Jan 30, 2025

Pest Control Sector Update – January 2025

pest control sector update

Easing Macroeconomic Conditions and Increased Time Spent at Home Supports Rising Pest Control Sector M&A Activity

Easing macroeconomic conditions, including interest rate cuts and softening inflationary pressures for consumers, helped accelerate Pest Control sector growth and merger and acquisition (M&A) activity throughout 2024. Valued at $24.4 billion in 2024, the global Pest Control sector is projected to reach a market size of $49.7 billion by 2034 at a compound annual growth rate of 6.5%, according to a Future Market Insights report.1 Improvements in market conditions driving sector growth throughout 2024 were underpinned by consumption trends that prioritized service-based spending amid increased time spent at home and aging homeownership rates. In addition, tailwinds such as population migrations to Southern regions of the U.S. and rising pest populations have continued to support long-term sector growth. These tailwinds made the space increasingly attractive to private equity buyers amid interest rate reductions. While select public companies faced growth pressures related to large-scale integration challenges, middle market pest control businesses’ performance remained strong as sector participants continue to leverage M&A as a key strategic growth driver. Easing macroeconomic conditions and mortgage rates will likely spur elevated home ownership, resulting in heightened demand and M&A opportunities for sector participants. Capstone anticipates that targets utilizing synergistic sales and marketing tactics will continue to pique acquirer interest as sector players aim to bolster customer adoption and organic growth capabilities via M&A.

Increased Time Spent at Home Continues to Propel Demand in Pest Control Sector

Increased time spent at home has continued to support rising demand for pest control services, especially as consumer spending preferences have increasingly shifted away from goods in favor of services. As of November 2024, consumer spending rose 2.7% on a year-over-year (YOY) basis, according to the St. Louis Federal Reserve.2 Within the Pest Control sector, demand for services has increased as a result of shifting consumer preferences away from do-it-yourself (DIY) towards do-it-for-me (DIFM), a popular trend among younger Millennial and aging Boomer homeowners. Between 2003 and 2022, time spent at home per day increased 10%, or by 1 hour and 39 minutes, according to a report from The New York Times.3 While time spent at home began accelerating prior to the COVID-19 Pandemic, rates spiked and have yet to fall to the levels seen before lockdown restrictions were implemented. This has, in turn, driven demand for home maintenance services including pest control. Additionally, aging homeownership rates have propelled demand for pest control services as worsening health and mobility issues have pushed older generations to increasingly seek out DIFM services at home. Sector participants seeking to capitalize on healthy demand and increased time at home trends have prioritized M&A targets with strong direct-to-home sales and marketing tactics driving customer adoption and recurring sales opportunities. As inflationary pressures continue to subside, pushing mortgage rates lower, the housing market is expected to accelerate providing further tailwinds to sector growth and M&A activity.

Pest Control remains one of the strongest sectors in the Consumer industry and, as a result of certain inherent attributes, it is one of the most prolific M&A sectors. Those attributes include the annuity nature of its revenue base, significant operating leverage, efficient media spend, and ease of integration to build a national presence. 2024 continued a now established long-term trend of public and private consolidators actively throwing down check books for independent operators. Public consolidators especially, have weened wall street on the attractive model of continuous M&A to drive growth. The challenge is for them to keep the M&A pipeline going in the face of increased competition for assets. The end result to our privately-held pest control operators? Increasing revenue multiples for sellers. This is particularly important given few Consumer sectors trade on revenue multiples. An obvious ‘boom’ to sellers. We do not see these dynamics changing any time in the future. If anything, we predict that the second half of 2025 will see an even stronger surge of acquisition dollars seeking sellers. Please call us to discuss.

Kenneth WasikHead of Consumer Investment Banking, Capstone Partners

Rentokil’s Terminix Integration Struggles Highlight Need for Strong Organic Growth Strategies

Large-scale integration struggles that have plagued Rentokil (LSE:RTO) in the wake of its acquisition of Terminix (December 2021, $7.6 billion, 3.7x EV/Revenue, 19.9x EV/EBITDA) have sent ripples throughout the sector and highlighted the importance of strong organic growth tactics for pest control businesses. After the acquisition, Rentokil’s incremental growth began to contract, which the company attributed to a multitude of factors including a poor termite season, soft sales within its Chemical Products division, higher than expected inflationary costs, branch integration and employee retention struggles, and weakness in customer acquisition and retention. Specifically, a mismatch in culture and management between Terminix and Rentokil operations has caused a two-to-three-month delay to post-acquisition synergies, according to its latest earnings transcript.4 Dissatisfied with the company’s performance post-acquisition, shareholders called for increased scrutiny of Rentokil’s Terminix integration plan, cost management practices, and executive leadership team. Notably, Trian Partners amassed a top ten stake (~$400 million) in Rentokil following the company’s July profit warning and expressed an interest in working with the management team to improve shareholder value and market strength, according to a June CNBC article.5

