Environmental, Health & Safety Market Update: Tightening Regulatory Environment Drives M&A Activity

Environmental, Health & Safety M&A Volume Outperforms 2021 Led By Demand For Environmental Consulting

Capstone Partners released its November 2022 Environmental, Health, and Safety (EH&S) Update, reporting that the EH&S sector is poised to benefit from significant tailwinds including elevated corporate profits, healthy construction and production activity, and an increasingly stringent regulatory environment. Sector players that specialize in environmental consulting have witnessed higher service demand amid growing government and private sector investment in environmental initiatives. Driven by heightened scrutiny surrounding corporations’ environmental goals, environmental consultants are forecasted to continue to attract strong demand, providing services that optimize clients’ sustainability initiatives. Similarly, manufacturers and builders are expected to utilize segment services to meet environmental requirements as production and construction activity remain elevated.

The complexity of laws surrounding workplace safety has continued to increase, supporting Occupational Health and Safety segment players. These regulations have bolstered the number of companies demanding health and safety consulting services to avoid government penalties. High-risk industries, including Manufacturing and Construction, are expected to supplement demand in the Occupational Health & Safety segment as companies operating in hazardous spaces have substantial room for improvement in safety measures.

Merger and acquisition (M&A) volume in the EH&S sector has been undeterred by an uncertain economic and dealmaking environment. Notably, the sector has emerged as one of the few spaces outperforming 2021 deal count, which was a record year for middle market deal activity. Strategic buyers accounted for a slight majority of acquisitions to-date, leveraging M&A to add coverage areas, expand technological capabilities, and bolster their regional footprint. Financial buyers have also remained active, led by private equity (PE)-backed companies completing add-on deals. Capstone’s Industrials Investment Baking Team expects EH&S M&A to continue at a strong pace as strategics and PE firms bolster market share to capitalize on sector tailwinds.

Also included in this report:

• Commentary about how high-risk industries present valuable revenue opportunities for sector players.
• A breakdown of M&A activity in to-date 2022.
• Summaries of recent notable M&A deals that occurred in the EH&S space.