ServiceMaster, parent company of Terminix (#2), announced on March 30 the closing of its transaction with Copesan Services, one of the largest national providers of commercial pest management services in the country.
As reported in ServiceMaster’s 10-K SEC filing, the preliminary purchase price was approximately $150 million, comprised of approximately $100 million due at closing and $50 million due on the third anniversary of closing.
The deal came together relatively quickly due to a variety of factors, including changes in the pest control market brought forth by ongoing M&A activity, and recent developments within both organizations.
For ServiceMaster, the acquisition represents another step in Terminix’s transformation that has included management restructuring, an influx of new leaders and renewed focus on the commercial sector.
In July 2017, Nik Varty, former president of the Americas and global vice president of mergers and acquisitions at WABCO, was named CEO of ServiceMaster. In October 2017, Matt Stevenson was brought in as president of Terminix’s residential pest control and termite business, and in February 2018, Kelly Kambs was named president of Terminix’s commercial pest control and termite business.
COMMERCIAL OPPORTUNITIES. Kambs told PCT that Terminix previously had not “built out some of the pieces needed for a go-to-market strategy in the commercial world,” and that the company recognized the need to grow its commercial market share, which is roughly 10 percent of a $3 billion sector, she said. The Copesan acquisition certainly helps Terminix accelerate its growth in the commercial segment.
“This is a really nice piece for us because it’s difficult to build out a platform to service national accounts and that’s what Copesan has done the last 60 years,” Kambs said. “A lot of the go-to-market pieces that we need for commercial have been built within Copesan. And then there are pieces of that strategy that we’ll build out at Terminix, and that is primarily a sales strategy focused on the end user.”
Under terms of the agreement, Copesan Partner companies continue to service the national (Copesan) accounts now owned by Terminix. “The beauty of it for Copesan clients is that they still have the same technicians, same company name, same vehicle, same ID badge, same account management group — that all stays the same for now,” said Copesan President Deni Naumann.
What’s changed is that Terminix national accounts are now reporting to Naumann, who in turn, now reports to Kambs. “The opportunities are extremely complementary with minimal overlap of customers and the targeted market segments,” Naumann said.
REDEFINING COPESAN. The sale of its national accounts to Terminix helps Copesan better chart its path forward. During the last 15 years the Copesan business model has had to adapt as a result of Partner companies selling to large, national firms outside of the network. Copesan has had to replace these ex-Partner companies, often adding multiple new Partners in a geographic area that was once serviced by one large Partner.
“As the business has consolidated, a lot of Copesan’s people resources become involved in bringing on and training new service teams,” Naumann said. “So, for us, it’s really about where you want to spend your energy and time. Is it in consistently bringing on new service partners and filling in service gaps, or is it in continuing to meet with more clients and penetrating those markets that we spend time developing (e.g., food processing and beverage industries)?”
Copesan has been considering these and other questions in recent years, and during the last year discussions about Copesan’s future became more crystallized. “As a board of directors, we thought thoroughly about the business, and about a long-term sustainable strategy. We also talked about how we could accelerate our growth. At that point we decided we would, more or less, assess the business and see what opportunities presented themselves. And so we hired Lance Tullius as our financial adviser and consultant and went through a variety of internal strategic evaluations and assessments, and that ultimately led us to take an opportunistic approach for Copesan.”
Copesan signed the letter of intent to sell to ServiceMaster in December. The sale was announced in February and it closed in March. — Brad Harbison