[View Point] Dual Storylines Make Trans-ACTION Compelling

Anytime PCT includes the phrase “…of the Year” on a cover, it’s going to generate heated discussion among our readers. This month’s cover includes a photo of Kevin Pass with the headline “Trans-ACTION of the Year” and the subhead “Kevin Pass’ sale of Action Pest Control to Scotts marked the entry of a new industry player. How did this deal go down? What’s next for Scotts?”

Choosing this particular transaction for a M&A-related cover story was not an easy decision. Several companies were busy in 2014 making acquisitions that have reshaped the pest control industry. Terminix, for example, made its first entry into Canada with the acquisition of Quebec-based Groupe Cameron, while Arrow Exterminators made a number of acquisitions in key markets, particularly the Gulf Coast. Rollins, parent company of Orkin, continued making high-profile acquisitions, most notably PermaTreat Pest Control, the highly regarded Fredericksburg, Va., company led by President and CEO Joe Wilson, a one-time Orkin executive.

Why then did PCT choose the Scotts-Action deal as its cover story this month (see page 22)? During NPMA PestWorld ’14 in Orlando, my PCT colleagues and I interviewed Pass; Kemp Anderson, vice president of business development, Scotts LawnService; and Lance Tullius, managing director of Tullius Partners. In reviewing our notes from that meeting we thought there were a pair of storylines our readers would find compelling. The first story we tried to capture was the M&A journey of Kevin Pass, longtime CEO of Evansville, Ind.-based Action Pest Control. Pass is a true pest control industry success story, taking a small, five-person operation, in 1986, and turning it into a successful regional company that reported $12.6 million in 2014 revenues. Along the way, Pass became an active NPMA member, serving as the association’s president in 2012-13. Like many of his industry peers, the 55-year-old Pass took stock of his personal and professional life, and made a decision that undoubtedly was not easy, but one that he felt was best for him, his family and his employees.

The second storyline is the entry of a new pest control industry player — Scotts. It’s a more complicated tale to tell, and one that surely will evolve in 2015, and in years to come. In January, Scotts LawnService, a business unit of the Scotts Miracle-Gro Co., announced that it had closed the acquisition of Action Pest Control for $22.7 million. In a Scotts press release distributed following the deal’s closing, Jim Gimeson, president of Scotts LawnService, said, “We are excited to complete the acquisition of Action Pest and see it as an important step forward in executing our long-term growth strategy.” The press release also stated that, “Given the fragmented nature of the $7 billion home pest control category, Scotts believes it can complement organic growth in lawn service by consistently expanding its pest control platform.”

It will be interesting to track Scotts’ strategy for “expanding its pest control platform.” As we noted in our cover story, Scotts Chairman and CEO Jim Hagedorn has intimated that the company does not intend to make another major acquisition in 2015. This may come as a surprise to PCT’s readers, who are accustomed to new players entering the pest control market with a platform acquisition and quickly following that up with a flurry of other acquisitions. However, this more measured approach, which seems to be the Scotts strategy, makes sense, according to an industry observer who told PCT, “I think [Hagedorn] is smart to do that. He’s got to see if his guys can successfully roll this into the business and grow it, before he goes out and buys another five pest control companies, and all of a sudden he has a $100 million business he’s bleeding cash out of, because nobody knows how to run it.”

At least immediately, it appears Scotts’ pest control growth will be organic (for more than a year, Scotts LawnService has been operating a pest business, Ortho Pest Control Service, in Florida) while it learns everything it can from its Action Pest Control business. What lies ahead for Scotts in terms of making significant acquisitions is anybody’s guess. For now, anyway, it appears as though the company is “sticking its toes in the water” when it comes to pest control. What Scotts does have at its disposal is one of the most recognized brands in the world; plenty of capital; and now — with the addition of Action Pest Control — one of most respected regional pest control companies in the U.S.

The author is Internet editor of PCT magazine and can be contacted at bharbison@gie.net.