Rentokil’s integration-driven struggles with organic growth represent a stark contrast to direct competitor Rollins’ steady and healthy organic growth over the same period. Rollins’ organic growth has been underpinned by successful marketing and sales strategies focused on increasing cross-selling opportunities and capturing additional recurring residential revenue streams. Additionally, the company has prioritized M&A targets that provide synergistic and accretive organic growth opportunities in-line with Rollins’ operational capabilities and end market services. In the succeeding months after the highly publicized growth and integration struggles at Rentokil, organic growth and shareholder optimism improved marginally as the company appointed a Trian partner to its board, instated a new CFO, CMO, and COO, and generated cost savings through headcount reductions, according to articles from the Financial Times and Reuters.6,7 The company plans to build on these improvements by further investing in digital lead generation to drive new customer adoption and organic growth and is also exploring a ~$528.2 million divestment of its French Workwear unit, according to a report from Bloomberg.8 Despite public shareholder focus on initiatives driving organic growth, M&A continues to underpin sector growth strategies among public and private buyers alike. As a result, Capstone anticipates sector acquirers to increasingly prioritize targets employing strategic marketing and sales tactics to safeguard operations through healthy organic growth capabilities.

Long-Term Tailwinds and Interest Rate Cuts Fuel Rising Pest Control M&A Activity Among Sponsor-Backed Buyers

Strong sector fundamentals, including recurring revenues and a highly fragmented market, have underpinned accelerated M&A activity in the Pest Control sector throughout 2024, particularly among sponsor-backed buyers that reinvigorated roll-up efforts amid easing financing conditions. M&A volume through 2024 increased 27.6% YOY, with 97 transactions announced or completed. Nearly evenly bifurcated between strategic buyers (50.5%) and financial buyers (49.5%), two years of rising M&A activity among sponsor-backed companies helped private equity groups continuously take up an increasing portion of sector deal activity. In 2024, add-on transactions accelerated 29.4% YOY. The increase largely stemmed from a handful of established platforms including Imperial Capital Group-backed Certus Pest (seven deals), Halle Capital Management-backed Rockit Pest (six deals), Thompson Street Capital Partners-backed PestCo (six deals), Barefoot Mosquito & Pest Control (five deals), Shore Capital Partners-backed Action Termite & Pest Control (five deals), and GCTR-backed Senske Services (three deals). While easing interest rates reinvigorated sponsor-backed buyers, platform acquisitions remained stagnant YOY as the number of available, quality targets with high revenues, competitive market share, and scalable growth potential continued to dwindle. However, private equity buyers are expected to remain active acquirors as the highly fragmented Pest Control market remains ripe for consolidation and long-term tailwinds, such as population migrations to Southern regions of the U.S. and rising Millennial homeownership rates, have continued to reaffirm private equity investment theses in the sector.

Top Buyers Continue Acquisition Spree in 2024

Leading buyers leveraging easing market conditions have continued consolidation activity throughout 2024 in an effort to bolster scale, service diversity, and geographic reach. These market improvements acted as a tailwind for private strategic buyers whose smaller scale and consumer-facing regional operations have been most impacted by macroeconomic volatility, with private strategic buyer activity up 31% YOY. Of note, top private strategic buyers Arrow Exterminators (six deals), Massey Services (three deals), and Plunkett’s Pest Control (three deals) continued their acquisition spree in 2024. Top buyers, that average two or more transactions each year, underpinned pest control M&A activity in 2024 as sector participants continue bolstering existing assets. Public buyer activity remained consistent, up one deal YOY. Stable public strategic buyer volume largely stemmed from Rollins and Rentokil as part of an ongoing historical M&A trend in the sector. Both key public players in the sector have reaffirmed their M&A strategies for the long-term, with Rollins recording 32 deals for a total of $106 million and Rentokil recording 23 acquisitions for a value of $255.1 million in the first three quarters of 2024, according to earnings releases from both companies.9

Additional improvements to the inflationary and interest rate environment will likely further invigorate deal activity across the sector, particularly as brands aim to continue generating growth by acquiring companies that bolster scale, service diversity, and geographic reach. Notable transactions in the Pest Control sector are outlined below.

