​The strength of M&A in facilities management should be no surprise now. The final quarter of 2022 continued the record run of strong performances that resisted the recent pressures on the economy.

The sector can head into 2023 with confidence, but businesses still need to ensure they take the opportunities available to them, such as staying ahead on developing talent through digital training.

Facilities managers should also ready themselves for the role they have to play in supporting business resilience across the market.

You can find out about all this in our latest quarterly review. 

There were 39 facilities management deals in the last quarter of 2022, including some notable transactions: Clayton, Dubilier & Rice's acquisition of Atalian Servest and OCS Facilities Services, G4S’ acquisition of T.S.S (Total Security Services), and Spie's disposal of its UK operations to Electricite de France-owned Imtech.

Announced M&A activity in facilities management (quarterly)

Announced M&A activity in facilities management (quarterly)

 

This batch took the annual total to 143, the highest number in a decade. 2022’s economic uncertainty seems to have made this sector even more compelling for investors. Sterling’s consequent devaluation also drove interest from overseas buyers and funders.

Announced M&A activity in facilities management (yearly)

Announced M&A activity in facilities management (yearly)

 

Hard services drive deal volumes

M&A activity in facilities management split by type

M&A activity in facilities management split by type

The ratio of deals involving hard facilities management services compared to soft facilities management services has crept up over the last five years. For example, in 2018, there were approximately 1.2 hard FM deals to every soft FM deal, down from c. 2.6 in 2022:

  • Building owners are turning from labour-led to technology-led solutions, particularly in fire and security
  • There has been increasing demand for office reconfigurations as the role of the workplace changes – there were 14 fabric maintenance, fit-out, and refurbishment deals in 2022, compared to just four in 2021
  • Increasing regulation and focus on ESG is driving interest in building energy management and control – this subsector has seen a c.60% increase in deal activity
  • The soft services market has been heavily consolidated, leaving fewer deal opportunities, with buyers becoming more selective as a result 

M&A activity in facilities management target sector split

M&A activity in facilities management target sector split

Private equity vs trade

M&A activity in facilities management split by acquirer

M&A activity in facilities management split by acquirer

Trade buyers accounted for 55% of deals in 2022. This 6% increase on 2021 broke a decade-long trend of trade accounting for a decreasing proportion of transactions.

This could be a sign that PE is becoming more cautious amid the rising cost of debt. It also shows that trade buyers have recognised that consolidation delivers economies of scale and maintains margins.

Another explanation is that in times of macroeconomic uncertainty, there are typically fewer mega-deals (which tend to be PE-backed and debt-funded) and more strategic lower-risk bolt-on deals.

Facilities management 2023 investment trends

Energy management solutions

Energy management solutions should be a hot investment area in 2023 for two reasons: combatting rising energy costs and fulfilling non-negotiable ESG targets and decarbonisation agenda.

Rocketing electricity and gas prices have revealed businesses’ exposure to energy costs. Building owners are looking to insulate themselves from this risk. This will create a steady flow of opportunities for energy management solution providers for several years, making them attractive investment targets.

While it's statutory for large businesses to report on ESG practices, enterprises of all sizes must get their operational practices in line with increasing ESG demand from stakeholders (including potential buyers).

ESG now heavily influences M&A processes and investment criteria, demonstrated in the growing number of impact funds, and new ESG-focused lending practices. In the not-too-distant future, this may include more favourable interest rates for ESG-compliant businesses and carbon footprint covenants.

Four ways inflation will impact deal activity

 

A promising outlook for 2023

Following a year in which major fiscal policy sometimes changed weekly, we (hopefully) expect to see a period of political stability driving deal volumes.

Interest rates have increased materially, but compared to the 2008 crisis, there's no shortage of debt or equity. In addition, macroeconomics has ruled out public offerings, which will again drive M&A activity.

2022 facilities management deal highlights

WestBridge buys £18.7 million majority stake in Alpine Fire Engineers

Alpine design, project manage and maintain complex fixed fire suppression systems across the UK for various industries, including logistics, food and beverage, automotive, aerospace, manufacturing, pharmaceuticals, and retail. The company operates in a niche market where growth is driven by increasing regulatory requirements. Our team provided buy-side corporate finance advisory.  

Atalian Servest Group acquires Incentive FM Group 

Incentive FM Group provides self-delivered total FM services alongside service specialisms, including cleaning, window cleaning, mechanical and electrical services, and consultancy. Atalian bought Incentive to accelerate their growth trajectory in the UK & Ireland and add to their integrated service division. Our team provided sell-side advisory.

