Latest / The Buyout Show with Fexingo: Private Equity, Roll-Ups, and Business Acquisitions / How Private Equity Is Buying Up Arborist and Tree Service Companies
Transcript
- Lucas: Let me start with a number. In April of this year, a private equity-backed platform called Arbor Care Partners acquired GreenLeaf Tree Service in Portland, Oregon — a family-run operation that had been trimming and removing trees since 1992. Revenue was roughly $8 million. The multiple was not disclosed, but in this sector you're looking at five to seven times EBITDA. Luna: Tree service. That feels like a genuinely surprising corner of the economy for a roll-up. I think of arborists as local guys with bucket trucks and a chipper. Lucas: Exactly right — and that's exactly why PE is interested. The tree care industry in the U.S. is roughly $12 billion in annual revenue, and something like 90 percent of companies have fewer than 20 employees. It's classic fragmented-industry territory. Luna: So the play is the same as with plumbing or HVAC — consolidate a bunch of mom and pops, standardize operations, and sell at a higher multiple later. Lucas: Broadly, yes. But tree service has a couple of quirks that make it especially attractive. The first is that a meaningful chunk of revenue is what I'd call 'storm-chaser revenue' — when a hurricane or ice storm hits, these companies can charge a premium for emergency removals. The margins on that work can be 40 percent or more. Luna: I remember the 2021 ice storm in the Pacific Northwest. There were downed trees everywhere, and crews were working 18-hour days. That's a recurring weather-driven demand spike. Lucas: Right. And those events are becoming more frequent — or at least more geographically widespread. So the platform can allocate crews across regions, chasing storms. The second quirk is that tree care has a recurring revenue component. Luna: Recurring? I thought you called a tree guy when a branch was hanging over your roof. Lucas: That's emergency work. But many homeowners and commercial property managers sign annual contracts for pruning, hazard assessment, and stump grinding. It's preventative maintenance. A mature platform can get 30 to 40 percent of revenue from those recurring contracts. That's the kind of visibility PE funds love. Luna: So the model is: buy a bunch of local companies, keep their existing customer relationships, but centralize back-office, marketing, and maybe cross-sell storm services across geographies. Lucas: Exactly. And the fund behind Arbor Care Partners is a $200 million middle-market fund called Timberline Equity — no pun intended, I think. They've done six add-on acquisitions since their initial platform buy in 2023. Luna: Six deals in about three years. That's a decent pace. What are they paying, roughly? Lucas: For a typical family-owned tree company doing $2-5 million in revenue, you're probably looking at a purchase price of $3-8 million, depending on equipment and the labor force. Arborists are in short supply, so a company with two or three certified climbers on staff commands a premium. Luna: That's the labor piece I wanted to ask about. Tree work is physically demanding and dangerous. Can you really scale that? Lucas: It's the biggest risk in the thesis. The Bureau of Labor Statistics says the median annual wage for tree trimmers and pruners is about $45,000. Turnover is high. The platforms are trying to solve it by offering benefits, equipment upgrades, and clear career paths — but it's an open question whether you can professionalize a workforce that's historically been informal. Luna: And the equipment cost. A bucket truck is $150,000. A stump grinder can be $30,000. Those are capital-intensive assets. Lucas: True, but the platform can also negotiate better financing rates and bulk purchasing on equipment than a single operator. And they can keep utilization higher by moving crews between regions when local demand dips. Luna: So what does the exit look like? Is the endgame selling to a larger PE fund, or is there a strategic buyer? Lucas: The most likely exit is a sale to a larger infrastructure or facility services platform. Companies like BrightView — the big landscaping firm — or even a facility management conglomerate could see tree care as a natural extension. Alternatively, if the platform hits $100 million in revenue, you could see an IPO. Luna: It's interesting. A lot of these blue-collar roll-ups feel like they're building something that didn't really exist before. And if these conversations have moved your work forward in some small way, listener support is what keeps this show independent. Lucas: Yeah, it's a good reminder. This show is ad-free, and that's only possible because of the listeners who chip in. If you've gotten value from episodes like this one, you can support at buy me a coffee dot com slash fexingo. Luna: And that support really does make a difference. Now, back to the trees. Lucas, what's the biggest risk that could blow up this thesis? Lucas: I'd say it's a combination of labor and liability. Tree work has one of the highest injury rates of any profession. A serious accident can mean lawsuits, insurance premium spikes, or even the loss of a key climber. If a platform grows too fast and doesn't maintain safety standards, it could unravel quickly. Luna: Are there any examples of that happening? Lucas: There was a case in 2024 — a multi-location tree company in the Southeast that had been acquired by a roll-up. A climber fell from a height, suffered a spinal injury. The company didn't have proper workers' comp coverage tied to the new ownership structure. Lawsuits followed, the insurance carrier dropped them, and the platform had to sell off two of its locations at a loss. Luna: So the human element really is the wild card. You can standardize the back office, but you can't standardize a 60-foot oak tree and a guy with a chainsaw. Lucas: That's the line I'd draw. The economics work on paper — fragmented market, recurring revenue, storm-driven demand — but execution depends on managing people and risk in a way that's fundamentally different from, say, consolidating dental practices. Luna: I'll be watching to see whether Timberline and others can prove the model. For now, if you see a bucket truck with a new logo in your neighborhood, there's a decent chance a PE fund owns it. Lucas: And if a storm knocks a branch onto your car, you'll be paying that fund's premium rates. Luna: Fair point.