  • Rollins-Owned Northwest Exterminating Acquires Gilstrap Exterminating (November 2024, Undisclosed) – In November 2024, Rollins-owned Northwest Exterminating acquired Gilstrap Exterminating for an undisclosed sum. The acquisition expands Northwest’s footprint in the Georgia and Metro-Atlanta area, a part of the high-growth Southeast U.S. region within the Pest Control sector. Gilstrap’s customer-centric approach attracted Northwest to the deal, and the team plans to keep owners Melanie and Jamie Gilstrap on board after closing, according to a press release from PCT.10 “Choosing Northwest was about trusting a company who would continue to care for our team and customers the way they deserve. Growing Gilstrap has been a great adventure, and we know the business is in good hands with the Northwest team,” noted Melanie Gilstrap, Founder of Gilstrap, in the press release.

The acquisition builds on a flurry of M&A activity from Rollins and Rollins-owned subsidiaries throughout fiscal year (FY) 2024. Of note, Northwest Exterminating also acquired D&G Exterminating (October, Undisclosed) and Enviroguard Pest Solutions (October, Undisclosed) in 2024. Other acquisitions from Rollins’ subsidiaries in 2024 include: OPC Services’ acquisition of both McGee Pest Control and Toby’s Pest Control (August, Undisclosed), Clark Pest Control’s acquisitions of Nexgen Exterminating (May, Undisclosed) and Oxley Pest Control (January, Undisclosed), and Orkin’s acquisition of Environmental Pest Control (EPCI) (March, Undisclosed). The company plans to continue leveraging M&A to stimulate growth and has outlined a healthy pipeline of targets to help the company achieve its 2-3% inorganic YOY revenue growth target, according to the company’s Q3 earnings transcript.11

  • Citation Capital Management Acquires Aptive Environmental (August 2024, Undisclosed) – Citation Capital Management, a middle market private equity firm focused on the Industrial and select Consumer verticals, completed its acquisition of Aptive Environmental in August 2024 for an undisclosed sum. The deal follows multiple attempts from Aptive to broker a sale and represents co-founder David Royce’s fourth pest control business he has launched and flipped, including the sale of Alterra to Terminix (November 2015, undisclosed), according to Pest Control Technology.12 Citation attributed Aptive’s strong, scaled North American market presence and additional growth potential within the highly fragmented Pest Control sector as motivation for the deal. In 2023, Aptive Environmental’s revenues grew 9% YOY to $450.5 million, pushing the company’s North American ranking up from sixth to fifth on a revenue basis within the Pest Control sector, according to the PCT Top 100 report. Additionally, Aptive’s position as one of the largest privately held and the third largest residential pest control operator in North America helped support Citation’s investment thesis in the company, particularly as platform opportunities have become increasingly scarce across the sector and private equity buyers battle for market share, according to Citation’s August interview with PE Hub.13 As part of the acquisition, Citation plans to accelerate growth organically through technology investments and brand awareness and inorganically by ramping up Aptive’s M&A activity moving forward.

“Pest Control is a very attractive category within the Residential Services sector. It has a very large addressable market and grows consistently in both price and volume. There are a few drivers of growth including increasing millennial homeownership, people spending more time at home, and a shift away from ‘do-it-yourself’ (DIY) to ‘do-it-for-me’… We view Aptive as a platform. The business has historically grown organically, which we believe will continue…In addition… There’s around 20,000 regional or family-owned pest control services businesses in North America. We see an opportunity to potentially consolidate some of that via acquisition,” noted Tiffany Hagge, Citation Founder and Managing Partner, in the August PE Hub interview.

  • Incline Equity Partners-Backed Barefoot Mosquito & Pest Control Acquires Marble Falls Pest Control (July 2024, Undisclosed) – Incline Equity Partners-backed Barefoot Mosquito & Pest Control announced its acquisition of Marble Falls Pest Control in July 2024. Terms of the deal were undisclosed. The deal represents Barefoot’s latest acquisition amid a flurry of roll-ups throughout 2024 following Incline’s January 2023 investment (undisclosed) in the company. Incline cited Barefoot’s environmentally conscious services within the high-growth Mosquito markets of Texas as basis for the investment. Incline’s investments have focused on developing Barefoot’s marketing capabilities, expanding its customer base, and enhancing its technician recruitment and training. Additionally, Incline’s investment has supported and accelerated Barefoot’s inorganic growth strategy, evidenced by the additional acquisitions of Evolve Pest Control Dallas (July, undisclosed), Mosquito Scott (June, Undisclosed), Sniper Services (June, undisclosed), Life After Bugs (February, Undisclosed), the Dallas and Houston branched of Termio Pest Control (January, undisclosed) and Bob Jenkins Pest Control (December 2023, undisclosed).

