Blooming Davey Tree keeps branching out

In this article with Crain's Cleveland Business, Karl Warnke, Chairman and CEO of Davey Tree, tells readers about the importance of the company's strategic plan and how it has grown through the years.

Posted: August 22, 2016

By Dan Shingler 

To the casual observer, Kent-based Davey Tree looks like a nice, local operation, exuding a sort of old-timey, small-town ethos with its grass-green trucks and hard-hatted employees.

And it is.

It’s also a company — more fully known as the Davey Tree Expert Co. — that is methodically chasing a billion dollars in annual revenue, with 8,600 employees from Florida to Vancouver. And it’s got a growing appetite for acquisitions.

“It’s the guy cutting the lawns and climbing the trees that make this thing go. Our job here is to focus their efforts. … A lot people have mission statements and vision statements in our industry, but few have a well-thought-out and constantly maintained strategic plan,” Davey CEO Karl Warnke said.

The plan’s not all that complex – maintain “organic” growth — yeah, he knows — of 5% a year by increasing market share, cross-selling new products between regions and subsidiaries, and increasing awareness of “green assets” by everyone from city governments to U.S. military bases.

“We need to grow organically, at least 5%, before we will go on with our acquisition work,” Warnke said.

But that hasn’t been a problem. Davey’s got $820 million in annual sales and growth is on track. So Warnke’s been free to go after additional growth via acquisitions — also a part of the company’s strategic plan and something he said Davey sets aside money for each year. Since Warnke took over as CEO in 2006 — he was already president — he figures the company has done three dozen deals. The price Davey pays for each company varies, Warnke said, but it’s generally equal to about a year’s worth of the company’s sales, or less.

Most of them are small pickups. The “tree care” industry is full of mom-and-pop shops, often run by guys who started their business, literally, out on a limb — right alongside the people they might call employees today. Davey buys them mostly when it can increase its geographic market, Warnke said. The really good ones that operate where no one’s ever heard of Davey keep their old names; others get the Davey name, the green trucks and a whole lot of training for their employees.

Some deals are big and involve established companies, like the 2008 acquisition of The Care of Trees, an Illinois-based company with about $50 million in sales and more than 500 employees. That brought Davey new markets in and around Chicago, as well as on the East Coast, Warnke said.

Other deals have been attractive because they brought Davey into new industries or gave it new areas of expertise — like the 2014 acquisition of Wetland Studies and Solutions Inc. (WSSI), a Virginia company focused on wetland remediation and other environmental work, with about $10 million in annual sales.

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