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By Usman B. Malik and Carl Parker
Facilities management (FM) annual deal volumes have been rising steadily since the start of the global pandemic, and 2024 was no exception.
Amid a challenging macro-economic environment, investors continued to seek security in a sector with a high resilience to discretionary spending. The requirement for FM services are often regulatory-driven but demand is also increasingly fed by the need for critical and non-discretionary services, creating strong recurring revenues and forward-looking orders. As commented by one investor, “increasingly if FM services aren’t provided or done correctly first time, there is an impact on operations and people get upset”.
M&A, in general, was boosted by falling inflation and interest rates in the second half of the year, as well as clarity on the next UK Government.
In 2024, our team helped 13 FM transactions cross the line, and the start of 2025 has proved equally busy.
Our FM credentials
Source: Grant Thornton UK proprietary FM M&A tracker
Source: Grant Thornton UK proprietary FM M&A tracker
There was a total of 181 deals in 2024, up 34% on 2021 and 5% on 2023, rising steadily throughout the year. There were 54 transactions in Q4, making it the busiest since Q1 2023. Deal volumes for early 2025 suggest this momentum has continued. The significant increase in deal volumes in Q4 were undoubtedly also in part due to shareholder concerns over potential capital gains tax (CGT) rises in the October 2024 Budget, which was increased from 20% to 24% over the initial Entrepeneurs’ Relief Threshold of £1 million.
Hard FM accounted for 75% of transactions. Notable deals include OCS doubling its hard services division with the acquisition of FES FM and FES Support Services in December 2024.
Source: Grant Thornton UK proprietary FM M&A tracker
Some 54% of deals in 2024 involved financial investors, compared to 50% in 2023. This is the highest percentage since we started recording this data in 2008 and reinforces the increasing investor appetite for this highly fragmented and resilient sector.
Direct private equity (PE) investment accounted for 28% of financial investor deals, with the remainder completed by PE-backed corporates.
Amid economic uncertainty, lenders sought solace in a sector backed by non-discretionary and compliance-related spend, frequently with significant contract backing. Subsectors with compliance requirements and government spending (such as, fire prevention/mitigation services) were viewed positively.
George Fieldhouse (Head of Debt Advisory) commented “lender activity and appetite increased in the second half of 2024 in line with improving UK economics and a better set of data to support borrower forecast assumptions”.
This increased activity boosted competition, resulting in a significant reduction in margins. Debt funds saw margins fall by approximately 50-100 basis points compared with this time last year. Lenders are also being more flexible around other terms, such as covenants.
Borrowing levels are still constrained as bank base rate remains well above pre-2022 levels (when inflation began to increase). Because of this increasing cost of debt, lenders remain focused on debt serviceability as a key metric for how much they're willing to lend.
With interest rates now expected to stay higher for longer, they'll continue to exercise this caution.
Source: Grant Thornton UK proprietary FM M&A tracker
Post-Grenfell legislation such as the new Fire Safety Act made fire and safety businesses the most active subsector for deals (18% of transactions).
However, processes in the subsector are becoming increasingly competitive as many opportunities have already transacted.
Buyers are also looking for niche built-environment services, such as testing, inspection and certification (TIC) businesses, and building compliance services.
As the regulatory landscape becomes more complex, we've also noticed an uptick in interest in related built environment consultancy services that advise on areas such as fire safety, asbestos removal, and water hygiene.
We advised IK Investment Partners on its acquisition of Checkmate Fire Solutions. Checkmate deploys over 200 employees across approximately 2,000 public and commercial buildings.
Building energy management solutions (BEMS) was the second most active subsector, accounting for 14% of deals in 2024. This compares to 9% in 2023, showing growing investor interest.
Deals with a renewables or decarbonisation element (including BEMS) accounted for nearly a third (31.5%) of all 2024 FM transactions.
We advised Next Energy Solutions on its sale to Certas Energy (part of DCC plc) in May 2024. Next specialises in solutions like solar panels and air source heat pumps for the domestic market, particularly social housing. Certas has recently bought four other companies in the energy-transition space.
