Environmental Health and Safety Market M&A Propelled by Supply Chain Realignment
Capstone’s latest Environmental, Health, and Safety (EH&S) Market Update reports that the U.S. administration’s imposition of tariffs on imports from countries like China, Canada, and Mexico has raised import costs and the escalation in trade protectionism is expected to increase inflation and merger and acquisition (M&A) activity in 2025.
The COVID-19 pandemic exposed vulnerabilities in the production of personal protective equipment (PPE) abroad and tariffs have reignited fears of an overreliance on Asian supply chains. In response, sector players have made concerted efforts to shift PPE manufacturing stateside. Legislation like the Make PPE in America Act has been proposed to bolster domestic production and enhance supply chain resilience. Notably, hospitals and healthcare systems that rely on foreign-made PPE—such as nitrile gloves, isolation gowns, and masks—have faced rising costs, with unforeseen delays, and growing supply chain instability.
More commoditized EHS products have historically been manufactured across Asia-Pacific (APAC) with substantial portions in Thailand, Malaysia, Vietnam, and China. Notably, the PPE market was forecasted to grow 8.4% YOY between 2023 and 2028 with APAC estimated to derive 36% of the growth in the forecast period, according to a report from Technavio. Public players, like Ansell (ASX:ANN) and Lakeland Industries (Nasdaq:LAKE), have discussed tariffs at length in recent calls. Ansell noted that the company will review sourcing options as a mitigator of tariffs and passing additional costs to customers. Lakeland, however, mentioned a robust nine-to-10 months’ worth of inventory with a useful life of five years sitting in the U.S. that are free of any tariff restrictions—a reversal of the destocking trend witnessed amid the pandemic, according to a conference transcript. This stock-up is expected to benefit Lakeland greatly as competitors struggle with rising costs and customer contract adjustments.
The transition by corporations to bring manufacturing stateside has created greater demand for EHS products and services tailwinds for M&A activity as companies seek to mitigate supply chain risks and capitalize on government incentives. M&A volume in the EHS sector has risen year to date (YTD) with 34 deals announced or completed compared to 28 in the prior year period. Private strategics have retaken the lion’s share of M&A activity, comprising 35.3% of deal activity YTD, doubling deal volume from the prior year period. Public strategics have seen activity soften, falling to five deals through YTD compared to nine in the prior year period. Capstone expects the Equipment segment (29.4% of total deals to date) to hold steady, while the Services segment has maintained the largest percentage of transactions (64.7%), as sector participants require assistance in adjusting to the new administration’s regulation changes. Private equity buyers have recognized the subsequent transition brought on by proposed tariffs and have entered the market in force, aligning themselves with broader national strategies for critical health and safety equipment and services.
Capstone Partners advised Safe T Professionals—a construction-related safety management consulting firm—on its investment from Gallagher Bassett Services in June 2024 (terms confidential). Founded in 2011 and based in Chandler, Arizona, Safe T Professionals is a leader in safety consulting and manager outsourcing. The company provides safety training, oversight, reporting, and management of all third-party contractors to assist in large-scale construction projects, ongoing maintenance, and repairs at industrial facilities. Safe T Professionals has developed a specialty in the Semiconductor and Electric Vehicle (EV) industries and represents some of these industries’ largest global companies.
Also included in this report:
How the evolving regulatory landscape, influenced by changing trade policies and economic conditions, has influenced demand for consultancy services.
Capstone Partners’ Industrials Investment Banking Team provides M&A, capital formation, and financial advisory services to the owners of middle market businesses in the Environmental Health and Safety Market. Our team partners with leading mid-to-large sized businesses that serve growing end-markets.
For more information on the EHS Market trends featured in this report or to speak with one of our Industrial M&A Team members about how to grow, value, and/or sell your company, we are here to help. Contact us today.
