Selling / Buying a Landscaping Business
Several years ago, I wrote an article for The Horticulture Week on the potential pitfalls to look out for when buying an existing gardening business, discussing how to make the transaction as smooth as possible. I have spent the last decade and more working as a Gardens Management Consultant, sometimes called in to offer my independent opinion. I feel it is time to revisit the subject, only this time, separating those businesses that offer only maintenance in the domestic sector, from landscape construction companies, as the gulf between the two disciplines involving compliances and legislation has widened considerably since my last offering.
Having now retired from working as a consultant, I am happy to pass on my thoughts as they may no longer be considered biased or partisan.
In the past ten years, the landscape industry has changed beyond all recognition from previous site management and working conditions, with a significant increase in regulation and formal competency requirements. One of the most important pieces of legislation affecting landscape construction work is the Construction (Design Management) Regulations 2015 (CDM) which set out duties and responsibilities from initial design through to practical completion of construction projects, and are enforced by The Health & Safety Executive. While CDM does not apply to all forms of landscaping or routine maintenance, it is highly relevant to design & build construction based landscape operations.
A wide range of demonstrable competencies, training records and documented policies are now expected within professional landscape businesses. These include evidence of safe use of tools and equipment, manual handling procedures, drug and alcohol abuse policies, noise and dust control measures, and the correct use of personal protective equipment. While not all of these are subject to mandatory certification in every circumstance, they are increasingly required through risk assessment, insurance conditions, client expectations and health and safety legislation, much of which originates from the wider construction industry before being introduce into the landscape sector.
Whilst the majority of landscaping businesses are started by an individual, growing and expanding, adding more staff, equipment, transport, skills and office practices, in a natural, organic way, some may seek alternative, faster, ways to become involved in landscaping, that do not take years to develop. Some may look at buying into an existing firm, either as a partner or taking over a complete business, including every contractual element of that company, as far as may be practical.
Partnerships are a whole separate issue, and whilst I mention them here for completeness, they are a stand-alone subject, deserving of a separate, comprehensive article.
There are very few – if any – landscape franchise opportunities available nowadays. Thirty years ago, a firm called Scenic Blue started offering franchises to smaller, existing firms and new start-up teams and individuals. Scenic Blue was brought out by Marshalls in the early 2000s, and has a couple of outlets still operating (to the best of my knowledge). Unlike
gardening or lawncare companies, landscaping does not readily and easily suit a franchise operation due to the sheer complexity and number of skills and disciplines involved that are not readily taught or ‘transferable’ by induction.
What is a ‘Landscaping’ business?
Several landscape firms specialise in planting and soft landscaping works, others offer a full range of construction including both ‘hard’ and ‘soft’ elements. Some may concentrate of paving, walling and driveways, whilst other design and built water features and ponds. The very nature of ‘landscaping’ is to design and build gardens, either partial or complete projects.
Many are members of trade associations such as The Association of Professional Landscapers (APL) or British Association of Landscape Industries (BALI). Landscapers who work mainly with paving may belong to company recognised groups or selected installers, including Bradstone, Brett, Talasey or Marshalls as ‘approved’ installers. All of these memberships are meritorious, requiring varying degrees of vetting prior to acceptance.
Landscapers who design and build, or build only at events such as Royal Horticultural Shows at Chelsea, Hampton Court, Malvern or Tatton Park may have been awarded medals for their work, possible a collection of such awards, serving as a publicly recognised foundation for the business.
Essentially, it may be accurate to describe a landscape company as being a business, with a team of individuals, a trading name and public image and history for whatever works they have produced over a number of years, with an owner who has built up the firm to become a viable and valuable asset. It may be any size, from a ‘two-man-band’ to a larger multi-disciplined team of artisans who work collectively under a single banner, all dedicated to building gardens.
Landscaping firms are not reliant on ‘regular’ customers in the same way as maintenance contractors, although they may benefit from recommendations from previous clients, therefore building up a local ’presence’ and considered as trustworthy, and this reputation should not be underestimated.
While profits themselves cannot be sold as a standalone asset, goodwill is a recognised and legitimate asset in both Law and accounting, representing the value of reputation, client relationships and future earning potential. Having said that, in landscaping, where reputation, skills and flair may be personal assets, together with personal relationships with co-workers and clients may play a significant role, goodwill can be difficult to place a value on, and even harder to evaluate and guarantee following a change of ownership.
Selling/buying a Landscape Company
Notwithstanding all of the comments above, none of these considerable attributes can be sold as part of any sale agreement, as they do not, and cannot, be included in the package.
Membership of a trade association, along with any awards and formal recognitions, may or may not transfer following a sale, depending on the structure of the transaction. Where a business is sold as an asset sale, such memberships and awards will generally cease, or revert to the original owners, and cannot automatically be claimed by the new proprietors. However, where a limited company is sold by way of a share purchase, the company itself continues to exist unchanged in Law, and its trading history, awards and recognitions remain with that legal entity, subject to the rules of the relevant awarding or membership body.
Whether a business continues to exist following a sale depends entirely on the legal structure of the transaction. In the case of a share sale of a limited company, the company continues as the same legal entity, with only the ownership changing. In contrast, where a business is sold as an asset sale, the original company or sole trader may cease trading, and a new business entity may be created by the purchaser, even if the trading name, branding and public image remain the same.
For this reason, I always recommend that both solicitors and accountants are involved in every sale of a landscape business, as there are so many challenging items, including agreements to warranty previous projects (this subject should be very carefully investigated, as responsibility for work continues under the names of the directors who constructed a project for a period of six years from completion under the Consumer’s Right Act 2015)
These matters should be covered by Indemnity Insurance policies paid for – and continued by – the original company, and not become the responsibility of the new owners. (Standard practice is to continue paying for Indemnity Insurance, which will reduce each year as likely liability is reduced as time goes by) Of course, in the event of a closure or liquidation of the old company, this status may end any legal liabilities on the part of the previous owners – every case will be have different circumstances……..
Transferring Existing Projects
When I sold my old company (Town and Country Gardens) to new owners, I had three current projects nearing completion, all large(ish) with one or two months to finish, soft works only, and seasonal planting including bulbs. Outstanding contract value totaled around £50,000 between the three.
In order to hand over project responsibilities, an agreement was drawn up, accepted by the client and new owner, whereby everybody knew what to expect, and when to expect it. A very simple document, it included a caveat regarding warranties on the hard landscaping aspects, (which I accepted liability for), and the planting works, which the new owners accepted as being their responsibility.
I was paid up to the time of handover, and the new owners were paid under a new and separate contract. The likelihood of there being a clean, sharp break between ending all contracts, when selling a company, and handing over to a new owner is small, and all transactions need to take into account the facts at the time of transfer.
In summary, buying or selling a landscaping business can be straightforward, even under complex scenarios, provided that everything is translucent and clearly laid out at all times. Goodwill may not be something you can ‘sell’ to a new owner, but goodwill between both Parties during negotiations is vital.