“Joseph and Jason have built a strong platform in a mosquito-friendly region, where demand is recurring and non-discretionary. There is significant opportunity to enter new geographies and explore additional service offerings through a combination of strategic M&A and greenfield openings,” noted Brad Phillips, Managing Director at Incline, in a press release.14

As macroeconomic conditions continue to ease, mostly notably regarding interest rates and inflationary cost pressures to consumers, Pest Control sector M&A is expected to continue accelerating, particularly among private equity and private strategic buyers. These easing conditions and an accelerated M&A market will likely also help fuel growth in the space, especially when accounting for tailwinds driving long-term sector growth and rising private equity interest.

To discuss the sector dynamics driving long-growth and increased M&A activity, provide an update on your business, or learn about Capstone's wide range of advisory services and Pest Control sector knowledge, please contact us.

Izzy Jack, Associate, was the lead Market Intelligence contributor to this article.


Endnotes

  1. Future Market Insights, “Global Pest Control Service Market is to Reach USD 49,665.8 million by 2034 Amid Rising Urbanization and Eco-Friendly Solutions: FMI,” https://www.globenewswire.com/news-release/2024/11/25/2986583/0/en/Global-Pest-Control-Service-Market-is-to-Reach-USD-49-665-8-million-by-2034-Amid-Rising-Urbanization-and-Eco-Friendly-Solutions-FMI.html, accessed January 22, 2025.
  2. Federal Reserve Bank of St. Louis, “Real Personal Consumption Expenditures: Services,” https://fred.stlouisfed.org/series/PCESC96, accessed January 9, 2025.
  3. The New York Times, “A Nation of Hombodies,” https://www.nytimes.com/2024/10/05/upshot/americans-homebodies-alone-census.html, accessed January 9, 2025.
  4. Rentokil, “Q3 Trading Update,” https://www.rentokil-initial.com/~/media/Files/R/Rentokil/documents/q3-trading-update-transcript.pdf, accessed January 9, 2025.
  5. CNBC, “Nelson Peltz’s Trian amasses stake in pest control giant Rentokil,” https://www.cnbc.com/2024/06/11/nelson-peltz-trian-rentokil-terminix.html, accessed December 6, 2024.
  6. Financial Times, “Rentokil Shares Rally After Cost Cuts and Growth at U.S. Unit,” https://www.ft.com/content/80c31293-4c64-4bf4-9480-3f4c8d393fb9, accessed December 6, 2024.
  7. Reuters, “Rentokil Shares Jump as Group Moves to Fix North America Business,” https://www.reuters.com/business/retail-consumer/rentokil-says-2025-profit-be-hurt-by-delayed-benefits-terminix-deal-2024-10-17/, accessed December 6, 2024.
  8. Bloomberg, “Rentokil Said to Weigh €500 Million Sale of French Workwear Unit,” https://www.bloomberg.com/news/articles/2024-11-15/rentokil-said-to-weigh-500-million-sale-of-french-workwear-unit, accessed December 6, 2024.
  9. Rollins, “Rollins, Inc. Reports Third Quarter 2024 Financial Results,” https://www.rollins.com/investor-relations/news-events/press-releases/detail/397/rollins-inc-reports-third-quarter-2024-financial-results, accessed December 6, 2024.
  10. Pest Control Technology, “Northwest Exterminating Acquires Gilstrap Exterminating,” https://www.pctonline.com/news/northwest-exterminating-acquires-gilstrap-exterminating/, accessed December 6, 2024.
  11. Rollins, “Third Quarter 2024 Earnings Conference Call,” https://d1io3yog0oux5.cloudfront.net/_7812d33d921ef856a9cb95dd534b1124/rollins/db/881/8403/file/Q3+2024+Earnings+Call+Transcript.pdf, accessed December 6, 2024.
  12. Pest Control Technology, “Pest Control Industry Entrepreneur Royce Profiled in Forbes,” https://www.pctonline.com/news/royce-forbes-magazine-profile/, accessed January 22, 2025.
  13. PE Hub, “Exclusive: Citation Acquires Pest Control Services Company Aptive,” https://www.pehub.com/exclusive-citation-acquires-pest-control-services-company-aptive/, accessed December 6, 2024.
  14. Incline Equity Partners, “Incline Partners with Barefoot Mosquito & Pest Control,” https://inclineequity.com/incline-partners-with-barefoot-mosquito-pest-control/, accessed December 6, 2024.

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