Spiers state of the environmental consulting sector
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U.S. Environmental Industry
Market Update and Strategic Trends
2020 Environmental Group
May 9, 2019
GROWTH + VALUE
2020 Environmental Group is a management consulting and M&A advisory firm
focused purely on the environmental industry.
Globally, the market for environmental and engineering consulting services is
expected to double by the year 2024, from $60 billion to $100 billion annually.
With the emergence of major infrastructure development, sustainable energy, water
resources, natural resources management and restoration and climate change, the
business of the environment is strong and generating significant interest from
players across the United States, UK, Europe, Asia, China and private equity
Overview of the Environmental Consulting Landscape
50 Years and Still Growing
U.S. Environmental C&E Industry Today
3,400 Firms, $35 billion, and Growing
Number of U.S. Environmental C&E Firms, Revenue Size, Market Share ($mil)
U.S. Env C&E Firm Size
(Gross Rev $)
# of Firms
Total Env C&E
Total Env C&E
(% of Net Rev)
Globals >$1B 4 8,920 7582 24.7%
Large > $200m 46 13,248 11526 37.5%
Mid $25-$200m 148 6,254 5566 18.1%
Small-Mid $10-25m 153 2,084 1980 6.4%
Small $5-10m 219 1,446 1388 4.5%
Micro Small $1-5m 709 1,800 1719 5.6%
Under $1m 2109 1,015 997 3.2%
TOTAL 3,338 34,767 30,758 100.0%
Environmental Consulting Industry Growth Rates
20 year growth rate has exceeded the U.S. GDP growth
• Smaller firms have higher organic growth rates averaging 10-12% a year
• Larger firms (>$300m rev) have lower organic growth averaging 3-5%.
Current Profit Margins
2018 strongest in 8 years; 2019 forecasted to be as good or better
Source: EFCG 6
Environmental Revenues by Service Areas
USA Environmental C&E Industry by
Business Service (in $million)
2015 2016 2017
2017 % of
Soil & Groundwater Remediation 5,980 7,465 8,480 24%
Water Resource Management 4,815 4,950 5,315 15%
Wastewater 3,960 4,200 4,960 14%
Environmental Planning & Permitting 4,825 4,325 4,525 13%
Environmental Impact Assessments 1,650 2,100 2,750 8%
Air Quality 2,230 2,006 2,230 6%
Waste Management 5,310 4,865 5,010 14%
Other (EH&S, Information Management) 900 1,200 1,750 5%
Total 29,670 31,111 35,020 100%
Who is Buying Environmental Services
• Private Sector clients comprise about 47% ($16.8b) of total EC&E revenues
• Public Government clients comprise about 53% ($18.2b) of total EC&E revenues
and Local Gov’t)
and Local Gov’t)
Major Markets and Client Sectors – The Big 10
In today’s strong U.S. economy, the environmental industry is benefitting from growth in
almost all key market sectors. At the top of the list is Infrastructure, Transportation, Water,
Real Estate, and Education. But also watch Energy and Oil and Gas, which is making a
Oil and Gas
and Local Gov’t)
Environmental Revenue Growth Rate by Customers
Geographic Growth Prospects by Region – 2019
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%
Source: Environmental Business Journal, 2018
Geographic Markets: What’s New, What’s Hot
• California – still the #1 market for environmental services, with strong drivers for infrastructure, transportation, water and
• Southwest and Rockies – Mining, oil and gas, renewable energy, energy transmission, urban clean water, water rights,
environmental permitting/NEPA, restoration plans, and Endangered Species Act (ESA), conservation plans.
• Pacific Northwest – Strong env market for transportation, ports and harbors, industrial waterfront development, river
restoration, hydroelectric power, dam removals, SEPA (state EIS), environmental permitting, FERC, site
• Florida and Gulf Coast – Energy transmission, strong state environmental regulations, ecological restoration, coastal
engineering. Large $B ecological restoration fund from BP oil spill to be spent at local levels.
• Texas – strong market for oil and gas, air quality and groundwater resource management. No NEPA.
• Midwest/Great Lakes – Contaminated sediments in waterways, env site assessment, remediation, some ecological
• Northeast – Urban redevelopment, contaminated industrial and redevelopment of brownfields sites, due diligence,
Key Trends to Watch
U.S. Economy on the strongest growth track in
seven years. Dow hits record high 25,000. 3.5%
GDP in 2018: Low inflation, low interest rates, low
Real Estate Commercial/Land Development markets are
hot, particularly large coastal urban centers. Real estate
property values remain high. Drives local development,
transactions, speculation, urban infill, brownfields, upgraded
infrastructure. Housing sectors are starting to run out of steam.
