Family's sale sets growth path: deal was best for future, ValleyCrest founder says.

Even after the sale of a majority interest in ValleyCrest Companies, Chairman Burton Sperber insists the company remains a family business.

Except now there are two families involved with operating the large privately-held landscape development and maintenance firm--Sperber's and that of the new stakeholder, Michael S. Dell, founder of Dell Computers.

The 77-year-old Sperber also foresees no changes in how the company will be run as a result of the sale, vowing "business as usual" at its headquarters in Calabasas, a gleaming 80,000 square foot building overlooking the West San Fernando Valley.

"It's a big company to finance," Sperber said of the deal with MSD Capital, L.P., Dell's investment group which was announced on Oct. 5. "We thought we needed some help going forward. This was a good time in company history to go to this next level."

ValleyCrest encompasses six divisions with 8,500 employees in 21 states and generatesg more than $800 million in annual revenues. The company has been named as the No. 1 family-owned business and the largest local construction firm by the San Fernando Valley Business Journal and among the Top 100 companies ranked by Lawn & Landscape magazine.

MSD Capital was launched in late 1998 with $1 billion. Investments include a 9.2 percent stake in Glendale-based IHOP Corp., and the Four Seasons Resort Maui at Wailea.

The deal between the Sperbers and MSD Capital took six months to complete. Global financial firm UBS acted as the intermediary as ValleyCrest was already working with the firm on refinancing issues.

Sperber, son Richard and brother Stuart were all on board with the sale of a majority stake to New York City-based MSD. Richard remains as president and chief operating officer of ValleyCrest, and Stuart Sperber stays on as chief executive officer of ValleyCrest Tree Company.

Family succession problems did not play into the decision to bring in an outside partner, as Richard Sperber has been president of the company for six years, his father said.

The three Sperbers retain a "significant" equity ownership in the company although Burton Sperber would not disclose the percentage. MSD Capital typically invests between $50 million and $200 million per transaction, according to the firm's website.

Although ValleyCrest's sale to Michael Dell was a surprise to some, industry observers were not surprised the company was in play.

It's very rare to have a family business grow in substantial size without change in capitalization and some change in ownership, said Ernie Doud, a name partner in Doud Hausner & Associates, a Glendale consulting firm for family businesses.

When a family business is profes sionally run and the family is formally governed then strategic changes in direction can be arrived at thoughtfully and carefully with all family members giving their support, Doud said.

"When that's the case you can do just about anything you want to do and make it successful," Doud said.

'Deep pockets'

Going with a "deep pockets" partner like Dell suggests ValleyCrest opening the door to growth strategies they could not have done on their own.

"If you are competing with them, watch out because suddenly you have a much stronger competitor than you had before," Doud said.

ValleyCrest was attracted to MSD Capital because of its real estate investments in luxury hotels, commercial and multi-family properties and land development.

"We service real estate," Sperber said. "That's our business--in maintenance and building new gardens."

ValleyCrest in turn brings to MSD entry into the estimated $80 billion to $90 billion dollar landscaping and nursery industry, the fastest growing segment of U.S. agriculture.

That's roughly 8 to 10 times what Hollywood studios bring in at the box office, said Jonathan Bardzik, of the American Nursery & Landscape Association.

"At the retail level mass merchants have put product in a lot more places and given consumers a lot more opportunities to purchase that product," Bardzik said. "Landscaping follows at two to three years behind housing booms and we've been going through a big one. That's driving things a lot as well."

According to its website, MSD puts its money into "outstanding businesses with world-class management teams" a description that ValleyCrest falls under with its compounded growth at 13 percent per year for its 57 year history.

Similar histories

The companies are a good fit also in that their respective founders share similar traits despite a 36-year age difference. Both Sperber and Dell were in their late teens when they began their business careers -Sperber in North Hollywood doing landscaping with a pickup truck and two used lawnmowers; Dell selling computers from his college dorm room in Texas.

And both made their ventures successful, with Dell eventually accumulating a personal net worth of $17.1 billion, and Sperber selling his company's services to Las Vegas casinos, major league baseball stadiums, and high-end golf courses, resorts and shopping areas.

Despite a long history with the company, relinquishing control was not a bittersweet moment for Sperber.

Instead, he looks to the future and continued growth for the company, especially in the area of designing and building landscaped spaces.

In the spring, ValleyCrest bought two landscape architectural firms for their design business. In early October, the company launched Estate Gardens by ValleyCrest, a full-service residential landscape design, construction and maintenance practice.

The company has strong roots in landscape design as it was the main service offered before shifting to installing and maintaining landscapes. Designing, building and maintaining landscaped areas will continue to be vital to ValleyCrest's future, Sperber said.

BY MARK R. MADLER

Staff Reporter