WILLIAM BLAIR / PCO M&A SPECIALISTS MONTHLY PEST PULSE
PCO M&A & Succession Specialists has teamed up with William Blair & Co, one of the most seasoned Equity Research houses that covers the pest control industry to create the William Blair / PCO M&A Specialists Monthly Pest Pulse index. This index is a collaboration between the fundamental research and insights from the Blair team and the hard data from PCO M&A Specialists sister firm, PCO Bookkeepers,
an outsourced CFO and accounting firm that focuses on the pest control industry with over 300 industry firms as clients that make up over $650 million in annualized revenue.
Our growth estimates are supported by real historical data and vetted by Wall Street experts. The historical data and reports we pull from our clients’ records provide strategic buyers with the components that are most important to building their models including tracking of customer retention, the all-important recurring revenue, and SG&A costs they can use to build their profitability analysis.
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The Pest Index tracks the monthly performance of 140 different privately held pest control companies across 30 states with combined annual 2019 revenue of $320 million. The purpose of the report is to track the monthly performance of several different U.S. pest markets, including residential, commercial, and termite.
April 2021 Summary
The total U.S. pest control index increased 21.4% year-over-year in April 2021, marking an acceleration from March (+17%), which was also a significant increase from February (+6%) and January (+5%). Much of this increase can be attributed to an easier comparison with last year, as all three markets (residential, commercial, and termite) were significantly affected by the pandemic in April 2020. However, even after taking the easier comparison into account, the result for April 2021 is strong and indicative of a healthy pest market in the United States. This index includes recurring and nonrecurring revenue for residential pest, commercial pest, and termite. It does not include residential door-to-door companies.
The uptick in April was driven by an acceleration in the commercial pest index and the termite index, and partly offset by a slight deceleration in the residential index. The residential index increased 22% year-over-year in April, down from 24% growth in March. The commercial pest index accelerated to 30% growth in April, up from 17% growth in March. The termite index accelerated to 12% growth in April, up from 10% growth in March. Meanwhile, the bed bug index increased year-over-year for the first time since February 2020.
April’s results support the thesis that the U.S. pest control market remains poised for another strong year of growth, as higher penetration rates in the residential market persist in 2021 and are supplemented by continued strength in the termite business and a rebound in commercial pest sales.
1. The Residential Pest Index increased 21.9% year-over-year and 15.7% on a sequential basis.
2. The Commercial Pest Index increased 29.6% year-over-year and 3.2% on a sequential basis.
3. The Wood Destroying (Termite) Index increased 11.9% year-over-year and 13.7% on a sequential basis.
4. The Bed Bug Index increased 13.4% year-over-year and decreased 1.6% on a sequential basis.
Our Take
The Total U.S. Pest Control Index increased 21.4% year-over-year in April 2021. On a sequential basis, the index increased 11.3% from March 2021. The index typically sees a sequential increase in April (up 8% in April 2020 and 17% in April 2019). This index includes recurring and nonrecurring revenue for residential pest, commercial pest, and termite. It does not include residential door-to-door companies.
The total pest index accelerated in April to 21%, up from 17% year-over-year growth in March, and up significantly from midsingle-digit growth observed in January and February. The acceleration was driven by an acceleration in commercial pest and termite, in part offset by a slight deceleration in the residential pest index.
PCO M&A Specialists Pest Industry Merger & Acquisition Insights
A behind the scenes look at PMP Valuations, deal structure, tax consequences of sale & the state of the market
If you are thinking about what your next steps are in terms of the future of your company and are interested in how to maximize your after – tax value upon sale, this guide is a “must read”.
PCO M&A Specialists Industry Insights
Is Rollins really selling? My take (taxes, taxes, taxes) and what it means to you
On June 4th, 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 aneye 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 the 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 curiousity piqued, I started to do a little research on what just happened, and over the news wire I found this…
Breaking: ServiceMaster to sell other brands, change name to Terminix
ServiceMaster will sell its ServiceMaster Brands (SMB) business to Roark Capital and change its name to Terminix at closing. The deal is expected to close in 30 to 60 days, making Terminix a pure pest control play, as the company chases the sky-high Rollins valuation.
SMB is a franchising operation with two primary segments:
• Restore – residential & commercial restoration services following fires, hurricanes, water pipe bursts, etc.; and
• Cleaning – janitorial and residential cleaning services.
How does low interest rate affect the pricing model and what happens to company values if they rise?
As noted in our valuation discussion when using a free cash model for determining the value of a firm one of the factors used in the formula is the required rate of return A.K.A. the hurdle rate.
History of Mergers and Acquisitions in the Pest Control Industry
The M&A activity since Y2K is quite different in that it has been fueled by pest control companies looking to grow their core businesses, find synergies where they can reduce costs and expand their brands. With all this competition to find the best target companies those looking for quality acquisitions have driven the valuation of these quality companies up. With most of this M&A activity coming from domestic players, the entire landscape changed when London based Rentokil did its first blockbuster acquisition in the U.S. in 2006 by purchasing JC Erlich, a multi-state firm out of Pennsylvania with over $100 million in annual revenue …
CLIENT SPOTLIGHTS
