PCT 100 — 15 Trends That Shaped the Industry

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In the May 2016 issue of PCT Magazine — the PCT Top 100 issue — Anne Nagro interviewed managing director Paul Giannamore on mergers & acquisitions and door-to-door sales. You can download a PDF of the article here: PCT Top 100 – 15 Year Trends.

15in15 - PCT Top 100 Pest Control M&A

1. M&A Volume Soared

If it seems like more big-dollar deals have occurred lately, you’re right. In fact, 2015 “was a bellwether year” and “the zenith in (dollar) volume” for merger and acquisition activity with more than $750 million changing hands, said Paul Giannamore, managing director, The Potomac Company. “There has definitely been a run up” in both transaction volume as well as valuations compared to the “relatively constant” volume of years’ past, he noted. “In 2007, the average $5 million pest control business would sell for 1.1 or 1.2 times revenue. Now two times revenue is not uncommon,” he explained.

Why? Central banks have artificially propped up the economy driving up asset prices and Rentokil became a serious buyer in the market; both gave exiting Baby Boomers more reasons to sell. This year’s list saw six companies that were on last year’s list get gobbled up because of M&A activity.

Many PMPs think the top five buyers — Rollins (#1), Terminix (#2), Rentokil (#3), Massey Services (#5) and Arrow Exterminators (#6) — always will need to acquire companies because they have a lot of cash on hand, but “the reality is money’s so cheap, they have to chase returns,” said Giannamore. When the government stops “printing money,” “I think you’ll see a big collapse in the U.S.” in terms of M&A activity, he said.

4. D2D Sales Made Gains

Selling door-to-door (D2D) isn’t new, but companies that excelled at this tactic charged up the Top 100 list. Alterra (#12) was generating revenue of more than $70 million when it was acquired by Terminix in November 2015. Frontline (#90) jumped five spots after entering the list last year.

In 2015, an estimated $200 to $250 million in annual pest control account value was added to U.S. companies through door-knocking campaigns, reported the Potomac Company in PCT’s February issue.

“No one can deny the impact of door-to-door sales in the service industry, and in the last decade we have seen an enormous increase in that type of marketing where companies hire specialized groups, saturate the market area and promote reoccurring pest control programs,” said Rusty Markland, COO, PestNow (#44), in the February issue.

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