Rollins, the parent company of Orkin, has finally taken the plunge. After years of international franchising, Rollins agreed to acquire Perth-based Allpest WA in January 2014.
Allpest generated approximately $25 million in 2013 and it is likely that Orkin will attempt to take a very similar path in Australia that it did in Canada, where it is now the dominant player in the Canadian market.
With Orkin finally operating in Australia, it shouldn’t be long before Terminix International gets into the game, which will once again unite the Big 3 – Orkin, Terminix and Rentokil – on English-speaking turf.
Over the last two years, cheap money and sluggish top-line growth has driven the large North American and European pest control companies to make acquisitions at pricing levels higher than the historical mean. It won’t be long before Terminix, Orkin and Rentokil are all competitively bidding in Australia, giving pest control sellers on the continent something to smile about.
While we believe that transactions in North America will continue to occur at higher multiples for the foreseeable future, the available of premium pest control acquisition targets throughout the United States, Canada, Mexico and the Caribbean are few and far between – which has caused the large US-based firms to start shopping abroad. Because Orkin and Terminix aren’t the most daring firms on the planet, they’ll likely continue to franchise in the emerging markets and leave acquisitions for countries a stone’s throw from the US shores.
These recent developments bode quite well for our pest control brethren Down Under who are considering a near-term exit from their businesses.
Pest control operators in Australia looking to sell their businesses will want to keep the following in mind:
- There is no such thing as a “going rate” for pest control companies. The competitive bid process is what causes an acquirer to pay a premium for your business. Therefore, never negotiate with only one acquirer and make sure you take your business out to competitive bid.
- Australians will soon be in an unprecedented era in terms of valuations, so don’t rely on market comps to price your business.
- If you are contacted by a US-based firm, don’t take the first offer. If the timing is right for you, use the unsolicited offer and go out and get competitive bids from other acquirers. There are a least four well-capitalized bidders in the Australian market right now, so if your business isn’t total rubbish, you should review a handful of offers before making a decision. To see an example of how to deal with an unsolicited bid, read this: The Right Way to Respond to an Unsolicited Offer – Case Study
To read about a recent example of Potomac’s advisory to the Australian pest control industry, click: Potomac Has Been Engaged by a Leading Australian Pest Control Firm to Provide Valuation and Strategic Alternatives Advisory
If you need advice on the purchase or sale of a pest control business in Australia, reach out to us today on +1-215-525-0689.
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