Considerations for M&A Strategies and Valuations

The global COVID-19 pandemic has disrupted the business of environmental and engineering consulting, and is causing buyers and sellers to reassess M&A timing and strategies.  However, it could also prove to be an unexpected catalyst of M&A activity, further driving industry consolidation, buyers looking for deals, and sellers deciding now is the time to get their equity off the table.

We took a closer look at M&A under these uncertain times, and found some interesting insights, including COVID as a force majeure event for valuations and other M&A considerations.

State and Federal Agencies, and Private Sector Clients Instruct Environmental Firms to Continue with Projects as Scheduled

In reviewing the rapidly changing climate amid the COVID-19 pandemic, 2020 Environmental Group is hearing from our industry contacts across the U.S. that public agencies as well as certain private sector clients that support Critical Infrastructure, Energy, and Environmental Protection are considered “essential businesses” and that work must continue.  And by extension, the environmental consultants who support these critical projects are also deemed essential and their project work must continue.

2020 is pleased to announce that Environmental Partners Inc ("EPI"), an environmental geosciences consulting firm based in Issaquah WA (suburb of Seattle), has been acquired by TRC Companies ("TRC"). 2020 initiated the transaction and served as the M&A advisors to EPI. 

This acquisition is part of TRC’s strategy to bolster its capabilities in geo-environmental services and growth strategy in the Pacific Northwest region and position TRC as the top player in environmental engineering and remediation in the Greater Seattle market.

Leadership Pipeline = Deal Success

One of the top M&A themes we are seeing today -- buyers asking sellers “can you please tell us more about your management succession plan and second tier leadership team?” The reason is quite simple.  While buyers are investing in a company’s long-standing reputation, client relationships, expert services and financial performance, it is the people that represent the future of the company.  And knowing the depth, level of development and management responsibility of a seller’s 2nd and even 3rd tier team is an important component to getting a deal done, and what can drive up valuations, or cause deals to fall apart.

When Evaluating Deals – Culture is King

When considering M&A, culture is king, buyers are structuring deals to include key employees, and levels of M&A activities and valuations are still high.  These are just a few of the key themes we took away from this year’s Transaction Advisors Annual Conference on the latest trends, strategies and best practices in mergers and acquisitions.  What we heard from M&A practitioners at companies both large and small, confirmed much of what we’re seeing here at 2020 with our clients and transactions. 

In this timely webinar Al Spiers, 2020 Environmental Group's CEO, discusses proven strategies for achieving growth in today's environmental markets. Topics include: overview of the environmental industry today; what markets are hot and not; strategies for expanding into new markets and geographies; improving key performance metrics to support investment goals; and opportunities for using M&A as a growth strategy. Also discussed are M&A strategies for companies that may be considering selling and merging with a new, larger strategic partner.

Valuations at Historic Highs, Number of Deals at Historic Lows

Industry surveys are reporting 2017 M&A valuations for environmental consulting and engineering (C&E) firms at 10-year highs. While this would seem to be good news for sellers, what was a surprise to many, including us, was that 2016 and the start of 2017 actually saw a dramatic decline in M&A deals in the environmental C&E sector. So, what are we to make of this disparity in the market? Will the trend continue? Thinking about this reminded me of one of my favorite Joni Mitchell songs, Both Sides Now, because clearly there are two sides to this story.

We're very excited to announce 2020's expansion to the Pacific Northwest and opening of  our Seattle Washington office, scheduled for July 2017. Our presence in Seattle will allow us to better serve our clients in the PNW and nationally.  Dan Spiers, 2020 Partner and Co-Founder, will be heading up the Seattle office.

2020 Environmental Group (2020) is pleased to announce the sale of E2 ManageTech’s (E2) Environmental Services Division to EnSafe.  2020 initiated the transaction and served as the exclusive M&A advisor to E2 as they sought to divest its Environmental Services Business Unit and further focus on the rapid growth of its Environmental Management Information Systems (EMIS) practice.

2020'S CEO, AL SPIERS, FEATURED IN M&A MARKET PERSPECTIVES

The U.S. Environmental Consulting & Engineering Industry (updated June 2017) is the definitive strategic business information resource on the U.S. Environmental Consulting & Engineering Industry. Recent market forecasts for 2017-2018 based on new EBI surveys and client-sector economic forecasts are balanced with historical perspective on the evolution of the industry and leading players in this encyclopedia of the C&E industry. EBI Report 727's 2,500+ pages analyze markets, competition, customers, management and service trends in the $30-billion U.S. environmental consulting & engineering market, as well as trends and leaders in the $68-billion global C&E market.