Pest Management Professional, September 2012

Sponsored by PMP How would you characterize the current merger market Is it a good time or not to do deals and why NC Its a great time to be doing deals The pest management market has shown itself to be recession resistant and a growth industry driven by new pest infestations New technologies and techniques are being viewed as commodity services higher margins because of regulatory and customer expectations This has led existing players to acquire other companies and attracted financial and service companies to enter the market PMP Are larger or smaller buyers more active NC While there is activity from buyers of all sizes the largest companies are the most active and are gaining market share The bigs have the deepest pockets Theyre in a position to offer superior terms if they feel the acquisition targets warrant it The sellers typically are owners of small to mid sized pest management businesses Sure there have been a few big deals done the past decade and there probably are a few more out there to be had But the majority of the merger activity will continue to involve small to mid sized sellers pest managements bread and butter PMP Is it currently a buyers market or a sellers market NC It truly is both a buyers and sellers market Fair prices are being paid giving sellers successful exits while also allowing buyers to earn good returns on their investments if they execute the mergers well PMP How would you characterize the lending market NC Among traditional banks its a bifurcated market Banks are willing to lend to large companies for large deals because they consider these larger deals less risky and less volatile but so far they have been reluctant to lend to smaller and mid sized companies However there are nontraditional sources of capital now coming into the market including private equity firms to fill the voids that banks have left open PMP What do buyers receive for their money How do buyers assess whether acquisitions were worth it NC When buyers acquire a pest management company they are paying for customer bases that will enable them to either expand their geographical reach or consolidate routes Some acquirers also value the access to new employees technologies brands and techniques but the main driver of value typically is customer relationships and the revenue that comes with those Buyers usually assess the success of deals based on the returns they receive on their investments In the great majority of deals Ive been involved with the acquirers earned solid returns on their investments PMP What advice would you give business owners looking to sell What about buyers NC For sellers Get your financial house in order Pull your financial statements together and clean up items like excessive personal charges paid by the company Clean up your team Say goodbye to problem employees And dont commit your company to new long term obligations For buyers Dont delay The market is heating up In this low interest rate environment companies have an extra incentive to redeploy cash and make strategic acquisitions PMP How important is it to get a deal done in 2012 vs next year NC There are many reasons to get a deal done sooner rather than later The Federal tax rate on capital gains stands at 15 percent because of the Bush tax cuts but is likely to rise on Jan 1 2013 unless Congress can agree on new tax rates Additionally the gift and estate tax exemption levels are very beneficial this year but these exclusions are due to expire on Dec 31 and could be substantially lower in the future PMP What do you like most about mergers NC I get to help sellers who are looking to retire achieve their financial objectives I also get to help buyers who have the desire to grow their businesses A successful deal requires work but is well worth it for all involved pmp You can reach Jacobs a Cleveland based contributor at jacobs3927@ sbcglobal net It truly is both a buyers and sellers market Fair prices are being paid giving sellers successful exits while also allowing buyers to earn good returns on their investments www mypmp net Pest Management Professional September 2012 M9