Thinking of Selling?

Every buyer has their own criteria for buying and their own strategy. Some want the target or potential acquired company to be commercial. Some buyers prefer residential. Some want mostly pest control. Some want mostly lawn care. Some are good with different combinations of lines of business. Some only want to buy in certain geography. Etc. Many have similar strategies, but they vary sometimes significantly. Each buyer also has their own risk tolerance and therefore their own hurdle rates to reach their target ROI within a certain time frame with the acquisition.

TCCG lets the market value the company and negotiates top purchase prices along with top terms, structure, payout schedules, etc. The company is worth what the market will pay for it. Markets also vary according to the micro and macro-economics of the time. So, for these reasons and the reasons mentioned above, in the open market, some buyers are willing to pay more than other buyers. We have a large database of buyers and we understand their criteria enabling us to match up our clients with the best buyers. Buyers are both strategic buyers and financial buyers (such as PE groups).

Currently, it is considered a seller’s market for sellers. However, it is also a market wherein there is a buying frenzy, so to speak. Keep in mind, also, that markets do change which could significantly affect multiples. The Clendenin Consulting Group has a large database of both strategic and financial buyers.

It is also good to actually know what the multiples are. Some think that the multiples for lawn care are not as good as they are for pest control around the country. We are showing our clients that is not the case. We are getting comparable multiples for lawn care companies, and we are getting great multiples for pest control companies. Again, the sell side advisor needs to know who the buyers are and what their criteria’s are.

TCCG is known for getting those great multiples and lawn care companies or companies with significant lawn and ornamental revenue as a part of their company are a big part of our clients and a big part of our lead flow/pipeline. Don’t settle for less than what your business is worth and that includes your lawn care business.

Characteristics of a Company That Affect the Purchase Price. There are many, but the following are some that affect the purchase price:

• Lines of business that the seller operates in
• Percent of recurring revenue
• Commercial vs Residential
• Geography
• Customer retention
• Size of company
• Criteria of buyer
• Percent of customers in the Top 10 in revenue of the company
• Age of the customer base
• Employee retention
• Is the purchase for acquiring a platform company, a bolt on or a tuck in?
• The role of the seller post-sale
• Is there a leadership pipeline?
• The adjusted EBITDA

What is Adjusted EBITDA?
The adjusted EBITDA must begin with a properly built Profit and Loss Statement with costs allocated to the proper line item and structured in the proper way to arrive at a correct net, pre-tax profit based on the accrual method of accounting.
Added to the net profit is any interest, federal taxes (if they appear on the PNL), depreciation and amortization. This gets those analyzing the PNL to the EBITDA. Then the analyst looks for addbacks/costs that went thru the PNL attached to the seller and anyone else who partook of the income of the company pre-sale that would not have gone thru the PNL if those leaving post-sale were not there, especially during the trailing twelve months of the operation of the company being sold. This would be things like the owner’s salary, owner benefits, items the owner is going to carve out of the sale such as a vehicle and all the costs associated with that vehicle, perks, etc. It would also include any other costs that go away post-sale.

In addition to the above, addbacks would also be costs that went through the PNL that were non-business related such as replacing the air conditioning system, remodeling an office, etc.
There are other less significant issues that may result in a minor up or down adjustment to the purchase price, such as net working capital targets being met or beat. Net working capital targets are negotiated before the asset purchase agreement is executed. Another item might be who is responsible for the transfer costs of assets such as the sales tax on the vehicles being sold. That also would be negotiated before the asset purchase agreement was executed.

Bio of Greg Clendenin, CEO of The Clendenin Consulting Group:

EDUCATION
• Graduate of Liberty University in Lynchburg, Virginia; B.A. in General Studies.
• MBA Graduate with honors; Crummer Graduate School of Business at Rollins College in Winter Park, FL.

