Why M&A Deals Fail in Commercial Cleaning

Key Takeaways:
• Successful mergers and acquisitions in the commercial and cleaning industry depend on culture, due diligence, and post-acquisition integration—not just financial metrics.
• M&A is only one growth strategy for commercial cleaning companies.
• Commercial cleaning leaders should pursue growth strategically, not simply for scale.

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Cultural and ethical alignment are also the two most important things for St. Paul, Minnesota-based Marsden Services when exploring an acquisition. Want proof? Look no further than Tom Kruse. Marsden Services bought Kruse’s business—one of 53 acquisitions the company has made in its history. Kruse is such a strong fit for Marsden Services’ culture that he continues to work as its Chief Development Officer over 18 years after the ink dried on the deal.

Having been on both sides, Kruse knows what succeeds, but just as importantly, what doesn’t in M&A. He says cultural fit is key, but so is infrastructure. He believes acquiring a new company is somewhat analogous to bringing home a new child. Everybody must understand that both a newborn and newly acquired companies need extra attention at first, making other things less of a priority. However, those “other things” can’t be totally neglected either. That means the timing must be right. Business owners must be ready.

BSCs are bound to encounter a few trouble areas when going through an acquisition. Kruse says too many businesses see the deal as purely transactional. Sure, money is important—a company shouldn’t pay $30 million for another valued at $15 million just for the “vibes”—but viewing the acquisition as just a deal is a big mistake in Kruse’s opinion. They must see how the deal impacts various aspects of the business. The work isn’t done when the purchase is made—it has just begun.

Another mistake is to be so smitten with a potential acquisition that its warts are overlooked and the company making the purchase simply says, “We’ll deal with this after the sale.” Things get overlooked when a deal is rushed. This often happens when investment bankers are involved. These financial professionals often want the deals to close fast so they can move on.

“Those issues are the things that really get you, so you have to investigate all the real stuff and have a talk about it,” stresses Kruse.

Another bad move is being afraid to have a difficult conversation early, waiting until the other side is deeply invested before disclosing—like some cruel dating strategy deployed by that ostensibly perfect match from a dating app. The buyer, not the seller, is more likely to be guilty of this unethical practice.

“We call it using diligence as a negotiation. And in our case, we will not use diligence as a negotiation,” Kruse says. “We use it to confirm our initial assumptions.”

Taking Another Route

As Rust, Kruse, Peduto, and Boutsalis explain, there are reasons for BSCs to explore M&A as a strategy for growth. However, it’s not the only path to take. Companies can grow organically or through a go-to-market (GTM) strategy. This is a step-by-step roadmap for expanding into a new market, a tactic that Boutsalis favors. 

“I think we've gotten good at GTM, and we can win deals without forking over a lot of capital,” says Boutsalis. “If you're exceptional at sales and marketing, I think you really don't need to do M&A unless you're looking to take a massive swing and buy a whale of a cleaning company.”

That’s not something on Boutsalis' radar at the moment. In fact, he’s generally anti-M&A now, which is probably to say it would take a fantastic offer to go whale hunting. Of course, nothing is permanent in the cleaning services business, but he points out that jumping into the M&A game has its risks.

As Boutsalis says, cleaning contracts are on a “30-day shot clock,” meaning clients can cancel an existing contract at any moment. He points out that if Business A acquired Business B, but then Business B loses a major customer account a week after the sale, the parent company is now facing a financial burden they weren’t expecting.

“You can lose a lot of revenue, which means you're paying a higher multiple than you modeled for,” Boutsalis says. “I also think a lot of people see easy revenue growth for the cost of a Small Business Administration (SBA) loan and think it’s easy to just buy a business and merge them. It's not that simple.”

If Boutsalis’ lack of love for M&A wasn’t already apparent, he adds that the process can be a massive drain on time and presents a lot of risk. He’d suggest companies instead work on getting better at GTM, build a pipeline, and perfect the art of deal closing. And one last thing: Don’t seek growth just for the sake of growth.

“It's ok to have a target, but you should build the business for the love of the build,” Boutsalis advises. “If you do great work, surround yourself with a great team, and build a strong brand, growth is inevitable.”

Two paths to growth have been mapped out. Which one a BSC takes is entirely up to them.

Jake Meister is the Managing Editor for Trade Press Media Group's Cleaning Group of brands. He works on three magazines: Sanitary Maintenance, Contracting Profits, and Facility Cleaning Decisions, as well as on Cleanlink.com, the home of all three publications. Jake has over five years of experience covering the commercial cleaning industry as an employee of Trade Press Media Group, but also spent time as a freelance journalist for the company.
Jake has attended many commercial cleaning events where he enjoys connecting and networking with representatives from all corners of the industry. This often lays the groundwork for profile articles featured across the group. He excels at identifying outstanding individuals and/or programs that showcase the great things the commercial cleaning industry represents.
In addition to writing, Jake moderates many of CleanLink's educational webcasts, and he is the voice behind much of the social posts.
Follow Jake on LinkedIn here.

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Pros and Cons of M&As for Professional Cleaning Companies