We advised Contact Solar on its sale to EDF Energy Services in February 2024. Contact Solar is a specialist in domestic solar panel and battery storage installation. This investment is part of the energy supplier's UK strategy to help its customers achieve Net zero.
These services accounted for 43% of all FM transactions, making them the joint-third most popular subsectors for investment. We continue to see strong interest in 2025, with a number of assets in these sectors coming to market.
We advised Japanese conglomerate Daikin on its January 2024 acquisition of Robert Heath Heating. The move strengthens Daikin's capabilities in air source heat pump maintenance as it consolidates its position in the renewables heating market.
FM services to the social housing sector accounted for 15% of transactions in 2024. The Fire Safety Act and Building Safety Act have created a huge demand for service providers that can make existing housing stock compliant.
With the Labour Government pledging to deliver the "biggest boost to affordable housing for a generation," we expect this trend to continue as investors bank on Government-backed revenues.
One of the biggest FM deals of the year, we advised Axis Europe on its merger with CLC. The deal was funded by H.I.G. European Capital Partners, which acquired CLC in June 2023. Axis predominately provides maintenance services for social housing and public stock, while CLC provides engineering services.
We advised Low Carbon Exchange (LCX) on its October 2024 sale to Sureserve. LCX specialises in decarbonisation services for social housing, such as the installation and maintenance of renewable energy technologies and energy-efficient building materials.
In November 2024, Hyde Group bought Pinnacle, which manages 70,000 homes on behalf of councils, housing developers, and institutional investors. The enlarged group owns and manages around 120,000 homes.
Cleaning was the most attractive soft services area for M&A in 2024, accounting for 12% of all FM transactions and 46% of soft services deals.
We advised Maxim FM, an independent commercial cleaning and facilities management business, on its sale to facilities services firm OCS. Maxim FM has public sector and private contracts across the UK and a strong reputation in the education, health, social housing, and manufacturing sectors. The transaction marked OCS's sixth strategic acquisition in six months.
Workforce-dependent FM subsectors like cleaning and maintenance will be challenged by the increase in the National Minimum Wage (NMW) and employer National Insurance Contributions (NICs). Meanwhile, the whole sector continues to battle an ongoing skills shortage.
Companies that can solve these problems will be high on investors' hit lists, particularly those that can pass on wage increases in their contracts and have effective recruitment and retention models.
For the same reasons, investors will target solutions that reduce the need for manpower with technology – for example, remote security monitoring.
Attractive prospects will also include business models that optimise the efficiency of ground staff, for example, by using fewer engineers to service dense geographical areas or tools such as AI to optimise workload and route planning.
Investors and lenders will focus on targets' contractual ability to deal with inflationary pressure related to rising energy, labour, and materials costs.
Some contracts, for example, may cover standard inflation increases but won't cover ‘shock events’ such as the NMW and employer NICs increases. This presents a risk to low-margin FM subsectors.
Listed FM companies played an active part in FM M&A in 2024, accounting for c.10% of all deals. We expect to see more transactions from listed companies following an overhaul of the Financial Conduct Authority's (FCA) listing rules in July 2024. These aim to streamline M&A processes by, among other changes, no longer requiring shareholder approval for acquisitions or disposals and reducing regulatory filings.
Our M&A teams helped with unprecedented deal volumes in October 2024 as business owners sold up in anticipation of the increases to CGT in the Autumn Budget. We may see a less-frenzied repeat of this before the April changes to Business Asset Disposal Relief and the rate of Investors' Relief.
On this point, our advice to business owners remains the same: to avoid a failed process, don't go to market unless you're fully prepared.
With a new UK Government and interest rates on a downward trajectory, investors have a clearer view of the domestic economy than this time last year. The increase in employer NICs and the NMW will also drive consolidation as investors seek to benefit from economies of scale.
They'll have to wait for similar clarity on the impact of President Trump's second administration. Points of focus will be trade tariffs and currency fluctuations.
Whatever the outcome, the sector's underlying resilience will continue to attract buyers. Our teams have had a busy start to the year, and we fully expect that to continue.
For more insight and guidance, get in touch with Usman B. Malik and Carl Parker.
