Exiting in 3-5 Years? Consider This Advice from Rentokil’s John Myers
If you’re a pest control company owner who’s looking to exit in the next several years, we have some advice for you. On a recent episode of the PMP Industry Insiders podcast, Dan Gordon, managing member of PCO M&A Specialists, asked John Myers the following question. “If I want to sell my pest control business in three to five years, what steps can I take to make my company more valuable or desirable?”
Myers is president and CEO of Rentokil North America, which has completed dozens of acquisitions over the past few years and, most notably, said in December it would buy Terminix for $6.7 billion.
Rentokil to buy Terminix: What an amazing time in our industry! Here’s my take
Dec. 14 was a huge day for the pest control industry, as a watershed deal was announced. If it closes as expected next year, it will make Rentokil, the world’s largest pest control company, also the largest in North America, leaving Rollins (Orkin) as the only public pure-play pest control company.
The deal calls for each Terminix shareholder to receive 1.069 shares of Rentokil’s ADR plus $11 of cash, valuing the deal at $55 per Terminix share, which is a 47 percent premium on their closing price on Monday, Dec. 13. For those pest industry M&A junkies, that’s 3.6 times revenue.
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.
Check back for Monthly Index Updates
The Pest Index tracks the monthly performance of 149 different privately held pest control companies across 31 states with combined annual 2020 revenue of $375 million. The purpose of the report is to track the monthly performance of several different U.S. pest markets, including residential, commercial, and termite.
February 2022 Summary
The total U.S. pest control index increased 19.7% year-over-year in February. On a sequential basis (from January 2022 to February 2022), the index increased by 0.5%. This marks another month of abnormally high growth. We expect February will be the last month of above-average growth rates and project a material deceleration in index growth rates beginning March 2022 due to more difficult comparisons with last year. As can be seen in the chart below, March 2021 was when the residential and commercial index both greatly accelerated, partly due to easier comparisons with 2020 (coinciding with the onset of the pandemic), and partly due to a broad-based opening up of the economy.
1. The Residential Pest Index increased 23% year-over-year and declined 2% on a sequential basis.
2. The Commercial Pest Index increased 19% year-over-year and 1% on a sequential basis.
3. The Wood Destroying (Termite) Index increased 18% year-over-year and 4% on a sequential basis.
4. The Bed Bug Index increased 17% year-over-year and 2% on a sequential basis.
Our Take
The Total U.S. Pest Control Index increased 19.7% year-over-year in February 2022. On a sequential basis, the index increased 0.5% from January 2022. This index includes recurring and nonrecurring revenue for residential pests, commercial pests, and termites. It does not include residential door-to-door companies.
The total pest index in February remained strong with above-average growth rates due to an easier comparison with last year. We expect growth rates to decelerate in the coming months on more difficult comparisons. The result in February 2022 was 13% above the pre-COVID level in February 2020. This month’s performance was driven by strong year-over-year growth across all four sub-indices (residential, commercial, termite, and bed bug).
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.
CLIENT SPOTLIGHTS
