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  "documentTitle": "Rollins Inc. (ROL)",
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  "authorName": "Spruce Point Capital Management",
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  "presentationDate": "2023-10-04 00:00:00",
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      "text": "The commentary illustrates why we believe Rollins' M&A growth strategy is being stymied by growing numbers of private equity bidders outspending the strategics.",
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      "text": "The Potomac Company is a recognized M&A expert and advisor in the pest control industry. They recently conducted a podcast in late July 2023 discussing private equity’s influence. The commentary illustrates why we believe Rollins’ M&A growth strategy is being stymied by growing numbers of private equity bidders outspending the strategics. Furthermore, the interview referenced three new large private equity platforms that will soon enter the space.",
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      "text": "We got that deal done, prior that, on my way out to Turkey, I stopped through and we got another one done. Immediately, prior to that, another private equity firm has now entered the pest control industry. We've got three new platforms that are private equity owned that are hush hush and won't be announcing those until Fall 2023.",
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      "text": "You see these strategics really trying to push to this because there is a massive disparity between the shopped deals and the un-shopped deal deals and sometimes in the order of 50% to 75% in terms of purchase price. The strategics are relatively slow. Rollins, Rentokil, Terminix and Anticimex are still doing deals, but it's really just the private equity firms that have been extremely active.",
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      "text": "We've added three new participants. One firm might be the second largest, it could be the largest in terms of assets under management, that has entered the pest control industry. It's a massive private equity fund, they made a majority investment in a platform.",
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      "text": "Yes. Most of the time now, in this market, the strategics don't even make it to round two in the bidding process, if they even make it into round one. The smart ones, sometimes, say, “We'll never be able to compete.” If a private equity firm is going to pay $100 million for something, they might say, “We're not going to get north of 60 for it, so why compete?” Some of these private equity deals, on the high end for the quality firms, we're seeing it in the low 20s in terms of EBITDA multiples and 2 to 3 deals got done north of five times revenue, one of them was at north of four times revenue.",
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      "kind": "quote",
      "text": "You had your shorts on PB, not watching this. The old pest control M&A market has continued to change. We've had three new private equity firms enter the pest control industry. These private equity firms like to make the investment and then just sit on this, and then go out and make a few add on acquisitions before they announce it.",
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      "text": "For now, we continue to focus on financial sponsors. I've mentioned in The Buzz before, an average pest control transaction, we're going out to 50 to 65 participants in the process, which is just mind blowing. In an industry like Pest Control, you've got one seller, and you take it out to 60 different potential buyers, and you run a process from there. It is very difficult when I think about these last three private equity deals that we did, it would have been a 3% chance of determining who the buyer would be at the start of the process.",
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      "kind": "quote",
      "text": "\"We've had three new private equity firms enter the pest control industry. These private equity firms like to make the investment and then just sit on this, and then go out and make a few add on acquisitions before they announce it.\" — Paul Giannamore, Potomac Founder",
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      "kind": "source-note",
      "text": "Source: “Private Equity’s Impact: Dynamics, Risks and Strategies,” The Potomac Company, July 23, 2023",
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      "text": "Industry Expert Blogs About Private Equity Impact",
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