As president of Action Pest Control, Kevin Pass possessed all the traits of a classic entrepreneur — tenacity, risk-taking, innovativeness, etc. — but perhaps the greatest reason for Pass’ and his company’s success was his ability to inspire others to follow his high-energy, enthusiastic lead. The Evansville, Ind.-based business had grown into a vibrant regional pest control company with seven offices, 125 employees and annual revenues of $12.6 million.
After completing his one-year term as NPMA president in July 2013, Pass returned to Action Pest Control to refocus on the business. But a funny thing happened. “I just couldn’t get energized again,” he said. “For 33 years, it’s been let’s go, go, go, and I’ve got a bunch of people who bought into that way of doing things. Now all of a sudden they didn’t have a leader that was go, go, go. I wasn’t aligned well with them.”
Soon thereafter, Pass came to the realization he needed to revisit his exit strategy. Kevin’s son, Sam Pass, has worked for Action Pest Control since his teens and he currently is an entomology student at the University of Florida, studying under Dr. Phil Koehler. Sam also has shown an interest in Action Pest Control, so much so that a plan was in place to “bring him along” in the business. However, what Pass could not figure out was a plan for transitioning the business from a financial perspective.
“When Sam and I talked about it, I said, ‘Sam, if I sold it to you, of course I wouldn’t sell it to you for what I could sell it to someone else, but even at a very sharply discounted rate, the amount of pressure on you would be tremendous. You would have to grow the business very aggressively to pay it off.’
“I know it’s a problem facing a lot of family businesses, and the majority of pest control companies are family businesses. A lot of us struggle with how to transition the business without saddling the next generation with this unbelievable challenge.”
Having decided against transitioning the company within his family, Pass began examining the sale of Action Pest Control. He reached out to Lance Tullius, manager director of Tullius Partners, who had helped Pass broker acquisitions for him during the past 10 years.
An Opportunity was Waiting.
At about the same time Pass began exploring the possibility of selling Action Pest Control, Kemp Anderson, a longtime M&A professional, joined Scotts as vice president of business development, Scotts LawnService. Anderson was charged with diversifying Scotts’ service mix and the service portfolios into pest and termite. Anderson soon connected with Tullius, whom he had known for years, and he made Tullius aware that Scotts was looking to make a platform acquisition.
One of the companies Tullius thought would be a good fit for Scotts was Action Pest Control. He believed the companies had similar corporate cultures and it was a bonus that they were relatively close in proximity (Scotts is headquartered in Marysville, Ohio).
Like most consumers, Pass was familiar with the Scotts brand and products and had some familiarity with its lawn services. In February 2014, Pass traveled to Scotts’ Marysville, Ohio, facility to learn more about the company’s culture; meet with Scotts executives; learn why they wanted to get into the pest control industry; and assess their vision moving forward. “I came away convinced that the mission was legitimate and credible, and thinking that these guys were going to do something big,” Pass said.
Of particular importance to Pass was the fact that Scotts is a global company with 8,000 employees, which could provide job security and potential new growth opportunities for Action employees.
Scotts, similarly, felt that Action Pest Control was a good cultural fit, said Anderson. “As we met with Kevin and Keith (Smith, COO of Action Pest Control) and as we talked to more people about Action Pest Control, the more we became impressed that this was a company built on taking care of the customers, taking care of the employees.”
Just prior to NPMA PestWorld, in October 2014, The Scotts Miracle-Gro Company announced that its subsidiary EG Systems Inc., doing business as Scotts LawnService, signed a definitive agreement to acquire the assets of Action, which ranked 59th on the 2014 PCT Top 100 list. When the deal closed in January, it was announced that Scotts acquired Action Pest Control for $22.7 million, a price most everyone PCT spoke with agreed was premium.
Post-transaction Update.
As part of the transaction, Pass remains with the company for two years in a consulting role. How will someone like Pass, a strong personality used to running the show, do in an advisory role?
“Yeah, I understand some of my friends are making over-under wages on how long I will last,” Pass said jokingly. “Maybe serving as president of NPMA and learning a little of politics will serve me well for the next two years.”
But Pass said he is excited about opportunities that might arise as a result of working for a large, well-financed company like Scotts. “A lot of times our progress, or our projects or our desires, didn’t necessarily align with our resources, and we obviously have pretty substantial resources now to do things that very much align with what Scotts wants to do,” he said. “And so I think it is exciting to be part of that and to be able to focus on something without having to worry about the 100 other things you worry about.”
PCT followed up with Pass several months after the announcement of the sale, to get an update on how the transition is going. Immediately following the announcement, Pass said his sales team was re-energized by being able to sell lawn care services, and Action has even received phone calls from customers saying, “We want to hire you for our lawn services. We are not happy with our current provider.”
Now that Pass is serving in an advisory role, the day-to-day operations are being overseen by longtime Action COO Keith Smith. Instrumental in the transition has been the Action team, including Paula Bazemore (HR director); Terri Haake (accounting); Ryan Fleming (sales manager); Sara McKinney (marketing); Scott Robbins (technical director); Misty Hoffman (executive assistant); branch managers and others.
Pass said Scotts employees are in the office frequently to learn the business and help with the transition. Both Pass and Smith have spoken at Scotts conferences where they have shared (and learned) best practices. Additionally, Pass said his biggest role has been in educating the Scotts team. “For example, I just spoke with a commercial salesperson from the Scotts side, and talked to him about what was involved on the pest control side — to answer questions like, “What are the triggers for people to purchase pest control?”
Does Pass have any seller’s remorse? “You can’t keep from having that, and I know those thoughts started slipping into my mind when I was driving back and forth from Evansville to Columbus, but once I met with Kemp and we talked more about both companies’ cultures and how my team would fit in, I realized that I had made the right decision.”