Environmental & sustainability M&A – Consulting and Engineering driving deals

Amid the ever-growing importance of environmental, social and governance (ESG), businesses in the environmental and sustainability services industry have become highly sought-after targets for major businesses seeking to tap into the best expertise, new technology and most active markets.

ESG is now firmly established as one of the main considerations for businesses conducting M&A at scale, helping buyers to achieve their sustainability-related goals (such as reaching net zero), bolster their green credentials in order to secure investment and boost valuations in a world where sustainability has become a core concern.

We covered this in-depth recently, in a piece looking at how companies can build their M&A strategies around ESG in order to expand their services and improve their valuations. In brief, sustainability has gone from a fringe concern, largely relevant at the due diligence stage, to the foundation of many M&A strategies.

With demand soaring, major buyers both within and outside of ESG-related industries are targeting acquisitions of smaller environmentally-focused companies. Furthermore, with ESG regulation continually evolving, this growing demand seems set to continue unabated, potentially being one of the investment areas least affected by global economic uncertainty.

Unabated growth despite economic chaos
Even as economic turmoil has driven down investment and M&A activity in a number of critical sectors, the environmental and sustainability market has continued to grow. According to an August 2023 forecast from International Data Corporation (IDC), the ESG business services market will see spending increase from $37.7 billion in 2023 to nearly $65 billion by 2027, which would represent a compound annual growth rate (CAGR) of just under 15 per cent during the period 2022-2027.

Dan Versace, a Research Analyst in IDC’s ESG Business Services division, commented: "With the needs for guidance and tools for sustainable operations growing, the market for purpose-built ESG and sustainability services is rife with opportunity for large and small vendors alike.”

"Pressure for change is more prescient than ever, and businesses that fail to act face risk to their brand image, financial performance, and even their infrastructure due to the ever-present threat of extreme weather events and resource shortages caused by climate change. With less than six years until the effects of climate change become irreversible, action is needed now to address current risks and mitigate the threat for the years to come."

According to a report from Equiteq, this is resulting from increasing climate change funding in many key geographies (the US, EU and UK), as well as the ongoing rollout of new ESG legislation. As a result of these factors, Equiteq says, environmental and sustainability-based spending is being driven at an executive level, with C-suite figures focusing on sustainability strategies and implementing them across their operations.

The US and Europe are at the epicentre of this growing market. Bloomberg Intelligence forecasts that, assuming a 15 per cent rate of growth, ESG assets could be valued at $53 billion by 2025, which would represent a third of global assets under management (AUM). According to Bloomberg Intelligence, the US and Europe account for almost the entire market share.

In Europe, environmental and sustainability spending is being driven by the differing regulatory regimes of the EU and post-Brexit UK. In the EU, the now fully-implemented EU Taxonomy Regulation is spurring investors and companies towards sustainable economic activities, while the Sustainable Finance Disclosure Regulations (SFDR) mandate financial market participants to make pre-contractual disclosures on integrating ESG factors. These changes are helping to enhance transparency while promoting sustainability. Overall, 30 per cent of the EU’s budget for 2021-2027 is earmarked for climate-related goals.

In the UK, meanwhile, certain businesses are mandated to disclose climate-related financial risks in line with recommendations from the Task Force on Climate-related Financial Disclosures (TCFD) in order to promote transparency and risk-assessment, while UK pension funds are required to consider ESG-related factors in their investment decisions. As a result of these recent regulatory changes, ESG integration is becoming a more pressing concern among UK businesses and investors.

Equiteq’s key takeaway from the growing funding and evolving legislation around sustainability is that demand for environmental and sustainability-related services, such as engineering and consultancy, will increase significantly.
Naturally, this is also leading to a considerable amount of M&A activity, with the sector seemingly bucking the trend that has seen declining dealmaking across so many other industries. Whereas the dealmaking environment more broadly has shown ongoing decline since around the beginning of 2022, following the post-COVID surge seen during 2021, environmental and sustainability-related deals have continued to increase.

In Equiteq’s report, the sector’s growing importance over recent years was demonstrated by the fact that more deals were tracked during 2020 (23) that during 2019 (15) - a somewhat astonishing figure, considering the fact that M&A virtually ground to a halt for much of the initial COVID-19 pandemic.

