From Snow to Soil: M&A Trends in Seasonal Service Industries

The U.S. landscaping industry is $180B+ and growing. The industry is highly fragmented with a contract-based revenue model with lower gross margins but healthy operating margins. Institutional capital, including many well-known PE firms, has flooded into the industry over the past 10 years through platform acquisitions and well-orchestrated buy-and-build strategies. Economies of scale and purchasing efficiency have followed as larger companies diversify their geography, client base, and end markets. Headwinds include labor shortages, lack of technology innovation, and weather pattern unpredictability.

The snow removal market is smaller at $23B and is also growing, despite climate change issues. This industry is even more fragmented and earlier in its outsider investment lifecycle. PE partner capital has only recently started to flow into this space as leading management teams and operating systems begin to emerge. Several tangential industries draft off of the snow removal industry including De-Icing, Snow Plow Manufacturers, and Salting. Financing buyouts with debt are somewhat limited due to seasonality and inconsistent weather seasons.

Outsourcing continues to be a rising trend over the past decade as client companies continue to find ways to increase their efficiency and focus on core competencies. Many landscaping companies have begun to offer snow removal services in the winter to even out financial seasonality and working capital needs, keep their employees busy year-round, and diversify their service offerings mix. The big question is whether these two industries can co-exist and complement each other? Or are the business fundamentals just too incongruent?

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