Industrial and Environmental Services M&A Update – January 2025

Burgeoning End Markets Necessitate Industrial & Environmental Services

Capstone’s latest Industrial and Environmental Services (I&ES) Sector Update reports that the sector is poised for significant growth as a result of multiple converging factors, particularly the increase in government-backed infrastructure investments, alongside high-value data center and artificial intelligence (AI) infrastructure projects. The Infrastructure Investment and Jobs Act (IIJA) and Inflation Reduction Act (IRA) have channeled billions into renewable energy projects, modernizing the electric grid and bolstering sustainability efforts.

These initiatives have fueled widespread infrastructure expansion, with companies such as Alphabet’s (Nasdaq:GOOGL) Google, Amazon (Nasdaq:AMZN), and Microsoft (Nasdaq:MSFT) leading the charge in data centers and AI facility construction, many of which rely on large-scale energy sources such as nuclear power plants. In October, Google signed an agreement with Kairos Power to develop a fleet of small modular reactor (SMR) projects in the U.S. Similarly, Amazon signed three deals with Dominion (NYSE:D), X-energy, and Energy Northwest. Amazon has committed $500 million to X-energy and will support the development of more than 960 megawatts (MW) of SMR capacity in Washington and Virginia, according to a press release.¹

Hazardous materials, including Naturally Occurring Radioactive Material (NORM) and Technologically Enhanced Naturally Occurring Radioactive Material (TENORM), have raised concerns as they gain prevalence among Oil & Gas, Mining, and Water Treatment segments. Increased demand for the handling and disposal of these materials has expanded sector participants’ revenue opportunities for projects that involve retrofitting or decommissioning older power plants or industrial facilities. With increased concerns and regulations around managing these materials safely, demand for specialized industrial services to safely remove, transport, and dispose of NORM and TENORM has risen, particularly among companies that manage these materials.

Industrial & Environmental Services sector M&A remained elevated with 137 deals announced or completed through 2024. Transaction activity remained strong amid increased demand for infrastructure, environmental cleanup, and sustainable waste management solutions. Investments in infrastructure projects and heightened regulatory pressure for cleaner operations bolstered demand for strong sustainability profiles or specialized capabilities. Strategic acquirers and private equity firms have been willing to pay premium multiples for established players, given the sector’s resilience and the long-term growth potential tied to essential infrastructure and environmental compliance needs. The competition among buyers, coupled with a supply of high-quality assets, drove recent acquisitions to surpass previous years’ valuation peaks, marking it as the sector’s strongest year on record.

Also included in this report:

• What Industrial & Environmental Services sector M&A multiples demonstrated as buyers vie for targets with strong sustainability profiles and specialized capabilities.
• How financing and minority-stake sales fared in the Equity Capital markets.
• A breakdown of Apollo (NYSE:APO) and BC Partners’ announced acquisition of GFL Environmental’s (TSX:GFL) Environmental Services business.
• Capstone’s recently advised transaction of Barclay Water Management’s sale to Ecolab (NYSE:ECL).

Capstone Partners’ Industrials Investment Banking Team provides M&A, capital formation, and financial advisory services to the owners of middle market businesses in the industrial and manufacturing industries. Our team partners with leading mid-to-large sized industrials and manufacturing businesses that serve growing end-markets. We ultimately look to work with companies that manufacture highly engineered products and differentiated services with an entrenched competitive position.

For more information on the Industrials & Environmental Services Update featured in this report or to speak with one of our Industrials M&A Team members about how to grow, value, and/or sell your company, we are here to help. Contact us today to start a conversation.