Environmental Health & Safety (EHS) Market Update – November 2024

Government Investment and Domestic Industrialization Continued Drivers for M&A Activity in EHS Markets

The Environmental Health & Safety (EHS) market has been upheld by resilient demand for sector products and services in the face of recent uncertainty in the broader macroeconomic and geopolitical environments. EHS players have found themselves at the intersection of increased government spending through the Inflation Reduction Act (IRA) and robust growth in energy demand. In March, the U.S. Department of Energy (DOE) announced up to $6 billion for 33 projects to decarbonize energy-intensive industries and strengthen the nation’s manufacturing competitiveness, according to a DOE press release.¹ With the elections in the rearview mirror, a Trump administration would likely face hurdles if it attempted to repeal or reduce the IRA, as it has received support from many Republicans and the general public. Meanwhile, the Oil & Gas Infrastructure market was valued at $714.4 billion in 2023 and is projected to expand at a compound annual growth rate (CAGR) of 6.7% between 2024 and 2032, as new fracking and deep-water drilling advancements, supported by the future Trump administration, unlock untapped reserves, according to a report from Global Market Insights.² Increased funding for infrastructure projects and manufacturing revitalization, regulatory compliance, and sustainability have become top priorities for companies across a range of Commercial and Industrial Construction and Manufacturing markets. Government-backed clean energy investments and the resurgence of oil and gas are expected to provide EHS market players with substantial revenue and merger and acquisition (M&A) opportunities.

Despite uncertainty in some industrial sectors, demand for EHS products and services is holding strong due to federal and state infrastructure incentive programs, and a robust regulatory environment for corporate environmental and worker safety requirements. As the funds earmarked for the IRA are further allocated and utilized, this demand will continue to increase along with decarbonization, clean energy and construction investment. Private equity groups and strategic buyers are recognizing these resilient tailwinds, and M&A activity in EHS has been steady in a sluggish market.

Chris CardinaleDirector, Capstone Partners

Industrial End Markets and Government Spending Cultivate Acquisition Interest for Public Strategic and Private Equity Buyers

The EHS M&A market has remained relatively stable, supported by public strategic buyer interest, government investment, and intensified demand in key end markets including Industrial Construction, Manufacturing, and Infrastructure. M&A activity the EHS market has declined 8.3% year-over-year (YOY), with 121 transactions announced or completed year to date (YTD). Public strategic acquisitions in the sector have risen 45% YOY to 29 deals in YTD 2024, namely driven by acquisition-ready businesses positioned in key Infrastructure and Industrial markets. This has largely offset private strategics’ moderation, falling 42.2% YOY, creating a more evenly divided buyer market. Government spending in the Commercial & Industrial Construction and Manufacturing markets has significantly boosted private equity interest in the EHS space, particularly platform acquisitions (up 45.5% YOY). Financial buyers have drawn on cash reserves as the IRA has created favorable market conditions for scaling and optimizing portfolio businesses. Of note, Forfend Industries, a newly formed serial acquisition holding company, launched and closed its first acquisition, Billy Pugh, a leading manufacturer of safety equipment for the Offshore and Maritime end markets (September, undisclosed). Hampton River Holdings-backed Forfend Industries is expected to focus on acquiring niche businesses across the Industrial Manufacturing and Heavy Industry spaces. The convergence of increased government funding and market transformation has accelerated M&A activity, making EHS players with exposure to these end markets particularly attractive to acquirers.

Multiples Remain Robust in the EHS Market as Services-Focused Strategic Buyers Seek to Expand Offerings

Acquirers have viewed EHS companies as essential partners in ensuring compliance with stringent and evolving regulations while promoting workplace safety, making the sector an attractive target for M&A activity. M&A multiples in the EHS market have averaged 2.7x EV/Revenue and 9.3x EV/EBITDA through YTD, outperforming the broader middle market Industrials industry which averaged 1.4x EV/Revenue and 8.2x EV/EBITDA during the same period. Strategic buyers have continued to expand into the Services segment, capitalizing on subsidies, tax credits, and long-term demand. Notably, NV5 Global (Nasdaq:NVEE) has announced or completed seven acquisitions to date, all of which provide services across various Infrastructure and Energy markets. In August, NV5 acquired Weston Solutions’ California Water Resources Group, a provider of environmental regulatory compliance services related to aquatic environments for government agencies (undisclosed). “Water Resources is a growing part of NV5’s business…. Demand for compliance services in the Water industry is growing rapidly due to expansion of the nation’s water infrastructure and stringent regulatory requirements,” said Dickerson Wright, Executive Chairman at NV5, in a press release.³ The Services segment has captured 57% of total deals through YTD as acquirers of EHS service providers seek to leverage blooming demand for outsourced expertise.

Acquirers Target Safety Equipment Manufacturers to Bolster Portfolio Offerings

The EHS market has continued to mature, with established players seeking equipment portfolio expansion and diversification into new and existing end markets and applications. Equipment and product manufacturers have accounted for 33 deals YTD, a 13.8% increase YOY as buyers have sought to bring outsourced equipment manufacturing expertise under one roof. Several notable safety equipment and product transactions are highlighted below.