Public State and Local Agency Markets are strong, fueled by
real estate property and business tax revenues high, as well as
Federal funding for infrastructure projects. Public municipal
markets at a hedge against recessions – last to fall off.
Oil & Gas is one of the largest private sector market for the environmental industry. After a steep decline in 2015, “O&G is
Renewable Clean Energy markets aiming for an Elusive Equilibrium in Supply and Prices. Cleantech and renewables poised
for an uptick in select regional sectors.
Climate Change, Adaptation & Resilience are new growth markets.
Technology, IT and Big Data is the newest market for environmental management services. Still fragmented and no clear
market leaders, but represents a major growth market for innovators and consolidators.
Business Drivers and Restraints
still drives the business,
but not growth
almost all are hot
top driver in last 3
years. But for how
and Data Management
are new drivers
No major new
Regulations in last 10
2015 decline in Oil
and Gas and Mining
many C&E firms
Recession looming in
the next 18 months?
employing new IT/IA
lose market share
Continued Global/Local Consolidation
• Mega-mergers among the Big Boys
(i.e.Jacobs/CH2M, AECOM/URS, Stantec/MWH)
• International buyers acquiring marketshare in the
• Middle market firms ($75-$150 million revenue)
have mostly been acquired, creating a void in the
• Smaller size firms are now not only the targets,
they are becoming M&A 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?
500 environmental firms could be putting up a “For Sale” sign by year 2020.
• Environmental Business Journal reports there are 3,300 environmental
companies in the U.S. 3,000 or 90% are “small companies” under 50 employees.
• 70% of small environmental company owners are baby boomers who are looking
at retiring in the next 3 years, and most have no ownership exit strategy.”
• The result could be sell off of small environmental firms, creating a shift in the
supply and demand and decline in current M&A prices for environmental firms.
Organic growth must be a firm’s top priority.
• Organic growth is best, lowest investment costs and
• But organic is slow, particularly with few new regulatory
or market drivers.
• Competition is tough and winning market-share is
• Growth by recruiting is difficult.
To achieve +10% growth in today’s market, you
need Organic plus M&A.
• M&A provides immediate turn-key access to new markets
• Acquiring new client relationships that would have taken
years to develop.
• New staff expertise and the backlog to support them.
• Builds critical mass for a stronger market position and
more competitive role.
• Creates long-term shareholder value.
Achieving Strategic Growth in Today’s Market
• Buyers interested in acquiring should first develop an
M&A Strategic Plan that has a focus and clearly
identifies what services you want to add, markets and
geography do you want to be in, and target acquisition
size (company revenues and # of employees).
• Have a realistic expectation for your M&A spend
budget, valuations and purchase price multiples in
today’s market, and financial deal terms (amount of
cash, note, stock, earn outs, etc.).
• Understand the Seller’s perspectives and challenges,
particularly owners of smaller firms who think their
company is worth more than it’s market valuation, or
are not emotionally prepared to “sell the baby.”
• Have an M&A Integration Plan that shows the seller
and their staff how they fit in, and the added value of
the new strategic partnership to their careers.
Achieving Growth thru M&A?
Have an M&A Strategy and Plan
• Owners or shareholders considering selling should be
pro-active, not reactive. Develop an Ownership
Transition and M&A Sale Plan in advance.
• Get your house in order:
• Stable leadership/management team that stays
• GAAP financials by outside CPA
• Steady earnings
• Diversified clients and markets
• Backlog reporting
• Growth forecasts
• Excellent project and cash management
• Clean up inter-personal/company affairs
Thinking about Selling?
Start with an M&A Sale Strategy and a Plan
• Understand your company’s strengths, weaknesses and strategic opportunities “through
the eyes of a Buyer.”
• Develop your “story and win theme” for why the Buyer will be interested in acquiring you.
• Have realistic price expectations – Sellers typically think their firm is worth more than it is.
Understand what goes into an M&A valuation and work to maximize your external market
• Times are good and the economy is cooperating. But start planning now for an economic
downturn by late 2020.
• Think strategic. Focus on what services, markets, clients and geographies are growing and
• Identify internal and organizational constraints that are bottlenecks for growth.
• Organic growth should be your top priority.
• M&A can be an important part of an overall growth strategy, with a well thought out M&A Plan.
• It is not just about growing revenues and profits, but increasing the firm’s Market Value.
Summary and Take Away’s
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San Francisco, CA 94111 Issaquah, WA 98027