Jun 5, 2024

Industrial & Environmental Services Market Update – June 2024

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Environmental Protection Regulations Spur Industrial & Environmental Services Market M&A

Increased regulations on manufacturers in the Industrial & Environmental Services (I&ES) market and advancements in environmentally conscious practices have continued to drive outsized demand and acquisition appetite in the space. Large government contracts and increased infrastructure funding for the U.S. Environmental Protection Agency’s (EPA) Brownfields and Superfund programs are expected to uphold sector revenues. The Brownfield and Superfund sites are areas in the U.S. designated by the EPA as hazardous due to pollution, contaminants, or similar issues, requiring large-scale, costly cleanups and rehabilitation. In November 2021, President Biden introduced the Infrastructure Investment Act which outlined $21 billion in investments for remediation projects and to clean up the designated Brownfields ($1.5 billion) and Superfund ($3.5 billion) sites, according to The White House.1 The remediation of these sites has provided significant economic benefits such as job creation and increased residential property value. In 2023, Superfund sites in reuse supported 10,261 businesses with total annual sales of $71.4 billion, an 18.1% and 12.3% increase, respectively, compared to 2018 levels, according to a report by the EPA.2 These sites also employed more than 237,000 workers earning a total $18.8 billion in income, according to the report. To capitalize on these tailwinds, buyers have increasingly targeted sector participants that possess remediation contracts and extensive service capabilities.

The increasing regulatory scrutiny and evolving legislation around PFAS will continue to drive revenues for companies with innovative solutions to address these challenges. As these companies are scaling their operations to address the surging demand, financial investors and industry consolidators are eager to find investment opportunities to benefit from these regulator tailwinds.

Timm KuechleSenior Director, Capstone Partners

Industrial & Environmental Services Market Records Strong 2024 M&A Growth

Merger and acquisition (M&A) volume in the I&ES sector has risen to 33 deals announced or completed year-to-date (YTD). This marks an increase of 21.2% year-over-year (YOY). The space has demonstrated resilience as broader M&A markets have continued to lag in 2024. Disclosed purchase multiples in the space from 2021 through YTD 2024 have averaged 1.5x EV/Revenue and 9.4x EV/EBITDA as companies with sustained revenue streams and government incentives have garnered attractive valuations. Comparatively, middle market M&A deals in the broader Industrials industry averaged 8.9x EV/EBITDA in the prior three-year period ending Q1 2024, speaking to the premium buyers have placed on the I&ES sector, according to Capstone’s Q1 2024 Capital Markets Update.

Sector fragmentation and niche market positioning by small- and medium-sized enterprises (SMEs) have drawn an active pool of strategic and private equity buyers. Competition for these businesses has stiffened YTD as buyers vie for a limited number of targets across diversified geographies. Strategic buyers have accounted for 36.4% of sector transactions through YTD 2024, compared to 34.6% during the prior year period. Public strategics have experienced the greatest influx of transaction activity to-date, comprising five deals versus one deal in YTD 2023. Despite tightened credit conditions and subdued expectations for interest rate cuts, private equity buyers have maintained an appetite for acquisitions in the space. This has largely materialized in private equity add-ons, which rose 45.5% YOY. As private equity holding times become exacerbated, Capstone expects more balanced M&A interest from strategic and financial buyers throughout 2024 and into 2025.

Government Regulation Boosts Deal Activity

In early 2024, the U.S. government instituted monumental changes to combat contaminated drinking water. Previously, potable water was a self-regulated operation with utilities and providers using best practices. The EPA has taken a firmer stance on protecting people from health risks posed by exposure to forever chemicals. These forever chemicals, also known as per- and polyfluoroalkyl substances (PFAS), are made up of thousands of synthetic chemicals that do not break down naturally and require significant resources and engineering capabilities to process. The presence of these chemicals in drinking water has been linked to cancers, heart and liver issues, and immune and developmental damage among infants and children. The EPA’s plan includes $9 billion in funding to address PFAS and other drinking water contaminants, and $12 billion in additional funding from the Bipartisan Infrastructure Law supporting investments in drinking water and PFAS treatment, according to an EPA press release.3 Government funding is expected to further propel an already active buyer market through significant investments in water treatment and PFAS disposal businesses. Meanwhile, public company players in the I&ES space have begun to realize the benefits of increased sector demand through strengthened revenue streams. This has contributed to an outperformance by Capstone’s I&ES public company index compared to broader markets, rising 33.5% YOY. Comparatively, the S&P 500 and Dow Jones Industrial Average rose 20.6% and 11.3%, respectively, over the same period.

The responsibility to combat PFAS and align with new regulations has provided I&ES sector participants with unique revenue and investment opportunities. Leading I&ES public company, Clean Harbors (NYSE:CLH), invested $200 million in a Nebraska incinerator to tackle reshoring and PFAS waste demand, according to an earnings call.4 The company’s pipeline for PFAS-related work has grown 15%-20% quarter-over-quarter (QoQ) in Q1 2024 with $50-$70 million coming from such contracts. Canadian-based solid waste management and environmental services company GFL Environmental (TSX:GFL) noted that PFAS will act as a revenue tailwind for their business, according to an earnings call.5 “We are in discussions with a multitude of companies to acquire or partner with to create a solution to the PFAS issue that everyone's going to be having to dealing with in the near future,” commented Patrick Dovigi, Founder and CEO of GFL Environmental, in the call.