Following that, the sector benefited from the overall boom in dealmaking during 2021, with activity increasing to 43 deals, before bucking the trend again and recording 66 deals in 2022, a year that saw M&A largely slow down elsewhere. Equiteq’s report, published in July of last year, showed 50 deals completed during the first half of 2023, putting the sector firmly on course to once again outstrip the previous year by a considerable margin.

Perhaps the key factor in the resilience of dealmaking volume in the sector is the increasing popularity of acquisitions involving smaller companies – a natural symptom of dealmaking mainly being driven by bigger firms targeting emerging technologies, innovations and expertise in niche areas.

Over the period tracked by Equiteq’s report (2019 to mid-2023), the number of deals involving large companies (those with employee headcounts above 500) remained relatively steady, with four deals in 2019, seven in 2020, six in 2021, eight in 2022 and three during the first half of 2023.

Acquisitions of smaller companies (those with under 100 employees), however, have increased substantially over the same period, going from six in 2019 to 12 in 2020, 28 in 2021 and 46 in 2022. In the first half of 2023, the previous year’s number of smaller deals was nearly matched, as Equiteq reported 44 deals involving smaller businesses.

The key buyers – Private equity firms and major global companies
Unsurprisingly, as a sector driven by innovations, niche expertise and technology, the environmental and sustainability market is heavily populated by private equity and private equity-backed buyers, who account for more than 50 per cent of the deals tracked by Equiteq.

According to the report, of the 197 deals tracked between 2019 and mid-2023, 108 were made by private equity firms or companies backed by private equity. 25 of those deals were buyouts in which a private equity firms acquired a company, while the majority (83 deals) were add-on transactions completed by private equity platform companies.

As in any expanding and fragmented market, underpinned by such strong growth drivers, private equity firms are keen to acquire promising companies in key areas (such as sustainability consulting, environmental engineering or software), often then using those businesses as platforms for acquiring more companies through buy and build M&A strategies.


Celnor is a compliance group backed by private equity firm Inflexion that is actively seeking acquisitions of UK, US or Europe-based companies with £250,000 - £10 million in annual profits offering testing, inspection, certification and compliance (TICC) services to the environmental, industrial and infrastructure sectors.

The group was launched in October 2023 through the acquisition of three businesses, Kent-based Riverside Environmental, Watford-based Vintec Laboratories, and Wolverhampton-based Ground Investigation and Piling (GIP).

At the time, founder and Group CEO Simon Parrington said:“We have hit the ground running with the acquisition of three companies which have been carefully selected to fit our vision and values. We are looking forward to working together to provide customers with the critical data they need for sustainable, safe and compliant activities.”

Since then, the company has completed the acquisitions of several businesses in the environmental space, including: Brownfield Solutions, a company providing site investigation, contaminated land and risk assessment services, which joined Celnor’s geoenvironmental operations; asbestos testing and consultancy APEC Environmental, which joined its safety and compliance division; and, most recently, Assurity Consulting, a workplace health, safety and environmental compliance consultancy.

Of course, not all of the major dealmakers in the environmental space are private equity-backed, with many acquisitions being undertaken by larger firms seeking to build scale, add services and expand geographically through consolidation of smaller firms.

As demonstrated by the Equiteq figures on deal size over the past four years, acquisitions of smaller companies have come to dominate the environmental and sustainability M&A market, much of this being driven by large firms acquiring boutique companies in order to gain market share in new areas and tap into pools of specific expertise.


In 2022, the most active buyer of high-growth UK companies, according to Beauhurst, was RSK Group, a consultancy and technical services group operating in the engineering and environmental sectors. In 2022, the company made a total of 36 acquisitions (including 19 UK businesses) and last year made a further 31.

RSK’s relentless acquisition drive, which is backed by investment from global alternative investment manager Ares Management, has seen it amass a portfolio of more than 200 companies around the worldwide, with a workforce of around 12,000 staff. Late last year, the company forecast that its turnover for FY23 would exceed £1.2 billion.

Many of RSK’s acquisitions involve companies providing sustainability-related services, with the group’s rapid expansion over recent years demonstrating the scope for growth through M&A that exists in the highly fragmented environmental services industry.

