Med-X: Targeted Roll-up Strategy Suggests Compelling Growth Ahead

We’ve been following Med-X for some time now. In fact, we’ve issued two reports covering the company. One was an overview report, which is available here. The other was a report surrounding the power of the company’s flagship product, available here.

If you’re one of the thousands of people that read these reports, you know that we feel strongly that this company represents a compelling opportunity. Nonetheless, it seems as though the opportunity is only growing stronger based on the Company’s targeted divisional roll-up strategy in the segmented pest control space.

Targeted Roll-Up Strategy Suggests Opportunity Ahead

There are roughly 20,000 pest control operators in the United States made up of mostly small, local and niche providers. Thus, there is a large pool of potential acquisition and partner targets for Med-X’s Nature-Cide products and services division to offer these companies a unique opportunity.  As the industry and their clients search for an effective “non-toxic” approach to a pesticide chemical solution, Nature-Cide is proving to be the answer. Nature-Cide has positioned the brand with some of the world’s leading distributors which has validated the products and allowed Nature-Cide to be a go-to green choice by many pest control professionals around the globe.

With that said, the company sees an untapped opportunity through targeted acquisitions of independent pest control operators and product companies with similar pest control philosophies.  This could result in both top line revenue growth for Med-X and also serve as an internal distribution pipeline and branding for its Nature-Cide products. Furthermore, the additional opportunity for advantageous synergies and economies of scale may create an opportunity for expansion and improvement to projected gross profit for both the target companies and Med-X.

This is an interesting scenario for a couple of reasons:

  • Potential Accretive Acquisitions on The Horizons – First and foremost, it is clear from the message that Med-X is looking forward to making strategic acquisitions within its multiple divisions. This acquisition-related growth will lead to a stronger opportunity when combined with the internal organic growth for the company.
  • Potential Partnerships – Moreover, the companies that are not interested in selling and becoming a subsidiary may be interested in partnering. This two-pronged approach gives the company multiple options when driving value for its investors.

Not Your Typical Large Pest Control Buyout

As the company reiterates that “this is not your typical large pest control buyout.” I recently had the opportunity to speak with members of management at Med-X to get an idea of what that means, and it’s a brilliant concept.

In general, when one company acquires another, it is not necessarily concerned with the future success of the founders or owners of the companies that they acquire. This is where Med-X sees opportunity and is implementing a plan of action.

The company’s plans are to purchase other companies and have them continue to operate within its verticals. In doing so, it intends on keeping the current owner and/or management team in the fray, outlining an opportunity that will drive value for Med-X and its investors, while investing in the wealth of the current business and rewarding the operator for continued growth.

This is an incredibly smart move in my opinion. By keeping the current business operator in place, and giving them “skin in the game” following the acquisition, this could lead to a much better wealth position for a target company and Med-X does not have to integrate and run a new business as with traditional roll-up acquisitions. At the end of the day, those who are operating the business now know their products and services best and can thrive further from the Med-X model.  Keeping them on board will only serve to maintain positive operations while reaching for growth for both operations and the Med-X and Nature-Cide brands.

In a statement speaking to the company’s acquisition/partnership goals, Matthew Mills, President and COO at Med-X, had the following to offer “We see the development and implementation of a targeted and calculated roll-up strategy as an exciting complement to our existing sales pipelines. We currently have active discussions with multiple targets across the United States, which we anticipate, subject to completion of our legal and financial due diligence and reaching final mutually agreeable terms, could represent more than $20,000,000 in top line revenue. Our goal is to structure each acquisition in a combination of cash, equity and debt aligning the business operator’s interest with our own with the mutual goal of growing Med-X long term.”

In further discussions with management, the plan is to continue to add value to each of its divisions as the company advances. For instance, if a small growing company has green product consumer positioning in retail pharmacy like Walgreens, or in do it yourself centers like Home Depot or Ace Hardware, the company could also build revenue by using these marketing positions to advance all of Med-X’s product lines.

The Bottom Line

The bottom line here is that what Med-X has done in the pest control and healthcare industries has been overwhelmingly positive. Moving forward, with plans to acquire and partner in addition to further supplementing planned organic growth, the Med-X story and opportunity is only becoming more compelling.

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