Accelerating Strategic Growth in the Environmental Industry
Organically and through M&A
EDR PRISM 2017
2020 Environmental Group
2020 Environmental Group brings together a new perspective in
management and M&A consulting aimed at helping environmental and
engineering consulting companies open new paths to success.
Companies in the business of the environment, and their private equity
investors, call us when they have something pressing on their minds -
whether it expanding into a new market, planning for ownership transition,
or achieving strategic growth through M&A.
2020 Environmental Group
Globally, the market for environmental and engineering consulting services is
expected to double by the year 2020, from $50 billion to $100 billion annually.
With the emergence of major infrastructure development, energy, water and
climate change, the business of the environment is hot and generating
significant interest from United States, UK, Europe, China and private equity
Environmental Industry – A Global Business
Maturing Market and Global/Local Consolidation
• Mega-mergers among the Big Boys (i.e.
• International buyers acquiring marketshare in
• Middle market firms ($75-$150 million revenue)
have mostly been acquired, creating a void in
• Smaller size firms are now not only the targets,
they are becoming acquirers, with the goal of
becoming the next middle market leaders.
• M&A activity and valuation multiples for
environmental firms are at an all-time high.
Is the Environmental Industry About to Shift?
• Environmental Business Journal reports there are 3,300
environmental companies in the U.S.
• 3,000 are “small companies” under 100 employees.
• 70% of small environmental company owners are baby
boomers who are looking at retiring in the next 3-5 years,
with no ownership exit strategy.”
• 300-500 small environmental firms could be putting
up a “For Sale” sign by year 2020.
• The result could be a shift in the supply and demand and
current high M&A prices for environmental firms.
Overview of the U.S. Environmental Market
A $30 Billion Industry
Environmental C&E Industry: by Business/Service (in $million) USA 2016
Soil & Groundwater Remediation 5,980
Water Resource Management 4,815
Environmental Planning & Permitting 4,825
Environmental Impact Assessments 1,650
Air Quality 2,230
Waste Management 5,310
Source: Environmental Business Journal, 2017.
Who is Buying Environmental Services?
Environmental Markets USA Total (in $millions)
Private Sector 13,970 48%
Government (State, Local, Federal) 15,820 52%
Total U.S. Environmental Consulting & Engineering 29,790
Real Estate and
Market Drivers for the Env Industry
To achieve growth in today’s economy, the common denominator will be companies
with a strong presence in the “Big 4”…Land, Infrastructure, Water, Energy
• US Economy on Modest Growth Track, 2.5% GDP in 2016-17: Low inflation, low
interest, low wages, low morale
• Global Economy Going the Same Way: Winding Down of Globalization and
Emerging Economies (China, India, Brazil, Russia)
• Real Estate: Property Values remain high. Drives local real estate development,
transactions, speculation, urban infill, brownfields, upgraded infrastructure.
• Local and State Government – property and business tax revenues high,
funding new capital works projects.
• Oil & Gas in the tank. Energy markets aiming for an Elusive Equilibrium in
Supply and Prices. Cleantech and renewables poised for an uptick.
• Commodity Prices: Global slump in Mining & Natural Resources
• Global Climate Commitments: Growth in Renewable Energy and Continued
Emergence of Adaptation & Resilience
• Trump Effect - Impacts of a New President
Historical and Expected Growth Rates in the
Ranking of Growth Prospects by Geographic
Region: 2016-2017 (Source: EBJ)
Very Strong Strong Good Slow/Flat Decline
US: Southern California 12% 15% 36% 36% 0%
US: Southeast 10% 13% 35% 39% 3%
US: Northern California 6% 18% 32% 44% 0%
US: Pacific Northwest 6% 18% 29% 44% 3%
All United States 0% 19% 46% 32% 3%
US: Mid-Atlantic 0% 20% 43% 33% 3%
US: New England 0% 19% 42% 35% 3%
US: Gulf Coast/Texas 3% 19% 34% 34% 9%
US: Southwest/Desert 3% 9% 30% 55% 3%
US: Rockies 3% 9% 35% 47% 6%
Mexico 6% 6% 19% 61% 6%
US: Midwest 0% 3% 42% 48% 6%
Eastern Canada 0% 3% 23% 67% 7%
Western Canada 3% 0% 17% 67% 13%
Organic growth must be a firm’s top priority.
• Organic growth is best, but is slow, particularly with few new market drivers
• Competition and winning marketshare is becoming harder.
• Growth by recruiting is difficult.
To achieve +10% growth in today market, you need Organic and M&A.
• M&A provides immediate access to new markets and geographies
• New client relationships that would have taken years to develop
• New staff expertise and the backlog to support them.
• Exposes existing staff to new career opportunities
• Builds critical mass for a stronger market position and more competitive role
• Immediate increase in revenues and profits
• Creates long-term shareholder value
Achieving Strategic Growth in Today’s Market
• What new businesses or markets would you like to be in?
• What business lines are growing and profitable?
• What are you NOT good at?
• What businesses or markets should you get out of, and would free up
cash for expansion in new areas?
• Does your company have an “entrepreneurial spirit” or a “lifestyle
• Is your management and organizational structure equipped to handle the
growth? Is your organizational structure a bottleneck to growth?
• What are you doing to build “brand name visibility” in your marketplace?
Key Points for a Strategic Growth Plan
Strategic Market Analysis
What are you good at and where do you want to be?
• Buyers need to develop a Strategic M&A Acquisition Plan that clearly
identifies what you want to do, where and why.
• Understand the Seller’s perspectives and challenges, particularly owners of
smaller firms who are “selling the baby.”
• Develop realistic purchase price expectations
• Have Integration Plan that shows the seller and their staff how they fit in, and
the added value of the merger.
Achieving Growth thru M&A?
Have an M&A Plan
• Be pro-active not reactive
• Develop an Exit Strategy and M&A Sale Plan
• Get your house in order
• Stable leadership/management that stays
• GAAP financials by outside CPA
• Steady earnings
• Diversified clients and markets
• Backlog reporting and growth forecasts
• Excellent project management and cash management
• Clean up inter-personal/company affairs
• Have realistic price expectations – Sellers typically think their firm is worth more than it is.
• Understand what goes into an external “M&A valuation” and work in advance to maximize your
external market value.
• Develop a Strategic Plan that shows where growth will come from in 2-3 years.
• Communicate with your Principals and include their expectations and goals (financial and
Considering Selling? Prepare in Advance
• Times are good and the economy is cooperating. But start planning
now for an economic downturn by late 2018.
• Organic growth must be your top priority.
• Think strategic. Identify and focus on the services, markets,
geographies and clients that are key to your business.
• M&A can be an important part of an overall growth strategy, with a
well thought out Plan and an understanding of the risks.
• It is not just about Revenues and Profits, but growing the firm’s
Shareholder and Market Value.
Summary and Take Away’s
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