ServiceMaster Global Holdings, Inc.
Thesis
We propose a three-fold constructivist plan for ServiceMaster to enhance shareholder value, including expanding the board with pest control experts, improving employee training and technology at Terminix, and spinning off ServiceMaster Brands to unlock additional value. Our analysis suggests that a tax-free spin-off could increase the IRR on the investment from 17% to 20%, with a target price of $78 based on a sum-of-the-parts valuation.
Did it work?
The long thesis targeted $78 per share via a sum-of-the-parts valuation and value-unlocking actions (board expansion, Terminix operational improvements, and a spin-off of ServiceMaster Brands). Instead, over 88 months — far beyond any reasonable horizon for the pitch — the stock declined approximately 89.7%, the opposite direction and magnitude of the thesis. The proposed catalysts clearly did not translate into shareholder value as envisioned, decisively invalidating the pitch.