BGL EIS Insider: Investors Uncover Opportunity in Infrastructure Services
March 06 2019
Cleveland – March 6, 2019 – The underground infrastructure services market is growing, driven by heightened regulatory pressure, aging infrastructure, and increased construction activity which are expected to sustain demand, according to the EIS Insider, an industry report released by Brown Gibbons Lang & Company (BGL). The report is part of BGL’s comprehensive coverage of the environmental and industrial services sector, which identifies segments experiencing favorable tailwinds and accelerating M&A activity from both corporate buyers seeking increased scale and diversification as well as the capital markets community seeking opportunities to participate in these favorable long-term macro dynamics.
The BGL report, now available online, documents a favorable demand outlook supported by increased regulatory enforcement and spending to rehabilitate and maintain the nation’s network of underground infrastructure including water and wastewater systems, gas and power utility systems, communication lines, and transportation infrastructure.
Major utilities are challenged with locating older underground assets, isolating problems with their systems, and engineering solutions—a boon for service providers with expertise in utility locating, excavation, and pipeline infrastructure. The high value of assets, coupled with the high cost of failure if assets are damaged during construction, is driving regulation and heightened attention to safety and compliance, elevating the need for turnkey underground infrastructure solutions. “Regulations are getting enforced at higher levels, and damage prevention in new construction is gaining more visibility. As regulations are enforced, it acts as a multiplier on top of industry growth,” said Mark Bruce, Vice President at Hydromax USA, a participant in the report. “Perhaps because it is underground and out of sight, it’s easy over time to let water and wastewater infrastructure deteriorate significantly so the challenge will be with us for decades to come,” added Thomas R. Barr, founder of Infrastructure Services Group, another report participant. Barr cited the Northeast U.S., where much of the pipe is over 100 years old.
The industry has benefited from an upswing in construction activity during the extended economic cycle, with healthcare, energy, utility, alternative energy, and general building among the markets showing strong demand. “General construction has been very strong for several years,” remarked Matt Aston, CEO at Ground Penetrating Radar Systems (GPRS). “Economies go in cycles, and we’ve been on a long run of very strong economic growth. I am confident there is a tremendous amount of remaining runway for growth in our industry.”
Significant private equity capital has entered the market with a number of sponsors pursuing buy-and-build strategies to create regional and national platforms and consolidate the market. ORIX Capital Partners (Hoffman Southwest and Infrastructure Services Group), Warren Equity Partners (Hydromax USA), CIVC Partners (GPRS), RLJ Equity Partners (Pro-Vac), and J.F. Lehman & Company (Inland Pipe Rehabilitation) are among the private equity funds to make recent platform investments in the industry.
About Brown Gibbons Lang & Company
Brown Gibbons Lang & Company is a leading independent investment bank serving the middle market. BGL specializes in mergers and acquisitions advisory services, debt and equity placements, financial restructuring advice, and valuations and fairness opinions, with global industry teams in Consumer, Diversified Industrials, Environmental & Industrial Services, Healthcare & Life Sciences, Metals & Metals Processing, and Real Estate. BGL has offices in Atlanta, Chicago, Cleveland, Denver, Philadelphia, San Antonio, and San Diego, in addition to international offices in more than 50 countries across 5 continents through our Global M&A Partners network. BGL is able to deliver to our clients unparalleled access to strategic relationships, investors, and opportunities globally. For more information, please visit www.bglco.com.