Water Mergers and Acquisitions Soar in 2021 as Sustainability, Infrastructure Concerns Drive Investment

Water Infrastructure

(Credit: Pixabay)

by | Mar 29, 2022

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Water Infrastructure

(Credit: Pixabay)

Water related mergers and acquisitions surged last year, showing a focus on strategies to tackle sustainability issues, quality concerns and failing infrastructure, according to a review of the deals from Bluefield Research.

There were 498 announced deals in 2021, a 34% increase over 2020, with a disclosed deals worth $80 billion. There were 13 water-related transactions that topped $1 billion last year, according to the water market intelligence firm.

Behind this jump is a convergence of critical factors shaping opportunities in water that include a mounting focus on ESG and corporate sustainability, federal infrastructure legislation, such as the Infrastructure Investment and Jobs Act, and available capital for investment,” says Bluefield CEO Reese Tisdale. “It is also worth noting that strategic and financial investors are increasingly aggressive in their approaches to water M&A, thereby driving up competition and values.”

Bluefield has been analyzing the water industry’s merger and acquisitions since 2015 and tracks deals across six segments, including digital technology, treatment, midstream water, engineering services, network and distribution and private water.

The private water segment, which includes utilities, as well as network and distribution made up 57% of the 2021 deals, according to Bluefield.

Water systems are a big concern in the United States and the Infrastructure Report Card gives the country a D in the area. As part of the $1 trillion infrastructure plan, $50 billion was allocated for water and wastewater infrastructure improvements and the EPA began distributing the funds to states at the end of last year.

The treatment and digital water segments make up 17% and 15% of the deals, respectively, according to Bluefield, which it says points to a growing focus on water quality and smart and digitally connected systems.

The industrial wastewater treatment market is expected to grow by more than 7% per year through 2027 and reach a value of $77.6 million, according to Meticulous Research, and software is expected to play a role in continued improvements there.

Additionally, automation and smart meters are all playing bigger roles in water sustainability efforts. A report by Banyan Water says automation and machine learning could be key to identifying water problems and eliminating water waste for businesses.

More companies are taking a proactive approach as well, such as Facebook parent Meta focusing on water sustainability in its data centers and pledging to replace more water than it uses by 2030. Intel also says it has restored 1.3 billion gallons of water to local watersheds as it builds new facilities, and the construction industry in the UK seeks to become water neutral.

Bluefield says investors are now going after water as an opportunity, and not just as a piece of a potential deal. The company expects activity in the water market to remain robust, but valuations of sectors like digital water and geopolitical concerns could slow down the pace.

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