Industry Experts' Insights Highlight PCT Mergers & Acquisitions Seminar

LAKE BUENA VISTA, Fla. — As mergers and acquisitions activity continues heating up, PCOs considering selling their businesses — as well as those looking to grow by acquiring other companies — are seeking knowledge on how to best position themselves. For these reasons PCT hosted the industry’s first-ever Mergers & Acquisitions Seminar, last week at the Hilton Walt Disney World Resort in Lake Buena Vista, Fla.

The PCT Mergers & Acquisitions Seminar was attended by more than 150 industry professionals, who heard from a diverse speaker lineup that included PCOs, consultants, brokers, franchisers and others.

As part of the seminar, just prior to the presentations, about 30 attendees visited nearby Massey Services for a facility tour. Tony Massey, president and COO of Massey Services, as well as Massey executives Adam Jones and Ed Dougherty, graciously hosted the tour and shared everything from pay scale and routing structure to benefit plans.

PCT Publisher Dan Moreland set the stage for the conference by reflecting on recent industry sales and acquisitions during the past few years and how these developments are shaping the way PCOs run their businesses (see also [PCT Special Report: Mergers & Acquisitions] Is It Time To Cash In?). “One of the things we found from speaking with PCOs on this subject is that often the companies that got in trouble were the ones who sold in a moment of crisis — without having done the proper planning,” he said. “So we tried to put together a program to address this subject from A to Z with the hopes of providing PCOs with information they can use as they go through the (sales or acquisition) process.”

Chuck Steinmetz, retired president of Sears Termite & Pest Control and Middleton Lawn & Pest Control, kicked off the seminar with a presentation titled “How to Build a $100 Million Company.” Steinmetz, who orchestrated numerous acquisitions during his tenure (and also was involved in large sales) was uniquely qualified to speak on this subject. Steinmetz reflected on how he grew his company, All America & Pest Control Inc. (which did business as Sears Termite & Pest Control).

One of the keys to Sears’ success was its once-a-year service model, which created a different company dynamic and helped the company differentiate itself from the competition. Sears also instituted combination sales/service technicians, which meant the company could do more work with fewer people. “Once we had the technical part and the business part covered, then we found we could open additional branches,” Steinmetz said. “We opened five branches in the first year and that grew to twelve almost immediately.”

Steinmetz said these new offices succeeded because of uniformity. “I think you need be disciplined in taking a consistent approach of running a business.”

In terms of acquiring new businesses, Steinmetz made a comment that was repeated throughout the two-day seminar. “How will it affect the customer and how will it affect the affect the technician? I found those were the two most important considerations. If you took care of those two things you would succeed.”

Following Steinmetz was a “State of the Mergers & Acquisitions Market” panel featuring ServiceMaster President Katrina Helmkamp, Orkin President & CEO Glen Rollins and HomeTeam Pest Defense President and COO Bob Wanzer.

Among the subjects Helmkamp touched on were what Terminix looks for in acquisitions, which she broke into two categories: tuck-in acquisitions and large regional acquisitions. For tuck-in acquisitions, Terminix seeks companies that have: a large percentage of recurring customers; competitive pricing relative to Terminix, and; few, if any, purchased assets. For large regional companies, Terminix seeks companies that: provide strategic enhancement of a particular service line; enhance Terminix’s competitive position; have management talent.

Wanzer spoke on several subjects including what he believes are keys to making new acquisitions work, which include:
• Communication with both employees and customers right off the bat.
• Share the vision of where you are going and what your company stands for.
• Embrace the employees – "Good employees are the company to the customer," Wanzer said.
• Don’t kill the culture – “We bought a company in San Antonio and found that they had a better culture than us. So instead of asking them to morph to us, we morphed to them,” added Wanzer.

Rollins echoed many of those same sentiments, noting that Orkin targets companies that operate with the goal of creating “long profitable relationships with customers and coworkers.” Rollins provided advice to both buyers and sellers. Rollins says the company examines a potential company’s assets:
• Reputation/brand
• Leadership team
• Customer relationships – “Are customers happy?”
• Knowledge and know-how

Rollins provided the following information to buyers:
• Quality not quantity
• Allow for a margin of safety
• Be humble when considering future performance
• Focus on the people. “Focus on little else for the first year,” Rollins said.
• Communicate, communicate, communicate

The PCT Mergers & Acquisition Seminar further examined issues that included: Determining right time to sell or acquire a business; how to negotiate going through negotiation process; exit and succession planning; transitioning employees following an acquisition; internal/external growth. Speakers included:

• Ira Bryck, Center for Family Business, University of Massachusetts
• Norm Cooper, Norm Cooper & Associates
• Joe Edwards, Arrow Exterminators
• Paul Giannamore, The Potomac Company
• Pamela Jordan, Acquisition Strategies, Inc.
• Greg Koleno, The Koleno Group
• Lance Tullius, Tullius Partners

Several common themes were discussed among these speakers, particularly the importance of preparation and the wisdom of selling one’s company when it is at or near its peak. Pam Jordan cited a quote from Lance Tullius for his article that appeared in PCT’s July issue. “Always be prepared to sell your business but operate it with the mindset that it will be yours forever.”

Additionally, a roundtable discussion on franchising included Kevin Clark, Critter Control; Jeff van Diepen, PestMasters; and Bill Nolen, Truly Nolen.

To close out the PCT Mergers & Acquisition seminar, Victor Hammel, J.C. Ehrlich Co./Rentokil Pest Control North America, spoke from the heart on the subject “The Highs & Lows of Selling Your Business.” Hammel described the difficulties in weighing the pros and cons of selling a business that had been in his family for 78 years (see also "The British are Coming"). Hammel said that as recently as two years ago he was not planning on selling his business. However, after reviewing all of the factors involved in perpetuating the family business, as well as the Rentokil proposal, Victor and brother Bobby Hammel decided to sell. A key to their decision to sell was the fact that the buyer, Rentokil, would be integrating its culture into J.C. Ehrlich’s culture.

The PCT Mergers and Acquisitions Seminar was sponsored by Affinity Ventures, Arrow Exterminators, Acquisition Strategies, Bayer Environmental Science, Hometeam Pest Defense, Orkin, Pestmaster Services, The Potomac Company, Preferred Business Brokers, Terminix and Truly Nolen.