Ep.23 Mergers and acquisitions
This week’s interview is essential listening for all those interested in what’s happening in the global pest control company mergers and acquisitions (M&A) market, especially if you yourself are contemplating the sale of your own business.
So, settle down and listen to what Paul Giannamore, the managing director of the Potomac Company, has to say. With offices in Geneva, Switzerland and Philadelphia, USA, the Potomac Company specialises in global mergers and acquisitions, with special expertise in the pest control sector.
Paul first explains that the reasons why an owner wants to sell their business varies greatly, and interestingly, has changed over time. Traditionally the sale of what are mainly family businesses often came about as a result of a family death or divorce, with the average age of the seller being 70-80 years old. Now sellers are around the 40-50 year mark and are aiming to cash-in on their investment, often then going on to start a second career.
Over the last few years, pest control businesses have experienced asset price inflation – from traditionally five to eight times cash flow, to now 15 to 20 times. Amazingly, these businesses have increased in value by 300% in the last five years.
2019 was in fact the highest year on record for spend on servicing company acquisitions – an estimated $1.5 billion (1.3 billion Euros) – double that of 2018. However, with the arrival of the coronavirus pandemic, the market this year is only 10% of 2019. But… Paul anticipates the market to return with force in Q4 and into 2021, with valuations remaining high.
So, no better time to sell. But how to do it?
For those contemplating selling-up, Paul recommends taking on the services of an advisor. He notes how those companies making acquisitions are getting a much better deal in Europe than in the US. Staggeringly, transaction multiples in Europe are only two-thirds of what they are in the USA.
As to what a company is worth, factors such as client base, geographic coverage, proportion of recurring contracts e.g. commercial accounts, resilience demonstrated during the Covid-19 crisis are significant factors, in addition to profitability. But listen to what else he says…
Paul stresses that if listeners take home one single message it would be, not to simply have casual conversations with a few potential purchasers – put together your sales materials, contact at least three or four potential acquirers and run a formal competitive process. Make them work for the acquisition.
As for the future, Paul views the largest business opportunity is making the industry more technologically focussed. Whilst people still remain key, there is increasing scope for enhanced data management and the use of remote technology, especially as the regulatory agencies continue to search for reduced biocide use.
Paul Giannamore can be contacted at firstname.lastname@example.org and you can visit his website here: www.PotomacPest.com