The scaling number of deals, increasing transaction values, and profiles of companies making acquisitions in water point to growing confidence in water-related solutions and strategies. A notable shift has been underway—instead of water just representing part of the deal, investors are now targeting water specifically as the opportunity. As a result, a host of new players—energy services firms, technology vendors, private equity investors—are rounding out the competitive landscape.
While water-related deal flow has been strong over the past five years, recent policy incentives, including the U.S. Infrastructure Investment and Jobs Act, investor focus on ESG, and corporate sustainability strategies are compelling organizations to be more aggressive in their approaches to water.
Water-related M&A surged in 2021, far outpacing the prior year, as measured by the number of water transactions and disclosed deal values. In 2021, Bluefield Research identified 498 announced deals, which represents a 34% increase over the prior year. The combined transaction sum for deals with disclosed values grew to US$80 billion, up from US$35 billion in 2020.
The biggest increases in deal flow have been in the Private Water and Network & Distribution segments, in which year-end transaction totals exceeded the prior year by 58 deals and 36 deals, respectively. These two segments make up 57% of the 2021 total --highlighting anticipated growth opportunities to address utility operations and aging infrastructure.
Water-related M&A surged in 2021, far outpacing the prior year, as measured by the number of water transactions and disclosed deal values
By year-end 2021, Bluefield identified 13 water-related transactions each topping US$1 billion, compared to only three in 2020. Three notable, billion-dollar “water pure-play” deals kicked off the year. Autodesk made a long-anticipated acquisition of private equity-backed, digital solutions player Innovyze ($1 billion). Quikrete purchased ductile iron pipes and precast concrete supplier Forterra, Inc. ($2.74 billion); and New Mountain Capital acquired Aegion Corporation for ($963 million) in the wake of acquiring a leading contract operations service provider, Inframark.
2021 will go down as the most active year for U.S. utility acquisitions in Bluefield’s records to date. This activity is largely a result of financial stresses for small system owners, increased investor-owned utility competition for assets, and aggressive strategies by new market entrants. The competitive landscape is shifting through a growing presence of firms such as NextEra Water, NW Natural, Liberty Utilities, and Central States Water Resources.
At the same time, the digital water market continues to attract strong interest from adjacent sectors. A range of outside players—from telecom companies and big tech firms to solid waste management solutions providers and global VC funds – launched new digital water partnerships, products, and investments in 2021. As enterprise software companies, cloud services providers, and electronics manufacturers build out water-focused strategies, solutions for utilities, industrials, and homeowners are expected to become more advanced.
Looking ahead, we anticipate global water M&A activity to remain robust, supported by strong market tailwinds, though high company valuations in key strategic sectors, geopolitical concerns, and inflation loom large enough to pose a potential cooling effect on the market. Until then, market watchers will remain on the lookout for any platform deal opportunities, including collateral divestments from the recent Suez-Veolia acquisition and EQT’s sale of French water management firm, Saur. If 2021’s activity is a sign, we can expect big things to come for the water industry.