Now that the merger of the nation’s two largest lawn care companies is complete, it doesn’t mean that Scotts LawnService (SLS) trucks will be immediately replaced by TruGreen vehicles.
The rest of this year is about ensuring a smooth transition, TruGreen CEO David Alexander told LM. He expects the now $1.3 billion-plus company will be able to do so by minimizing disruption for customers and maximizing the momentum he said TruGreen has built as a standalone company.
For example, the company made $84 million on nearly $1 billion in revenue in 2015, compared with losing $5 million in 2013 as part of ServiceMaster (from a pro forma standpoint, looking at standalone costs).
Both TruGreen and SLS had good first quarters in 2016 and great years in 2015, Alexander said.
“So many times in mergers, you’ll see two weak companies merge or a weak company and a strong company merge,” Alexander said. “In this case you have two companies performing at their best—possibly ever. There’s an awful lot of power and momentum behind the merger.”
On the customer side of things, SLS clients will continue to be served by SLS technicians in SLS trucks throughout 2016. Clients will begin seeing co-branded leave-behind materials later this year, in line with an expected brand changeover and combination of routes in 2017.
“The more productive thing would be to combine routes right away,” Alexander said. “But it would create more disruption for the customer.”
But that doesn’t mean the company is waiting until 2017 to make changes.
The company has been working with a consulting firm since December to determine where TruGreen and SLS locations overlap and to create a plan for each market based on a five-year analysis of capacity and demand.
There are 140 markets with some level of overlap, Alexander said. He noted there are multiple ways to define “market” and what constitutes an overlap. Just because there is an overlap, it doesn’t mean there will be consolidation, Alexander said.
“Even if we consolidate branches, it doesn’t mean I need fewer customer service people or technicians,” he said. “We’re trying to be very careful with every market.”
Changes will come as early as June, Alexander said.
Pest, franchise, irrigation plans?
Outside of TruGreen’s plans to execute the merger with clients and staff intact, he didn’t reveal many new details about future plans for the company.
Regarding the SLS acquisition of Action Pest Control, Alexander said he sees it as a positive. TruGreen has a noncompete agreement with its former sister company Terminix. The noncompete, which expires in 2017, allows it to operate Action Pest.
“We think Action pest has a great future with us,” he said.
Plans for expanding into the irrigation maintenance market are also status quo, Alexander said. TruGreen Sprinkler Repair and Maintenance is in 20 test markets this year. The company plans to roll out the service nationwide next year.
SLS had about 90 franchise locations and TruGreen had about 40. The company is honoring its agreements with those franchisees, he said. Plans for franchising in the future are yet-to-be-determined.
Alexander also said the company, which has historically done tuck-in acquisitions, likely won’t acquire any companies in the next six months, but he expects it will do so again in 2017.
