Don’t be alarmed if you hear the Roark Capital Group pros have gone on gardening leave. The Atlanta-based firm recently closed its purchase of Pike Family Nurseries, looking no further than its own backyard for the lawn and garden center, which also has roots inthe Dogwood City.
Terms of the deal were not disclosed, although Neal Aronson, a managing partner and founder of Roark, noted that it was nearly an all-equity transaction. The only the debt the company took on came in the form of a small senior revolver for working capital provided by PNC Bank. The purchase price was not made known, but Aronson did say the transaction fit within the firm’s typical transaction range of $25 million to $150 million.
Pike Nurseries, with annual revenue of roughly $100 million, operates 26 nurseries in and around the Atlanta metro area, selling everything from plants and shrubs to planting materials and landscape products.
Private equity is no stranger to the lawn and garden space. From Thomas H. Lee Partners, and their investment in fertilizer company United Industries Corp., to Wind Point Partners’ buyout of garden tools maker Ames True Temper, LBO buyers have been attracted to the sector in recent years. Other firms that have invested in lawn and garden companies include Franklin Street Equity Partners, Kohlberg & Co., Friend Skoler & Co., and Heritage Partners.
The appeal of the space plays into the popular baby boomer theme, and is predicated on the trend of retirees picking up gardening as a hobby in their golden years. Additionally, with the explosion in real estate, the gardening customer base of homeowners has been growing as well.
“This is a $93 billion industry. It has grown over 7% a year for the past 15 years, and lawn and gardening has emerged as the number one leisure activity in the country,” said Aronson. “This company has an unbelievable brand in this region. Plus they target a very good niche, which fits somewhere in between the big box retailers, such as Home Depot, and the mom-and-pop stores. And the Atlanta market has seen enormous population growth and gardening is probably more popular in the Southeast than any other area in the country.”
To source this deal, Roark capitalized on its presence in the Atlanta market. “The family wasn’t necessarily looking to sell the business,” Aronson said. “We probably had over 100 face-to-face meetings with the family members and through that, really built a good report…Plus, us being here locally definitely helped make the family feel more comfortable about selling.”
For Roark, the acquisition represents the firm’s fifth acquisition overall, and its fourth deal in the past 11 months. Roark currently invests on a deal-by-deal basis, according Aronson, and has so far committed roughly $170 million of capital. Investments for Roark include acquisitions of mail advertising company Money Mailer, sign-maker Fastsigns Inc. and ice cream cake manufacturer Carvel Corp. Aronson said that the firm has considered raising a traditional fund, although no definite plans have yet been finalized.
Buyers: Roark Capital Partners
Target: Pike Family Nurseries
Purchase Price: Undisclosed
Legal Counsel: Roark: King & Spalding
Accountant: Roark: Ernst & Youn