Where are deals being done?
Unsurprisingly, the USA is a hub of dealmaking activity in the sustainability market, with Equiteq reporting that the US has seen 60 deals in the sector since 2019. However, despite its miniscule size in comparison to the USA, the UK has established itself as a similarly busy marketplace for sustainability-related M&A, with 58 UK-based deals between 2019 and 2023, according to Equiteq.

As well as keeping pace with the USA, this level of dealmaking puts the UK well ahead of any of its European counterparts, with the next most active marketplace being the Netherlands, which saw 11 deals during the period in question, followed by France, with nine, and also far beyond other key marketplaces such as Canada (12 deals) and Australia (ten deals).

Overall, during the period from 2019 to the halfway point of 2023, the UK accounted for more than half of the 108 deals struck in Western Europe, with particularly active UK buyers including consulting group Anthesis, environmental consultancy ERM, professional services giant Deloitte, investment firms KKR and Oakley Capital and, perhaps most notably, sustainability consulting consolidator RSK Group – one of the UK’s most acquisitive companies across any sector.

Consulting and engineering the key trends
The two key areas within sustainability that are driving this strong M&A activity are consulting and engineering. Environmental consulting, which also links in with the increasing focus on professional services among M&A buyers, has become a key priority due to the assistance that businesses need during the initial stages of a sustainable transformation, particularly those companies that have not undertaken similar steps in the past, as well as the growing regulatory burden that companies face in relation to ESG.

According to Equiteq, 85 of the 197 environmental and sustainability deals it tracked between 2019 and mid-2023 involved consulting firms. Key consulting areas include ESG and Net Zero, environmental assessment and planning, energy and emissions, waste and alternative packaging and green IT.

Amid this surging interest in the sector, environmental consultancies have seen their valuations increase rapidly over recent years, in spite of challenges such as COVID-19 and recent geopolitical and economic turmoil.

According to Equiteq figures, the average Enterprise Value/EBITDA multiple for a sustainability consulting business stood at 13.9 per cent – higher than any other category within environmental services tracked in the report – a 24 per cent increase over the previous five years.

Given the solid growth that the consulting segment has seen, it’s no wonder that it is a regular target for private equity buyers and that many of the leading consolidators in environmental consultancy are backed by private equity firms.


One such firm is APEM Group, an environmental consultancy group serving the property development market that has established itself as an active consolidator in the consulting space since it was acquired by private equity firm WestBridge in 2021.

With the backing of WestBridge, APEM has expanded considerably through acquisitions, amassing a team of more than 600 staff. The Stockport-headquartered group has also expanded geographically, acquiring companies in Sligo, Galway, Dublin and Southampton.

In October 2023, the group completed its sixth private equity backed deal, with the acquisition of Oxfordshire-based ecological planning consultancy Aspect Ecology. The target company provides a wide range of consultancy services to property developers, including ecological licensing for protected species and other necessary mitigation works. The deal added a further 40 ecologists to APEM Group’s workforce.

APEM Group Chief Executive Leah McGimpsey said: “Aspect Ecology brings deep expertise in terrestrial ecology to the Group, building on our existing market-leading capabilities and significantly increasing our strength and depth. This acquisition provides a substantial opportunity to continue our expansion into the infrastructure and built environment market.”

“As the need for clean infrastructure increases, Aspect’s knowledge and work with clients in assessing the biodiversity of a developer’s plans and how to deliver Biodiversity Net Gain solutions, will be of real value to APEM’s own clients.”

WestBridge partner Peter Barkley added that the deal builds on APEM’s “existing capabilities in terrestrial ecology, broadens the service offering and further enhances APEM’s reputation in the environmental consulting marketplace.”

He continued: “The APEM Group Leadership Team continues to add culturally aligned businesses to the Group via its strategic acquisition strategy, while delivering value adding services to clients.”

This demand for sustainability consulting is only set to increase further, with IDC forecasting that strategy consulting’s importance will continue to grow as more and more companies undertake sustainable transformations.

A 2022 IDC survey focused on ESG professional services in consulting, implementation, engineering, and IT services, including such services as ESG strategy development and implementation, sustainable operations consulting, ESG reporting services, circularity consulting, green IT implementation services, and managed sustainability performance services.

The survey found that nearly two-thirds of respondents planned to allocate more than half of their spending in the professional services area to sustainability over the next two years, demonstrating the vital role consultancy continues to play. IDC said: “Strategy consulting enables organisations to efficiently embed sustainability into their business strategy, which is the driving force of corporate purpose and in turn sustainable operations.”

