to control bed bugs. Slightly more than one in ten (11.6 percent) relied on heat treatments. Service revenue derived from controlling bed bugs increased 5.6 percent from the prior year, bringing total revenue earned from controlling this pest to more than $470 million. Single-family homes and apartments were the primary leading types of accounts pest control operators treated for bed bugs, followed by hotels and motels. “We estimate that more than 725,000 bed bug jobs were completed in the U.S. this past year,” said Curl.
Nationwide, pest control operators reported robust growth in commercial GPC service revenue from the prior year. Total service revenue generated from termite work improved as well. There was a nearly four percent increase in the number of post-construction termite jobs completed. Improved pricing actions raised the average post-construction job 3.0 percent to $861.38 per treatment this past year. Pest control operators reported that more than 17 percent of their post-construction termite treatments were completed on commercial accounts. Pre-construction termite treatment revenue increased on the strength of an 8.2 percent increase in privately owned new housing unit construction “starts.” More than 45 percent of all privately owned housing “starts” in the U.S. received a pre-construction termite treatment this past year.
While much has been written about the potential impact insect pollinators may have on the professional pest control industry, less than eight percent of respondents said it had a “major impact” on their business. Only 2.9 percent of the respondents said the addition of the EPA’s pollinator protection language (the “Bee Box”) had changed their insecticide product purchases this past year. Slightly more than five percent of the respondents said they expect the language to alter their purchases in 2015.
The 2014 season market report is the 15th edition of “A Strategic Analysis of the U.S. Structural Pest Control Industry” from Specialty Products Consultants. A total of 800 owners or managers of pest control companies were surveyed for this study. The market report forecasts pest control service revenue through 2016, and pesticide product category sales through 2019. The impact of the commercial and residential real estate market, mosquito and wildlife management services, changes in distribution, and pest control operators’ outlook for 2015 are just a few of the topics analyzed in this year’s report.
Learn more about SPC by calling 973/543-5195 or visiting www.spcresearch.com.
Top 100 Map
|To see the full map, click the image above.|
A variety of states, counties and cities are making gains in employment and population numbers, according to the U.S Census Bureau. How do these nationwide statistics compare to the locations of the PCT Top 100 (represented by the red circles on the map)?
Sacramento, Calif. — Among the 50 largest counties with the most employees, Sacramento had the highest rate of employment growth among all sectors between 2012 and 2013 (up 5.5 percent). Source: U.S. Census Bureau, April 23, 2015
California — California was the third state in rate of employment growth between 2012 and 2013 — a 3.5 percent increase to 13.4 million. California also had more single business locations (874,243) and employees (13.4 million) and a larger annual payroll ($742.5 billion) than any other state in 2013. Source: U.S. Census Bureau, April 23, 2015
Los Angeles — Los Angeles, Calif., is still the nation’s most populous county with a July 1, 2014, population surpassing 10.1 million. Source: U.S. Census Bureau, March 26, 2015
Arizona — The Tucson, Ariz., metro area surpassed the 1 million population threshold between 2013 and 2014. Source: U.S. Census Bureau, March 26, 2015
Travis County, Texas — Among the 50 largest counties with the most employees, Travis County had the second highest rate of employment growth among all sectors between 2012 and 2013 (up 4.9 percent). Source: U.S. Census Bureau, April 23, 2015
New York, N.Y. — Manhattan topped all counties in annual payroll, at $217.6 billion. Source: U.S. Census Bureau, April 23, 2015
Delaware — Delaware led all states in rate of employment growth between 2012 and 2013 with employment levels climbing 5.1 percent. Source: U.S. Census Bureau, April 23, 2015
North Carolina — Between 2013 and 2014, North Carolina became the ninth-most populous state. Its growth was fueled by two counties: Wake (Raleigh), which added about 24,000 people over the period, and Mecklenburg (Charlotte), which grew by about 20,000. Source: U.S. Census Bureau, March 26, 2015
Ohio — Cuyahoga, Ohio, (Cleveland) is the county with the second-largest population decline. Source: U.S. Census Bureau, March 26, 2015
Michigan — Wayne, Mich., (Detroit) remains the county with the largest numeric population decline at just less than 11,000. Source: U.S. Census Bureau, March 26, 2015
Texas — Two Texas metro areas — Houston-The Woodlands-Sugar Land and Dallas-Fort Worth-Arlington — were the only ones in the country to add more than 100,000 residents over the 2013-14 period. Source: U.S. Census Bureau, March 26, 2015
Visit http://bit.ly/1G0hMJH to view an interactive version of this Top 100 map.
DUE DILIGENCE: Navigating the 6 Steps to a Successful Deal
With so many articles about companies buying companies, what can you do to prepare — and what are your responsibilities — if a buyer comes knocking at your door?
Whether you’re the buyer or the seller of a pest management business — or you’e a five-man firm or a Top 100 firm — you have responsibilities throughout the deal-making process, ranging from openly communicating with the other party to protecting your own interests. Building a support system of advisers — minimally a CPA and a lawyer — is generally wise, since tax and legal implications run deep in almost any type of merger or acquisition.
Following are insights from Dan Gordon, CPA, founder of PCO Bookkeepers, and mergers and acquisitions attorney John Corrigan, CPA, of Corrigan & Baker, into the areas buyers and sellers must address to ensure a successful transaction.
1. Confidentiality Agreement/Information Request. When in discussions about a merger or acquisition, both buyer and seller are encouraged to keep the conversation under wraps until the deal closes. The confidentiality agreement protects both sides in the event the deal falls through.
Confidentiality agreements tend to be fairly standard in nature: Buyer and seller promise in writing to keep confidential the fact that negotiations are proceeding, and promise not to disclose any information learned during the investigation or negotiation phases.
