When Willie Sutton was asked why he robbed banks, he famously replied: "Because that’s where the money is." For the same reason, business owners looking to grow or expand have traditionally turned to banks for financial support. But more recently, a new source of cash has become available: private equity (PE).

The snow and landscaping industries have key characteristics that appeal to PE firms: relatively stable, reoccurring and repeatable income, and a degree of resistance against recessions and scalability. PE is more of an investment partnership that injects financial resources into a company to help it expand, diversify or become more profitable—or all three. In other cases, PE can serve as a well-funded buyer for a company owner looking to retire or transition roles.

For Jason Case, CSP, ASM, private equity was the best way to achieve the goals he had for Case Facilities Management Solutions. "The bigger the business, the bigger cash and investment needed to achieve the next level of growth." For more than a decade he had invested profits back into the business, to the point where CFMS became a national powerhouse. But he knew that strategy could only take the company so far.

"Other businesses had multimillion-dollar backers that, if something wasn’t trending well, could pump money in to get the business back on track. I had to look in the mirror and ask, ‘Where do I want to take [the company]?’" For Case, the answer was partnering with The Halifax Group in 2021.

The right fit

Schill Grounds Management (SGM) CEO and President Jerry Schill has acquired 12 companies supported by funding from Argonne Capital Group since 2020. This has helped Schill expand its reach from Indiana to Pennsylvania and north into Canada.

Schill says that PE sometimes gets a bad rap. "There were a couple transactions over the last 20 years that soured people’s impressions or view on private equity," he notes. "Private equity has made huge investments in our space in terms of capital and technology that have led to the professionalization of our industry."

Like snow and ice companies, PE firms have their own culture, approaches to business and investment strategies. Case says selecting the right partner took a year and involved a lot of time and consultation so he didn’t make the wrong decision.

"The selection is important based on culture, philosophy, investment strategies and protecting our team and employee base and what kind of opportunities for growth might be available for them, maybe even equity opportunities. That’s something I wouldn’t have brought to the table without someone to help guide me," he says.

Ask questions about all of these factors, Schill advises. "You need to be certain that both organizations are aligned culturally, operationally, and strategically for the employees, clients, and the communities they serve."

For Don Mahoney Jr., founder of Mahoney & Associates, a private equity partnership was not even on his radar in 2022. But a conversation during a peer group meeting sparked his interest. He went through an exhaustive process of identifying eight potential partners, ultimately choosing Kian Capital and their residential landscaping platform, Diamond Landscaping.

"I felt confident that we had alignment on the vision and growth plan for the business and I was excited to join a larger team with additional capabilities and resources," he says. "Kian and the Diamond team were crystal clear on their focus and they have not wavered or compromised on the vision or mission."

There are also private investment companies that don’t fit the mold of typical PE firms. Maine-based Chenmark is a family-owned holding company that builds its company and subsidiaries with internally generated capital. Chenmark’s first foray into the green/white industry came with its purchase of Piscataqua Landscaping & Tree Service. Piscataqua President Justin Gamester, CSP, says the Chenmark partnership came about when the company’s founder, Booth Hemingway, wanted to retire. Since the initial deal, Chenmark has done six more deals, folding those companies into the Piscataqua brand.

"Opportunity comes in all shapes and sizes, and we review each opportunity to see if it fits our strategy," Gamester says. "We enjoy working with Chenmark because they genuinely care about what’s best for the business and our values are very aligned." Chenmark partner James Higgens says: "Our goal is to create the conditions for our companies to be successful now and for the next several decades."

Future focused

In the Poconos of Pennsylvania, Zech Strauser spent nearly 25 years building Strauser Nature’s Helpers into a successful landscape and snow services company. He says the pandemic gave him time to not only reflect on that achievement but also to think about the future. From there, Strauser says he became "really focused on building a team, on building financial discipline. The whole motive was if we could get better organized around financials and budgeting, it would either allow me to have some space within my company or allow me to pursue other things."

Shortly thereafter, Strauser began talking with Schill about becoming part of the SGM platform. It’s an example of how PE involvement doesn’t have to mean an end to the purchased company’s brand (Strauser Nature’s Helpers still exists) or the exit of the owner (Strauser is now an advisor to the larger SGM enterprise). Strauser now has a "seat at the table" in discussions about where the SGM platform is heading and that likely would not be the case if he had chosen to simply sell to a national company.

Since partnering with Kian Capital, Mahoney has remained active in the business, focusing on areas he is passionate about like client relationships and business development. More importantly, Mahoney notes, his team is still in place.

"My team has been instrumental in building the firm and they have been 100% dedicated to our success. I needed to know they would be protected and their jobs not in jeopardy post-partnership," he explains. "One of the main reasons I decided to partner with Kian was their commitment to ‘business as usual.’"

A good catch

Most business owners believe their company is firing on all cylinders. But a potential buyer is going to look at your business differently. Schill says a lot of prep work goes into being an attractive acquisition target: "If you don’t have your house in order, it’s going to be difficult to go out and find a partner willing to pay a premium multiple for your business.’’

A seller needs to have solid internal financial and operating systems in place, a talented management team, "and a compelling plan for the future of the business before beginning a sale process," Schill adds.

Positive PE impacts

The entry of PE into the landscape and snow space has impacted companies that have nothing to do directly with private equity. SGM President and CEO Jerry Schill feels that this development has helped to spur increased professionalism across the industry: "When private equity enters a space, with it comes innovation, cash, technology, professionalism, and interest from investors."

Paul St. Pierre, founder of Ontario-based Landscape Effects Property Management, which recently merged with Case Facilities Management Solutions, says forward-thinking companies have an advantage: "Companies that embrace technology and innovation can gain a competitive edge in the market and attract investment from investors looking to capitalize on these trends. As a result, we can expect to see continued activity in mergers, acquisitions, and investment in the coming years."

There are also personal benefits beyond the sale/growth of a business. Strauser Nature’s Helpers founder Zech Strauser notes that the business expertise that PE investment professionals provide has given him a chance to learn. "Like a lot of founders who built a company from the ground up, it’s not like I had any formal education on leadership or running bigger companies. So this has been an opportunity to listen, learn, ask questions."

Mahoney & Associates Don Mahoney Jr., CSP, agrees: "I don’t have an MBA or accounting degree—I built a company I am very proud of by working hard. Now I have vast resources through key strategic advisors and partners that I could not replicate on my own."

Patrick White has covered the landscape and snow and ice management industries for a variety of magazines for over 25 years. He is based in Vermont. Contact him at pwhite@meadowridgemedia.com.