Along with consultancy, engineering is the other major area of environmental services that is driving M&A activity, with Equiteq reporting that engineering accounted for 86 of the 197 deals completed since 2019 (slightly outstripping consulting).

As of June 2023, businesses in the engineering and environmental services subsector were commanding an average EV/EBITDA multiple of 11.4 per cent, a 27 per cent increase over the past five years (a greater increase than seen in the consulting subsector over the same period).

Engineering forms a key part of how businesses rethink their operations from a sustainable viewpoint, meaning that it is key to planning a sustainable transformation and should continue to grow in importance as the market for environmental change matures and companies move from strategising to implementing their transformation plans.


During 2023, RSK was particularly active in acquiring UK environmental engineering businesses, making a number of deals for engineering firms specialising in a wide range of sustainable and environmental solutions, as its M&A drive continues to gather pace.

In July, the group acquired PD&MS, an Aberdeen-based specialist in engineering services in energy transition, conventional energy, low carbon and renewable energy. The company, which had made several acquisitions of its own prior to being taken over by RSK, serves many major operators in the energy sector, helping them in their transitions towards decarbonisation and net zero.

The following month, RSK acquired Sligo-headquartered multidisciplinary consulting and engineering firm Jennings O’Donovan. Founded in 1950, the company specialises in renewable energy supply, wastewater treatment and the provision of planning and environmental services, serving clients such as water and power utilities, local authorities and private developers.

The company’s 100-strong workforce spans design engineers, environmental scientists, resident engineers, planners and project managers, with RSK Group CEO Alan Ryder saying the firm “has enviable skills and experience in crucial sectors that are so important to RSK across the world and are key to our commitments to the UN Sustainable Development Goals.”

Finally, in November 2023, RSK acquired Homer Burgess, a Scottish mechanical engineering firm working with leading clients in the energy, water, manufacturing waste and food sectors. Homer Burgess is a relatively small family-owned business, employing 50 highly skilled specialists in mechanical engineering, design, fabrication, installation, repair and maintenance services.

Alan Ryder commented: “This acquisition will also support RSK’s presence across the UK water sector and the group’s commitments across Scotland. Homer Burgess is home to a skilled workforce serving multiple sectors, and its significant experience in fabrication will be incredibly useful to other RSK businesses that I know will share my appreciation for its expertise.”

Environmental and sustainable services are one of the few sectors that we can safely say are on a definite upward trajectory. While there may be fluctuations within the sector (for example, if consulting becomes less vital as an increasing number of companies begin enacting their sustainable transformation strategies rather than simply planning for them), the overall trend points to a continuing growth in investment.

Of course, a frequently tightening regulatory environment is forcing companies to make investments in sustainability in order to remain compliant, but businesses are also increasingly awakening to the other benefits that environmental factors can deliver, in terms of improved value and becoming more attractive to potential investors, such as private equity firms.

There is a view amongst some in the investment community that ESG is becoming somewhat cliched and less of a drawcard for capital. We would argue that this is more an issue over labelling and the lack of how to quantify ESG initiatives.

Incorporating the principles of Rational Sustainability, as articulated by Alex Edmans, Professor of Finance at London Business School, into the realm of environmental and sustainability M&A offers a nuanced perspective. Edmans' approach underscores the importance of long-term value creation, beyond the conventional ESG labels, advocating for decisions grounded in solid evidence and analysis. This approach aligns well with the evolving landscape of M&A in consulting and engineering, where the focus is increasingly on sustainable outcomes that are both financially sound and environmentally responsible.

Rational Sustainability challenges the traditional ESG narrative by emphasising outcomes over labels, intrinsic value over instrumental gains, and the acknowledgement of diminishing returns and trade-offs. In the context of M&A, this translates into a more strategic evaluation of potential deals, where the sustainability aspect is not just a tick-box exercise but a core part of the long-term value proposition. Deals driven by this mindset are likely to be more robust, enduring, and aligned with broader societal goals, thus potentially yielding better long-term returns for all stakeholders involved.

To summarise, the environmental and sustainability services sector will not only continue to play a major role in the overall dealmaking market, but will only increase in importance over the coming years. A rare thing indeed in such an uncertain economic environment.

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