• Municipal Emergency Services Acquires Frontline Outfitters (October, Undisclosed) – Municipal Emergency Services (MES), a leading provider of firefighter equipment and first responder solutions, acquired Canada-based Frontline Outfitters for an undisclosed sum (October). The acquisition allows MES to strengthen its network, capabilities, and expertise in the First Responder Uniform market across North America. Frontline operates in the Public Safety Uniform and Outerwear Distribution spaces, providing high-quality products to law enforcement, fire departments, emergency medical services (EMS), and correctional services. Their offerings include top brands such as Elbeco, Preserver, Uncle Mikes, Cobmex, US Armor, and Merrell & Bates Footwear. The deal marks MES’ third transaction to date, and its eighth since it was acquired by Platte River Equity (PRV) Management (October 2021, undisclosed) as the platform has continued to expand its portfolio and geographic reach.

“This is the perfect next step in the evolution of Frontline Outfitters as we continue to provide high-quality uniform and equipment products and services. MES’s product offering significantly expands our potential, and their next-level technology, including advanced online ordering software and logistical expertise, will help us better service our customers,” said John Allen, President of Frontline Outfitters, in a press release.⁴

• Sound Growth Partners Acquires ATEK Access Technologies (September, Undisclosed) – In September, Sound Growth Partners (SGP) acquired ATEK Access Technologies, a manufacturer of equipment products under its Datakey and Larco brands. Datakey is the leading provider of rugged, reprogrammable memory keys for access control and data storage applications, meanwhile Larco is a manufacturer of industrial safety mats and door access controls. Seattle-based SGP closed on $275 million in capital commitments in June to invest in niche market leaders in the lower middle market, according to a press release.⁵ SGP has since closed three transactions to date as the company has begun deploying fund across the Light Manufacturing space.
• National Safety Apparel Acquires Tri-Star Glove (July 2024, Undisclosed) – In July, Blue Point Capital Partners-backed National Safety Apparel (NSA) acquired Tri-Star Glove (TSG), a manufacturer of personal protective equipment (PPE) apparel. Terms of the deal were not disclosed. The acquisition marks NSA’s 14th acquisition since 2012 and the first investment since it was acquired by Blue Point in May 2024 (undisclosed). TSG primarily serves the Automotive, Foundry, Fabrication, and Glass end markets, expanding from a manufacturer of high-performance gloves for the Domestic Automotive space into the increasingly diverse Industrial Safety space. The Hand Protection market has boasted the highest YOY growth compared to other adjacent Safety segments, according to a deal press release.⁶

“Tri-Star has developed a reputation for manufacturing outstanding personal protective apparel that spans a variety of project types and serves a diverse group of customers. Through this partnership, we will continue providing premium PPE products to our customers, leveraging our combined experience and industry knowledge,” said NSA CEO, Chuck Grossman, in the press release.

The EHS market has continued to be a critical focus across industries as companies prioritize regulatory compliance, risk management, and employee well-being. Safety products and services have remained at the forefront as businesses face increasing pressure to meet stringent safety standards and environmental guidelines. Demand for comprehensive EHS solutions has materialized in strong M&A interest as players seek to proactively manage risks and foster safer, more sustainable operations—a trend that is expected to continue into 2025.

To discuss the Industrials-wide safety equipment and services imperative, provide an update on your business, or learn about Capstone's wide range of advisory services and EHS market knowledge, please contact us.

Neve Adler, Analyst, was the lead Market Intelligence contributor to this article.

Endnotes

1. Department of Energy, “Biden-Harris Administration Announces $6 Billion to Transform America's Industrial Sector, Strengthen Domestic Manufacturing, and Slash Planet-Warming Emissions,” https://www.energy.gov/articles/biden-harris-administration-announces-6-billion-transform-americas-industrial-sector, accessed October 24, 2024.

2. Global Market Insights, “Oil & Gas Infrastructure Market Size,” https://www.gminsights.com/industry-analysis/oil-and-gas-infrastructure-market, accessed October 24, 2024.

3. NV5, “NV5 Reaches Agreement to Acquire California Water Resources Group from Weston Solutions, Strengthening Water and Wastewater Capabilities,” https://ir.nv5.com/news-events/news-releases/news-details/2024/NV5-Reaches-Agreement-to-Acquire-California-Water-Resources-Group-from-Weston-Solutions-Strengthening-Water-and-Wastewater-Capabilities/default.aspx, accessed October 24, 2024.

4. Network Association of Uniform Manufacturers & Distributors, “MES Acquires Frontline Outfitters,” https://naumd.com/mes-acquires-frontline-outfitters/, accessed October 24, 2024.

5. Business Wire, “Sound Growth Partners Closes Fund I at $275 Million Hard Cap,” https://www.businesswire.com/news/home/20240604476844/en, accessed November 7, 2024.

6. Blue Point, “Blue Point-Backed NSA and Tri-Star Glove Are a Tailor-Made Fit,” https://www.bluepointcapital.com/news/blue-point-backed-nsa-and-tri-star-glove-are-a-tailor-made-fit, accessed November 7, 2024.