(FORTUNE Small Business) – After logging its best year ever in 2004, Sunair Electronics devised a dazzling encore: It sold itself to an investment group called Royal Palm Capital Partners, dropped "Electronics" from its name, and entered a new business: pest control. "Initially we scratched our heads, but the Royal Palm people had a track record of building very substantial companies," says Michael Herman, 48, who was chairman of Sunair until February. His exit came after the Boca Raton investment group agreed to pay $25 million to buy a controlling interest in what until then had been a communications venture. Adds Herman, now a Sunair stockholder and board member: "You have to be open to an opportunity where somebody can do a better job with your company."

To outsiders, it looked as if Sunair--No. 15 on the 2005 FSB 100, a ranking of America's fastest-growing small public companies--had been doing well. Founded 50 years ago, the maker of hi-frequency radio equipment had found steady success selling to government clients, including the U.S. Coast Guard and the Egyptian navy. In 2004 the company moved into telecom equipment. The Fort Lauderdale firm took in revenues of $10 million for fiscal 2004--up 62% from 2003. Earnings per share skyrocketed 95.5% between 2001 and 2004.

When Sunair stockholders approved the deal for a takeover by Royal Palm, the investment group announced that it planned to get out of the telecom business and into pest control. What's the link between high-frequency products and creepy crawlers? Besides antennas, there isn't one. "There's no synergy," says Richard Rochon, 48, founder and CEO of Royal Palm. "We weren't concerned with the underlying base business; we were concerned with good underlying assets on the balance sheet." The investors wanted a company with a good reputation--and a core business that was generating profits. Royal Palm viewed Sunair as a vehicle for entering pest control, a $7-billion-a-year industry in which two companies, Terminix and Orkin, account for one-third of the market, and roughly 20,000 smaller companies fight for the rest. By using Sunair stock to acquire the smaller players, Royal Palm aims to build a major pest-annihilating player.

This is not an unfamiliar strategy to the managers of Royal Palm. Before founding the company in 2002, Rochon spent 14 years as president of Huizenga Holdings, the investment company of H. Wayne Huizenga. There he helped Huizenga construct a number of NYSE-listed companies, including Republican Waste Industries and AutoNation, using the same approach. He would buy a small public company, diversify it into another business, and bulk it up with acquisitions. "This follows a very clear-cut pattern," says Dave Ehlers, chairman of Las Vegas Investment Advisors, who has known Huizenga since the 1960s and who bought Sunair stock immediately after he learned of the Royal Palm investment. "These are very capable people."

The new majority owners set up Sunair Southeast Pest Holdings, a subsidiary, and tapped as CEO 53-year-old John Hayes, a former executive with ServiceMaster's TruGreen lawn care unit. In June, Sunair spent $50 million acquiring Middleton Pest Control of Orlando, the country's 20th-biggest bug-buster. And Sunair, which plans to buy more regional players, says that's just the beginning. If so, Terminix will face a different kind of pest.