Wastewater Treatment Targets Benefit from Increased Government and Public Scrutiny

Increased regulation on forever chemicals by the Biden-Harris Administration, coupled with elevated public scrutiny on the health and quality of water, has spurred robust M&A activity in the Wastewater Management segment. Companies that have demonstrated exceptional consultancy services and a fully integrated ecosystem of environmentally safe capabilities have garnered buyer attention. Several notable transactions reflecting this trend are outlined below.

  • Heritage-Crystal Clean Acquires Envirosafe Services of Ohio (January, Undisclosed) — In January, Heritage-Crystal Clean acquired Envirosafe Services of Ohio for an undisclosed sum. Crystal Clean is a leading provider of parts cleaning, hazardous and non-hazardous waste services, used oil re-refining, antifreeze recycling, industrial and field services, and emergency and spill response services. The acquisition is Crystal Clean’s first since the company was taken private by J.F. Lehman and Company (July 2023, $1.3 billion). Envirosafe expands Crystal Clean’s network to include a federal and state Resource Conservation and Recovery Act (RCRA) permitted treatment, storage, and disposal facility (TSDF), which allows it to accept nearly 600 different U.S. EPA waste codes, according to a press release.6 “The addition of Envirosafe immediately enhances our infrastructure with a fully permitted TSDF that improves our hazardous waste infrastructure and processing capabilities. Adding these abilities will allow us to bring more value-added services to our growing customer base as we take another step towards realizing our vision of helping the business world run cleaner,” Brian Recatto, President & CEO of Crystal Clean, commented in the press release.
  • Oak Hill Capital Management-Backed Trinity Consultants Acquires WestLand Resources (November 2023, Undisclosed) — Oak Hill Capital Management-backed Trinity Consultants, a leading global environmental consulting firm providing services and solutions in the Water and Ecology markets, acquired WestLand Resources in November 2023. The terms of the deal were not disclosed. WestLand is an Arizona-based engineering and environmental consultancy firm that will join Trinity’s Water & Ecology team of experts and marks Trinity’s sixth acquisition in the space. The two companies have collaborated on projects for shared clients since 2017, recently teaming up on a number of renewable energy and mining projects throughout the West, according to a press release.7

“WestLand shares our commitment to technical excellence and client service to address the complex planning and resource issues our society faces today. The company’s complementary services, combined with its cultural synergies, will serve as the foundation to expand our engineering, planning, and environmental consulting businesses and ultimately set the stage for continued growth and innovation in North America,” said Mike Remsberg, Divisional President of Water & Ecology at Trinity, in the press release.

  • CIMA+ Acquires C3 Water (November 2023, Undisclosed) — CIMA+ acquired municipal water and wastewater service provider C3 Water for an undisclosed sum (November 2023). Through the acquisition of C3 Water, CIMA+ expands its portfolio with additional expertise in water modelling platforms, which includes the development of digital twins for water systems. “Drinking water is an important resource for our communities that requires careful planning to ensure its sustainability. As a combined team, we will provide more comprehensive water engineering services to our clients, covering every aspect of water infrastructure, from source to tap,” said CIMA+ Vice President Infrastructure, Ontario, Brian Sudic, in a press release.8

To discuss the dynamic regulatory environment, provide an update on your business, or learn about Capstone's wide range of advisory services and Industrial & Environmental Services market knowledge, please contact us.

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


  1. The White House, “A Guidebook to the Bipartisan Infrastructure Law for State, Local, Tribal, and Territorial Governments, and Other Partners,” https://www.whitehouse.gov/wp-content/uploads/2022/05/BUILDING-A-BETTER-AMERICA-V2.pdf, accessed May 7, 2024.
  2. EPA, “Redevelopment Economics at Superfund Sites,” https://www.epa.gov/superfund-redevelopment/redevelopment-economics-superfund-sites, accessed May 7, 2024.
  3. EPA, “Biden-Harris Administration Finalizes Critical Rule to Clean up PFAS Contamination to Protect Public Health,” https://www.epa.gov/newsreleases/biden-harris-administration-finalizes-critical-rule-clean-pfas-contamination-protect, accessed May 7, 2024.
  4. Clean Harbors, “Q1 2024 Clean Harbors Earnings Conference Call,” https://edge.media-server.com/mmc/p/ywgu8h3h/, accessed May 7, 2024.
  5. GFL, “GFL Environmental 2024 Q1 Earnings Call,” https://events.q4inc.com/attendee/847833622, accessed May 7, 2024.
  6. Crystal Clean, “Crystal Clean Adds Hazardous Waste Treatment Facility to Network with Acquisition of Envirosafe Services of Ohio, Inc.,” https://www.crystal-clean.com/crystal-clean-envirosafe/, accessed May 7, 2024.
  7. Westland, “Trinity Consultants Acquires WestLand Resources,” https://westlandresources.com/2023/11/trinity-consultants-acquires-westland-resources/, accessed May 7, 2024.
  8. CIMA+, “C3 Water Joins Forces with CIMA+,” https://www.cima.ca/en/press-releases/c3-water-joins-forces-with-cima/, accessed May 7, 2024.

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