First person: what does a district director bring to an organization? -PCT
To better understand the logic of international acquisitions, a good place to start is to consider the value of the global pest control market. Estimates vary, but at the service company level, the view is that the global market is worth around $ 20 billion. The North American market alone is about half that, and if you add Latin America, you get close to 60%. Less than half of it remains for the rest of the world. Europe accounts for around 19 percent. (See graph on page 36.) Not a massive target, but increasingly, large corporate clients that operate globally are looking for service companies that they do business with in their country and whose resources they can use. services and standards internationally. This includes food processing and manufacturing companies, as well as many hotel chains, which now establish their own global pest management protocols and wish to deal with one, or a limited number, of service companies around the world.
EUROPEAN DIVERSITY. The first hurdle for any American business in Europe to overcome is language. The European Union (EU) has 27 countries. It is therefore 27 different languages to understand, to which must be added the variations of culture and the ways of doing business. Add to that the United Kingdom. Yes, in the UK English is spoken, but there is still considerable variation in the vocabulary used in the pest control industry. Add to that the number of different currencies used and you begin to understand some of the practical issues that must be overcome.
Then with all of these countries there are regulatory differences – the products available and how PMPs can use them vary widely. The EU can add an active ingredient to its list of approved substances, but it is then up to each member state to assess each formulated product and determine how it can be used in their country – hence the variation.
As if that were not enough, the European professional pest control market, estimated at around $ 4 billion, is itself highly fragmented. Accurate data in Europe is virtually non-existent, but a survey by the Confederation of European Pest Management Associations (CEPA) estimated that there were around 10,000 service companies with a workforce of around 40,000.
Of these 10,000 companies, there are a very small number with large operations in many territories, mainly only Rentokil, Anticimex and, to a lesser extent, Ecolab. In each country, then, there is a limited number of medium-sized, often private, enterprises that operate mainly on a regional basis. After that, there are literally thousands of small, one to five man operations. It is estimated that 95% of service companies have less than 10 employees, and only 1% have more than 50.
It is difficult for any international company to establish an operation of any size if the only way to do it is to buy a regional company of 10 to 30 technicians. It is therefore medium-sized companies that have become the target of acquisitions – as illustrated by the recent activities of Rollins (Orkin).
A DISPLACEMENT IN EUROPE. Rollins, operating as Orkin, once again tops the Top 100 PCT list and certainly holds the top spot among US companies striving for a global position. That being said, the company still has a long way to go to approach the global coverage of Rentokil, which now operates in 81 countries and claims market leadership in 55.
With this global target, Orkin established its first international franchise in 2000. By 2020, the number of international franchises has grown to 103, but this represents less than 1% of total revenue. While the franchise model works well elsewhere in the world, its acceptance in Europe has been limited. So in the last few years there has been a change of direction as the business acquisition path has developed.
Tom Luczynski, President of Global Development and International Franchising of Orkin, explains: “Orkin / Rollins’ expansion in Europe includes several operations owned by Orkin in the UK and franchises in Ireland, the Netherlands, in France, Portugal, Romania, Georgia and Hungary. Our franchise expansion strategy is currently focused on Europe and Asia.
“However, in recent years there has been a shift in strategy as the path to company acquisition has developed. For example, we are now firmly established in the UK following our first acquisition, Safeguard Pest Control, in June 2016, followed by six other acquisitions. In fact, in March 2020, we completed two more acquisitions, namely Albany Environmental and Van Vynck Environmental. We are now closer to providing national service to the UK and we feel we are in the top five, ”he said.
Terminix comes in second in the Top 100 PCT and they too have spread their wings internationally. In fact, by 2020, they will likely have overtaken Orkin for non-U.S. Income. In September 2019, they entered the European market following the acquisition of Nomor Holding AB, the Stockholm-based pest control company, followed by the national accounts sector of what was Rentokil’s Mitie Pest Control Ltd in October 2019. These acquisitions, according to ServiceMaster, will make it the fourth largest pest control company in Europe, while the $ 200 million acquisition of Nomor will make it the second largest after Anticimex, in Sweden and Norway, with a combined workforce of around 500 people.
Acquiring Mitie Pest Control was certainly hard work for ServiceMaster, as that part was purchased from Rentokil, which had attempted to acquire 100 percent of Mitie’s pest portfolio (which formed a small part of the overall business of this facility management company). The entire acquisition was however blocked by the Competitions & Market Authority of the United Kingdom which insisted, for anti-competitive reasons, that part of the acquisition be sold. ServiceMaster’s efforts paid off, as in one fell swoop they acquired a ready-made company with over 250 field staff capable of providing national coverage to national accounts, unlike Orkin, who had to buy six companies and has not yet reached that level. cover. At the end of 2019, the UK company was renamed and successfully launched as Terminix and now ranks third by size in the UK.
Unfortunately for ServiceMaster, their international acquisition momentum seems to have temporarily slowed down. This follows the high settlement of termite claims and lower earnings from the fumigation business in fall 2019, the decline in the company’s stock value and the sale announcement. of their franchise brands.
Ranked # 4 in the Top 100 PCT, Ecolab is also present in Europe. In France and the UK, the company ranks second behind market leader Rentokil, although around half its size based on the number of technicians. Ironically, Ecolab established this position when in 2002 it acquired Terminix, which had been present for some time in France and the UK but mainly due to a change in strategy, withdrew from the market. Ecolab also operates, but to a lesser extent, in other countries such as Portugal, Spain, Italy and Poland. Compared to Orkin and Terminix, there seems to be a deafening silence on Ecolab’s part regarding any M&A activity.
Well, really Nolen. Familiar mouse cars are rare in Europe. Although the company has a presence in most European countries, it is very small and local. As Orkin discovered, the franchise business model has had little impact in the European pest control service industry.
Once the ravages of COVID-19 have passed, further international consolidation within the industry is expected.