INDUSTRY INVOLVEMENT HAS INCLUDED:
• Board member, NPMA.
• Received the National Leadership Award from industry peers in 2003.
• Board Member and past chairman of the Quality Pro program, NPMA.
• Past Chairman of the National Lawn Care Committee, National Pest Management Association (NPMA).
• Speaker at industry meetings and conferences.

CAREER HISTORY:
Greg began his career in the lawn and pest control in 1979. In 1982, Greg became the General Manager and partner of Middleton Lawn & Pest Control, eventually becoming CEO and leading Middleton to become the 14th largest company in an industry comprised of approximately 20,000 companies in 2005. Greg led the organic growth of Middleton from five employees and $488 thousand in annual revenue in 1982 to approximately 300 employees and annual revenues of $35 million in 2005. This was accomplished with no acquisitions. During Greg’s tenure as CEO of Middleton from 1996-2005, Middleton grew from $8 million to $35 million in annual revenue without any acquisitions…adding $27 million of organic revenue in nine years.

Other career milestones include:
• After the acquisition of Middleton in 2005, Greg was the CEO of the public company from June 2005 until October of 2007. While Middleton was a full-service pest control company, it was also the 5th largest lawn care/spray company in the nation.
• In 1989, Greg also became a partner and the Vice President of Operations for Sears Authorized Termite and Pest Control as well as a member of the Board of Directors of All America Termite and Pest Control, Inc dba Sears Authorized Termite and Pest Control. During Greg’s tenure as COO, the revenue grew from $35 million to over $100 million. The vast majority of this growth was organic. The company had nearly 100 locations in nine states and was the largest privately held pest control company in the nation in 1996.
• In 2000, under Greg’s direction, Middleton received the first Environmental Excellence award from the Orange County Environmental Protection Division. This was the first time a pest control company had ever received this award.
• In 1999, following Greg’s initiative, Middleton established the first complete website in the industry with the ability to allow customers to purchase and schedule services online.
• From 2005 to 2007, Greg led the negotiations, acquisition and integration of 12 companies into the Middleton platform.
• Over the course of his career, Greg and his associates have overseen the acquisition and/or sale of $500MM worth of transactions.
• From 2010-2018, Greg held senior level management positions including CEO of Heron Lawn and Pest Control, later rebranded as Heron Home & Outdoor.
• Currently the Founder and CEO of The Clendenin Consulting Group

COMMUNITY INTERESTS AND ACCOMPLISHMENTS HAVE INCLUDED:
• Finalist, Entrepreneur of the Year Award, Center for Entrepreneurship, Crummer Graduate School of Business at Rollins College.
• Personal awards include the Gov. Lawton Chiles’ Corporate Champion Award from the Howard Phillips Center for Children and Families, the Leadership Award from the Department of Juvenile Justice and the Excellence Award from the Orange County Citizens’ Commission for Children.
• Member of the Orlando Mayor’s Parramore Neighborhood Revitalization Task Force, by personal Mayoral appointment.
• Chairman of the Public Safety and Public Works Committee, Orlando Parramore Revitalization Task Force, 2004.
• Received the Key to The City of Orlando from Mayor Glenda Hood on February 15, 2003.
• Member of the elected board of the Florida Citrus Sports Association.
• Member of the Board of Overseers, Crummer Business School at Rollins College.
• Member of Board of Directors, Center for Entrepreneurship, Crummer Graduate School of Business at Rollins College.
• Member of Mayor’s Safe Orlando Task Force, by personal Mayoral appointment.
• Leadership Council, Orlando Philharmonic Orchestra.
• CEO, Vision 360, global church planting organization, volunteer position.
• Member of the Board of Regents, Liberty University.
• Member of the Alumni Board, Crummer Graduate School of Business.
• CEO, Founder, The Clendenin Consulting Group and Sell-Side Advisor in M&A.

Greg has been on both the buy side and the sell side in M&A in the green space of Lawn and Ornamental care and Landscape and also Pest Control, Mosquito Control and Termite Control since 2005, completing dozens of acquisitions since then on both the buy side and the sell side.