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02 March 2021 / Keith Hays
Outsiders No Longer Just Window Shopping in Water


Recent excitement over 3x billion-dollar acquisitions in one week underscores a scaling interest in water and an opportunity for water as a platform for growth. While it is obvious that water is essential to all sectors of any economy, the growing roster of companies entering the market and expanding their positions validates the water industry’s longer term prospects in the face of current economic uncertainty.

But what’s driving the flurry of M&A activity from companies now zeroing-in on water for investment? (Hint: it’s not all about technology).

  1. Growing frequency of climate events: The U.S. alone has sustained 255 weather and climate disasters exceeding US$1 billion since 1980—not including the lower profile, more pedestrian events like boil advisories, water main breaks, and contamination crippling municipalities. The current plight of Texas’ water consumers after a winter freeze is just the latest in a fast-growing list of these disasters.
  2. Alarming water quality concerns on the rise: As of mid-2020, 29 states have implemented policy efforts to address unforeseen and widespread health-related impacts of per- and polyfluoroalkyl substances (PFAS) in drinking water, including testing requirements and prohibitions on specific materials.
  3. Qualified personnel becoming scarce: Labor represents more than 40% of total operating expenditures for water & wastewater systems and the Bureau of Labor Statistics (BLS) projects that 10.6% of water sector workers will leave (i.e., retire or transfer) their jobs.
  4. Digital transformation has arrived and accelerating: Among the more than 350 companies offering digital solutions, 64% of them have been founded in the last 20 years, indicating the water industry’s prioritization of new and smarter solutions to meet expectations of the 21st century.

Given these transformative influences, the water industry landscape is ripe for optimization. And it’s not just investor-owned utilities or traditional infrastructure players who are investing in water. Many players from outside the water sector that previously passed on investment now see the industry, and the current moment, as an opportunity:

Big Tech firms are no longer just window shopping: Enterprise software companies, cloud services providers, electronics manufacturers, etc., are moving into the space. Most recently Autodesk acquired water pure-play Innovyze for US$1 billion. Amazon Web Services (also an Innovyze partner) launched a water unit and asset management tool Monitron. Samsung has begun building-out a strategic position in water by launching BESPOKE smart home water purifier solution.

Water sustainability drives corporate focus: Consumer product companies (e.g., Beauty & Personal Care, Food and Beverage) are setting more ambitious water efficiency targets for 2030. These days “going green” [or “going blue”] is considered good for the bottom line, and water plays well into sustainability goals and brand. Many companies are already allocating funds towards achieving these targets, like PepsiCo with Green Bonds and Tesla’s water reuse strategies at its gigafactories.

Private Equity seeks to capitalize on growth: The combination of resiliency and need for investment is attracting interest from more private equity firms than ever before. With the pandemic, we expect to see a buyer’s market in the digital water start-up space, but the two recent deals (Aegion, Inframark) by New Mountain Capital and the buzz created by EQT’s divestments of Synagro and Innovyze have stirred the pot. Other potential divestments have created a buzz.

Telecoms Expand IoT Capabilities in Water: Growth in digital water across municipal and industrial networks is compelling information, communications, and telecom stakeholders to seek opportunities in water, leveraging existing sales channels and infrastructure backbones to move into digital water hardware and software. Telecom companies such as Telstra (Australia), Bell (Canada), and Verizon (U.S.) are looking to water to scale their IoT footprints, investing in utility-facing solutions in order to build positions in the broader smart city value chain.

The path to market entry and investment in water is not always clear. At Bluefield, we help these companies address water as an opportunity from a number of different angles:

  • What’s the best market entry strategy?
  • What is my addressable market in water?
  • Who are our potential customers and partners?
  • How can we build on our new platform position?

Water is a more attractive investment than it was just a few years ago. At Bluefield Research, we help companies capitalize on this opportunity. Start a conversation with Bluefield.

 

 

Keith Hays
VP & Managing Director

Keith Hays is a seasoned market insight professional with over 15 years’ experience in the telecom, energy, and water sectors as a management consultant and industry analyst. As the point-person for Bluefield’s custom research advisory services, Keith has provided strategic guidance to an impressive list of global companies, including infrastructure investors, technology suppliers, water & wastewater utilities, and equipment manufacturers. Prior to joining Bluefield, Keith built market insight services for Pyramid Research, Emerging Energy Research, and IHS in the US and Europe.

He frequently shares his perspectives as a panelist and moderator at global industry and corporate events. Keith has also been cited in The New York Times, ABC News and other major news outlets.

Keith received a BA from Columbia University in English Literature and Hispanic Culture and a Master of Business Administration from IESE Business School. He leads Bluefield Research’s team of water experts from Barcelona, Spain.




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