Large-scale acquisitions mark the transition to a phase of consolidation in which deal making gives way to performance.
It was predicted. Ever since the consolidation movement hit the PHC industry three years ago, the roll-up artists said, “You ain’t seen nothing yet.” Accumulating billion-dollar empires was the hard part, and the one entailing risk. The joyful part, from their perspective, was reaping the rewards when their rolled-up companies got gobbled up by even bigger fish. This had happened in waste management and other consolidated industries, and was an inevitable consequence of the consolidation movement.
ServiceMaster’s purchase of ARS doesn’t perfectly fit this scenario, simply because it is anything but a success story of consolidation gone according to plan. The founding chieftains of ARS certainly envisioned selling out for more than the pitiful $5.75 price paid by ServiceMaster for each share. But this was not entirely unforeseeable. Like any other business, consolidation has its winners and losers, and the losers tend to go up for sale faster than the winners. That $5.75 price looks a lot better than the sub-$2 slum ARS inhabited a few months ago — although not so delightful to the contractors who exchanged their pride and joy for ARS stock when it was flying in the $20+ rarefied air, or even to the original investors who bought in at $15.