[View Point] Charting a course for post-recession success

Pest management professionals can be justifiably proud of the manner in which they weathered this country’s most severe economic downturn since the "Great Depression." In fact, some PMPs actually thrived as unemployment soared and access to capital dried up in 2009. Many of the most successful companies were featured on PCT’s Top 100 List last month, but others continued to grow with little fanfare, perhaps not at the double-digit rate they had become accustomed to in the early ’90s, but enough to maintain current staffing levels while still putting something away for a rainy day.

Now that the worst is apparently behind us, what’s next for the pest control industry? It’s a question PCT’s editorial staff has been grappling with for much of the past month as we began work on a two-part series dedicated to helping our readers navigate the uncertain economic waters that undoubtedly lie ahead.

In the first part of our special report, featured in this month’s issue of PCT, we examine why increased mergers and acquisitions (M&A) activity – particularly at the distributor level – may be a subtle sign that business conditions are beginning to improve as companies consider future growth opportunities. Recent acquisitions by Viking Termite & Pest Control, Arrow Exterminators and Rentokil North America have added to the growing body of evidence that the industry may see a spike in M&A activity in the second half of 2010.

No less an expert than Jim Cramer, the high-energy host of CNBC’s "Mad Money" and former president of The Harvard Crimson, is bullish on the pest management industry. "This is not an industry that needs a good economy to make money," he observed earlier this year. In addition, Cramer said, "It’s not one that should suffer if we get a dreaded double-dip recession, even as I think that’s a very remote possibility."

Chris Donaghy, owner and CEO of Residex – a regional distributor with service locations in eight states – said most of the markets served by his company have stabilized, but that doesn’t mean we’re out of the woods, particularly in those parts of the country hardest hit by the recession. "In Florida, the housing market has not made a comeback yet and as long as there is little new construction and no movement on the current inventory of vacant houses, business will be flat to down with a couple of areas showing slow recovery," he observed. "Planned activities of the current administration could flip us back into a nationwide downward spiral as our nation’s debt soars and taxpaying consumers are burdened with greater taxes and living expenses."

However, that hasn’t caused leading-edge companies with healthy balance sheets and strong management teams in place from cutting back on their M&A aspirations, even in the hard-hit Florida market. A case in point is Massey Services, which purchased Middleton Lawn & Pest Control in mid-December during the height of the recession (see "The Art of the Acquisition," pg. 33). Sound crazy? You’re not the only one who thinks so. "I believe this is the best time to buy," observed CEO Harvey Massey, a 30-year veteran of the industry. "The economy purges itself every seven to nine years. Disaster for some is opportunity for others, so maybe this is the best time to make these kinds of acquisitions."

In fact, COO Tony Massey said the state of the economy never entered into the conversation when Massey’s management team considered purchasing its longtime rival. "We clearly understood going into the acquisition what we were facing," he said. "Once we said ‘yes’ to the question: ‘Do we want to do this?,’ we were ready to go."

That’s what I love about this industry. The "can-do" attitude and entrepreneurial enthusiasm of so many of its members – whether it’s PMPs or distributors. This is why we’re so excited about Part Two of our special report, "Now What? How PMPs Can Make the Most of the Economic Recovery Moving Forward," scheduled to appear in the July issue of PCT magazine. Look for it next month!

The author is publisher of PCT magazine.