The subsequent information request is presented to the seller by the buyer in an effort to gain an understanding of the seller’s company. The buyer submits a written questionnaire with the intent of learning more about the assets being purchased and any liabilities that would be assumed upon acquisition, as well as key business points that help the prospective buyer determine whether the company is a good fit. In general, buyers request information about the business entity and its geographic scope, employees and their compensation, contractual obligations, customer service agreements, operational issues, customers, assets and liabilities.
2. Letter of Intent/Due Diligence Process. Once the information request has been fulfilled, the buyer may choose to draft a letter of intent (a.k.a., a memo of understanding), setting forth the price and terms. Once both parties have this document in hand, each has a specified time period (generally 30 to 60 days) to research the other party to determine whether they want to proceed.
The buyer will want to review leases, contracts, loan agreements, financial statements, tax returns, sales and inventory reports, payroll reports, accounts payable and receivable records, and other documents during this phase to fulfill these objectives:
- Confirming the value of the assets, including the customer list
- Investigating outstanding liens
- Understanding any liabilities that will be assumed
- Uncovering any potential trouble spots in completing the transaction and transferring the assets
- Assessing how smoothly the assets can be incorporated into the buyer’s business
The seller will want to investigate the buyer as well. “If you’re selling to a big player, then you already have a good idea of who they are and their ability to close the deal,” says Gordon, “but if it’s a smaller company, you’ll want to make sure this entity has the wherewithal to make the deal happen.”
Gordon suggests researching the buyer’s credit profile, management experience, reputation and future plans, especially if you intend to work for this company after the sale, or if part of the purchase price will be paid in the future through a financing arrangement or an earn-out. “Even if you plan to collect all of your cash at closing, walk away and never look back, you should be satisfied that there’s at least a reasonable likelihood that the buyer will be able to operate the business successfully,” he adds.
3. Financing the Deal. Here’s where creativity comes into play. There are virtually endless financing options — for example, all cash/equity, cash down payment (CDP) + promissory note, CDP + promissory note + earn-out, CDP + equity, a multi-year employment agreement, CDP + debt assumption, an escrow holdback with guarantees or a combination thereof. Each of these options has unique tax considerations that are likely to affect the value of the deal.
Corrigan shares, “Buyers and sellers definitely have differing viewpoints on what constitutes the ideal financing option. Generally speaking, the buyer wants to pay the least amount possible while the seller wants to pocket as much as possible. It’s important to look at all of the tax considerations and figure out a fair way to divide the tax benefits.”
4. Purchase/Sale Agreement. This is the time for the lawyers to do their stuff, as they hash out the details of the agreement. If a deal is going to die, it’s likely during this phase. Mutually beneficial deals rely on skilled lawyers on both sides, says Corrigan.
He identifies the following as standard components of asset or stock purchase agreements:
- Definitions of assets being acquired
- Purchase price
- Liabilities being assumed (if any)
- Types of consideration received
- Restrictive covenants
- Representations and warranties
- Miscellaneous “boilerplate” clauses
While the first four components are part of the financial negotiations — again, taking tax consequences as well as buyer and seller interests into consideration — restrictive covenants and representations and warranties require some explanation as they can also play a critical role in the outcome of the deal.
Restrictive covenants set forth a variety of “promises” upon which the deal is contingent. The seller must protect confidentiality and trade secrets, for example, and must honor non-compete and non-solicitation clauses. “The law protects the buyer from having the seller go down the street and open a new business, taking the customers, trade secrets and such from the acquired business,” explains Corrigan.
Representations and warranties are also promises: assurances by the seller that certain situations will or won’t occur. This is where the seller shares previously disclosed liabilities (pending lawsuits, for example), guarantees that the information provided during the information phase was accurate, and provides any additional relevant information about what’s going on within the business. Corrigan says there are 20 or 30 common representations and warranties, all of which are negotiable. “Reps and warranties give the buyer recourse in the event something goes wrong,” he explains. “If the seller isn’t up front about certain issues, and those issues surface down the road, the buyer can sue the seller or take other punitive action. Renegotiation may take place once the buyer knows everything about the business. The issues disclosed may cause a change in the price, or they can even kill the deal.”
5. Other Considerations. A variety of human resources issues, as well as miscellaneous business issues, fall under this heading. Where will employees go? How will they be integrated into the new business? Are any managers in line for bonuses? Is the business locked into any office leases? Any outstanding issues should be disclosed during this penultimate phase.
6. Closing the Deal. Before signatures are finally swapped, a checklist must be created and reviewed to ensure all loose ends have been tied up. For example, vehicle titles must be transferred, the landlord must consent to the office lease transfer, the state needs to conduct or waive its audit, the promissory note must be drafted, etc. Once all of these final details have been managed, both parties sign the purchase/sale agreement and other related documents, and payment is transferred to close the deal. — Donna DeFranco
Congratulations to everyone on this year’s PCT Top 100 List!
All of us at Univar Environmental Sciences admire their hard work and commitment to growing the industry. We’re proud to have contributed to the success of many of these outstanding companies as a full-line distributor and partner.
Partnering with PMPs to help drive their business is what Univar is all about. Everything depends on getting the right products when you need them — and we strive to do it better than anyone else. This year, we’re putting more trucks on the road, adding more ProCenter stores, and increasing our warehouse footprint to deliver your products faster than ever. We’re also giving customers faster access to product information, hands-on management tools, and state-of-the-art industry training — all backed by our knowledgeable people.
Univar is always finding new ways to help every business achieve more. Because the right product is just the beginning — we’ll connect you with the resources to be successful both today and tomorrow.
Univar Environmental Sciences — Americas