Continued growth in the E&S market
The global Environmental & Sustainability Consulting market is undergoing a period of rapid growth, driven by the increasing demand for ESG disclosure and rising investments in climate change initiatives across Europe and the United States. This growth is expected to continue, with ESG now a top priority at C-level, creating opportunities for increased investment and consolidation.
Over the last five years both sustainability and engineering consulting have seen rises in value, with the global E&S consulting market hitting more than $40bn in 2021, and this looks set to continue with hundreds of billions of spending assigned to combatting climate change across the EU, UK, and US. Furthermore, the International Data Corporation (IDC) recently reported that in a new forecast focusing on purpose-built sustainability services, spending on ESG business services is expected to surge from $37.7 billion in 2023 to nearly $65.0 billion in 2027, which represents a compound annual growth rate (CAGR) of 14.9% over the 2022-27 forecast period.
Across the EU, the US, and the UK regulation is also pushing companies to greater action on ESG disclosure and implementation, boosting demand for services and spreading responsibility across a wider range of business functions.
Opportunities for investment and consolidation in the E&S market
It seems that hardly a week goes by without another acquisition or financial investment being announced in the ESG consulting and technology services sector. In the first half of 2023 the stand-out, eye-catching deal was probably Carlyle’s investment in the UK specialist consultancy, Anthesis, who had previously been invested by Palatine.
The ecosystem as a whole is dominated by global firms, with a fragmented market providing opportunities for consolidation. Much of the M&A activity is concentrated in Europe and the US, with private equity firms driving over 50% of the market.
Smaller deal sizes are dominating, with key strategic consolidators seeking to acquire boutique firms as a way to gain C-Suite access and bolster their in-house expertise. The public market rewards sustainability and engineering consulting firms in particular given their position at the forefront of the energy transition strategy.
For sellers, this translates into premium valuations by public markets, with an aggregate median EV in CY23 EBITDA of 13.2x, with strategic buyers paying higher multiples than PE firms.
For more insights on the E&S marketplace and a detailed breakdown of M&A activity and current valuations don't miss Equiteq's latest Environmental & Consulting market report.
You can also speak to one of our experts directly about your firm's strategic objectives and opportunities for M&A. Request a meeting with the team, by emailing info@equiteq.com.