Commercial Landscaping: An Owner’s Guide to Private Equity Activity and Valuation Considerations

Until recently, PE considered commercial landscaping to be a niche, hard-to-scale segment of the broader facility services industry. However, landscaping has increasingly attracted PE attention, with more than 30 PE platforms as of this writing. This growing interest has been fueled by a combination of stable, recurring revenue models with predictable cash flows; opportunities for operational improvements as companies scale, professionalize their management and sales teams, and invest in back-office support and systems infrastructure; and a fragmented competitive market and aging owner conditions that are ideal for investors with roll-up strategies.

This piece covers this PE investment trend, as well as why it matters to business owners operating in the commercial landscaping sector.

Why does PE “suddenly” have interest in commercial landscaping?
Private equity interest in the landscaping services sector is not a new phenomenon; however, the number of platform investments has gone up significantly over time. This increase is driven by a mix of long-established industry characteristics and emerging trends, with these elements being the most influential…

• First, private equity investors typically begin by assessing whether the industry’s dynamics can drive strong investment performance and growth. Key factors they consider include the total addressable market size and the level of industry fragmentation. Commercial landscaping “checks the box” in this regard. The U.S. landscaping (~90%) and snow & ice removal (~10%) industry generates approximately $200 billion annually with a steady annual growth rate of approximately 3-5%. The industry includes over 640,000 landscape management providers and 85,000 snow removal services, the majority of which are privately owned, small-scale, “mom-and-pop” operations. Several industry publications publish company size rankings, including Landscape Management and Lawn and Landscape, which highlight the largest industry players. These rankings are based largely on self-reported data, meaning they may exclude competitors who prioritize anonymity over visibility. The industry’s “long tail” of small, private players offers attractive add-on opportunities to complement acquisition strategies for private equity investors.
• Second, the emergence of third-party technology solutions has enabled PE’s ability to consolidate, integrate, and manage field (and route based) services companies in ways that weren’t previously possible (e.g., field service management software combined with GPS-based fleet tracking and location monitoring; industry-specific customer relationship management tools, contract management systems, and accounting programs). With these technologies, PE has an arsenal of business management and improvement tools to facilitate operational efficiency, expansion, and growth. In prior years, many of these tools were less developed, too expensive, not yet proven, or still in the early adoption phase. Before these solutions were widely available, the industry wasn’t quite “PE ready”.
• Third, demand for the industry’s services is consistent and predictable, while the industry landscape remains highly fragmented. The former allows PE investors to utilize debt (especially in today’s capital markets environment) to amplify their equity investment returns. The latter provides ample potential M&A targets, which offer a path to continued capital deployment and potential synergies.
• Lastly, but perhaps most importantly, past PE successes breed present/future PE interest. Initial successful PE investments in the sector paved the way for additional PE interest. The investments below proved that the industry could yield compelling returns. In short, successful deals beget more deals.

Successful recent PE exits
Several noteworthy private equity exits have taken place over the last decade, with meaningful activity pickup since 2019. Each generated significant returns for investors, with most EBITDA multiples between 7x and 15x (more on valuation ranges and considerations below). These successes generate(d) a feedback loop in the sector.

Industry valuation drivers
Commercial landscaping industry valuation multiples are influenced by a combination of financial performance, services mix, customer demographic, operational, and workforce-related factors. These factors, when analyzed together, help PE investors determine appropriate valuation for each company, typically expressed as a multiple of EBITDA, revenue, or cash flow (e.g., EBITDA less maintenance capex).

Valuation is both an art and a science, but key PE investor considerations and representative valuation ranges by company type and size are highlighted in the figure below. Working with an advisor who has commercial landscaping transaction experience can help a private business owner understand the likely company valuation range prior to engaging in a market-testing process.

Importantly, by understanding which attributes and characteristics are important to potential investors, business owners can proactively address “problem areas” in advance of selling their business.

Representative current PE-backed landscaping platforms
The figure below presents several current PE-backed landscaping companies. If you’re a landscaping business owner, you have probably received inbound interest from one (or several) of these platforms, either directly or via a buy-side advisor (which can mask the would-be acquirer’s identity). These companies often have in-house M&A professionals, and their investors are sophisticated parties well versed in commercial landscaping. They understand industry business models, valuation drivers, and how to convince business owners to sell, often on a proprietary basis. In these cases (when not running an organized, full auction process), the business owner is usually leaving money (or deal terms) “on the table” since the buyer doesn’t feel the competitive tension of a sell-side process when negotiating.

Conclusion and next steps
An experienced advisor can guide you in refining both the quantitative aspects (such as purchase price, escrow terms, and working capital calculations) and qualitative factors (like non-compete or employment agreement language) of your deal. By exploring multiple partnership or sale options, you’ll be able to choose the one that fits best. Since first impressions with potential buyers are critical, we work with you to ensure you’re well prepared before going to market.

If you are considering a complete or partial sale of your business, or anticipate doing so in the future, we’d welcome the opportunity to introduce ourselves. With deep experience in the commercial landscaping sector and a strong track record in the broader essential services space, we can provide valuable insights into the current M&A landscape and help you explore your options in greater detail.