Mike Loftus runs Connor’s Landscape, a family-owned, California-based landscaping company founded in 2014. In five years, he has built a $5 MM business (with margins exceeding 10%) through strategic acquisitions by focusing on relationships, discipline, and consistency. I sat down with him recently to learn more about his story, the lessons he’s learned, and his advice for other first-timers in M&A. The conversation was a rich lesson for early-stage entrepreneurs in the principles of strong M&A strategy: building relationships of trust, executing with discipline and consistency, and maintaining a growth mindset and tolerance for risk.
Starting from Scratch
Our story begins with Mike’s unexpected entry into the landscaping business. Armed with a finance degree and a general desire to launch his own venture, Mike found himself drawn to the year-round opportunities that the landscaping industry offered in California. Despite its lack of glamor (“it’s a pretty unsexy business,” Mike quips, “but I love it”), he quickly built a strong foundation and started to gain traction.
After the first year, Connor’s really began to hit its stride, and Mike began to develop an appetite for a more intentional and systematic approach to growth. This led him to exploring mergers and acquisitions (M&A). At the outset, he admits, he had little understanding of what M&A entailed. He had heard about contacts in his networks acquiring companies, but hadn’t considered it for himself. So he started with the frontlines for learning a new topic: Google.
“I literally started Googling ‘landscape companies for sale,’” Mike recalls. “I didn’t want to get out over my feet, and I wanted to take my time. I got into entrepreneurship because I didn’t want people telling me what to do. So why would I want outside investors telling me how to run my business?”
As with most early-stage entrepreneurs, Mike’s first few deals were pretty nerve-wracking. Though the deals were (by his own estimation) relatively small in the world of M&A, they required huge personal investments and a healthy dose of risk. “You have to realize this was every dollar I had at the time,” Mike recounts. “After every deal, I always had a moment where I was like, ‘what the hell just happened? I’m broke again.’ ”
Strategy, Execution, Integration…Repeat
A major driver of Mike’s success has been his disciplined execution on a thoughtful strategy (read more about how to build a strong M&A strategy in my last blog post). Mike’s approach to deals was rooted in seeking long-term sustainability rather than chasing short-term gains. He focused on small acquisitions that aligned with his strategic goals, and then he executed on these deals with discipline and consistency. His goal was to pay 2x for his acquisitions, to be able to finance without outside investment (beyond bank financing), and to grow slowly and steadily instead of being tempted by big, risky deals. This approach ensured a manageable level of risk as he steadily expanded his portfolio. “I’d rather pay 2x for two smaller companies than 3x for one larger company. It takes more time, but it’s worth it to me.”
He has also been clear on his investment thesis. He knows what he is looking for in his acquisitions: a healthy employee base. In the landscaping business, the big equipment takes a beating and will inevitably need to be replaced – but a strong, reliable workforce means a healthy customer base. “These are asset sales,” he shares. “I want to see employee retention. If 70% of the workforce has been there three to five years, they’re probably pretty sticky, and they’re probably good employees.”
“If 70% of the workforce has been there three to five years, they’re probably pretty sticky, and they’re probably good employees.”
After the acquisition, Mike’s approach to integration is similarly disciplined. He is patient, and takes time to really understand the company and its employees before making major changes. “My rule of thumb is no major changes for one year,” he shares. “Sure, we look for back office efficiencies, but I try not to do anything that will scare off longtime employees.” Remarkably, this approach has yielded Mike 90% employee retention over five acquisitions.
“Trust is Paramount”
The value Mike places on his acquired employees points to another critical ingredient in Mike’s formula: trusting relationships. This is a major theme throughout Mike’s M&A journey, and he’s quick to credit his repeat success to this orientation to trust-building. “The relationship with the seller – that’s make or break. The last two deals I closed were won out over cash offers from much bigger buyers. But the seller picked me.”
“The relationship with the seller – that’s make or break.”
How does Mike go about forging deep relationships of trust in a context that can easily become contentious? By recognizing that for the seller, the deal is about far more than numbers. For small business owners, selling their company is a deeply personal experience. Mike consistently took extra time to understand his sellers and to operate with full trust and openness throughout the process. “Trust is paramount,” he shares. “I made sure I treated them with respect, looked them in the eye, bought them lunch. And a big question was always whether I would take care of their employees. Some of these employees have been with the company for 15, 20 years. My response was that I wouldn’t be buying the business if it weren’t for the employees.”
In one case, Mike had a first and sole offer in on a company that wasn’t yet listed for sale. Instead of pushing to close the deal immediately, he encouraged the seller to run a marketing process to make sure his offer was fair – even if it meant getting competing offers. Ultimately, the seller chose Mike’s offer over a larger one from a bank because of the foundation of trust that had been built between them.
Mike has brought this orientation to relationship-building to other aspects of the M&A process. He regularly consults with trusted advisors on financials when considering a purchase to make sure he has someone to fill in the gaps in his own knowledge. He has also spent time investing in building a strong relationship with his bank, which has facilitated financing for his last two deals. “Don’t waste the bank’s time,” he advises, and they won’t waste yours.
“The End of the Comfort Zone”
The final ingredient in Mike’s recipe is his own mindset. From pushing through those “sweaty palms” moments in the early days to an openness to taking on more risk as his business expands, Mike’s growth mindset has helped him persevere when the going got tough. “Where you do best is at the end of your comfort zone,” he shares. “It’s not easy to hire 12-14 people in a single day. You have to push through the discomfort.”
“Where you do best is at the end of your comfort zone.”
More times than not, the source of that discomfort is a surprise. Mike admits that no diligence process will unearth every possible challenge. Entrepreneurs have to have a hardy stomach for the unexpected hiccups, and a bank account that has some ability to absorb the costs that come with them. Still, he’s a firm believer in the potential for M&A to propel small businesses to the next level, and strongly encourages his fellow entrepreneurs to get in the game.
The story of Mike Loftus and Connor’s Landscaping beautifully demonstrates the “sweet spot” in M&A – the intersection between building strong relationships, executing with discipline and consistency, and embracing a growth mindset and risk tolerance. With these principles as the north star, Connor’s Landscaping had flourished and positioned itself as a formidable force in the industry. We can’t wait to see what’s next for Mike and his company.
About the G-Spire Group
The G-Spire Group helps entrepreneurs looking to grow through acquisition identify potential targets, negotiate with sellers and integrate the newly purchased business into their portfolio. To learn more, please visit: https://www.gspiregroup.com/