NYSE-listed Johnson Controls International buys Asset Plus Energy Performance

Asset Plus is a specialist provider of energy reduction and zero-carbon measures, supporting the UK public sector’s path to net zero carbon. The company is specifically placed to capitalise on the upturn in demand for bespoke energy-saving measures, which is expected to accelerate over the next decade. Our team provided sell-side advisory. 

G4S Security Services (owned by Allied Universal Services) buys T.S.S (Total Security Services)

The acquired company is a family-owned security business with over 6,500 front-line staff, providing over 11 million hours of guarding services annually to some of the UK’s largest retailers. Our team provided sell-side advisory. Allied Universal Services is US-based and T.S.S is the company's first significant international inorganic investment. Our team provided sell-side advisory.

Blink Charging Co. buys EB Charging

EB Charging provides electric vehicle charging solutions across the UK: design, installation, ownership, and charging infrastructure management. Joining a larger international group will maximise the company's growth potential because of its in-house sector experience and deep capital resources. Our team provided sell-side advisory. 

Source: Grant Thornton proprietary M&A tracker compiled from multiple databases: Mergermarket, Zephyr (Bureau Van Dijk), Mergermarket and various press sources

For more insight and guidance get in touch with Usman Malik.

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Several factors continue to prolong one of the more pronounced economic disruptions in recent memory. Inflation remains high, as the CPI index rose 10.5% in the twelve months to December 2022. This continues to exacerbate the cost-of-living crisis: around 75% of adults report concern regarding rising prices, as real wages fell by 2.7% in the year to September- in a trend which has persisted as real wages continued to fall by 2.6% from September to November - while food prices rose by16.9% in the year to December 2022. As such, one can expect significant consumer inertia regarding additional consumption for some time.

In a potential bright spot, both central and investment banks, including the Bank of England and the Federal Reserve, and Credit Suisse, predict a tapering of inflation in the next year, closer to the 2% target. This is due to energy price caps, limited import price growth, and the easing of production bottlenecks.

This comes alongside a slowing of interest rate hikes as part of the monetary policy response, which will begin to ease financing pressures that have crippled businesses. As rates are widely expected to peak around 4.25%, that the Bank of England raised the base rate to 4.0% in February 2023 suggests that rates are nearing their peak. In tandem, these macroeconomic factors are helping to manage expectations and are being priced into markets. Nonetheless, the economy faces a tumultuous year of continued volatility as uncertainty persists and policymakers seek to restore calm.

Businesses also face significant disruption from geopolitical unpredictability, as the war in Ukraine rolls on and supply chains continue to recover from both COVID-19 disruption and Brexit complications. As a consequence, industrial production is predicted to fall by up to 5%, although this could be tempered in the medium run depending on policy responses. Similarly, a tight labour market and skills shortages are inhibiting growth and recovery.

Domestically, continued strike action in various industries over pay, pensions and conditions also risk impeding the economy by stunting productivity. Indeed, economic growth has already stalled: GDP continued to fall in the three months to November 2022 and production output decreased by 0.2% in November 2022, following a fall of 0.1% in October.

However, it may be that a slowdown is useful for businesses to recalibrate to better respond to their economic circumstances. It's crucial that facilities management leadership seizes the opportunity to do so.

The need for resilience

Businesses have been tested since 2020 and are no doubt aware of the need for resilience in the face of adversity. But 46% of entities over 20 years old fear they wouldn't survive a recession. Resilience is imperative to ensure factor mobility and the ability to thrive moving forwards in an economy facing considerable headwinds.

Ultimately, agile business models which uphold business relevance and fully address customer needs will be best positioned to weather the storms ahead.

Businesses need to leverage facilities management 

Many firms, particularly SMEs, often underinvest in technology: 84% note that reliance on legacy systems causes challenges and disruptions. This may present a considerable barrier to productivity, as SMEs’ output is around two-thirds lower than large firms, mainly due to their lower agility and adaptability. It's therefore imperative for facilities management companies to continue their effort to integrate technology into workspaces, which can enable the data-driven insight that enables firms to evolve.

Hand-in-hand with technology, firms should ensure their cybersecurity remains a priority. As uncertainty continues, the scalability of technologies, such as the cloud, will allow firms to mitigate their on-site footprints and increase their manageability to better support an increasingly hybrid workforce. Likewise, uncertainty could certainly prompt additional, more stringent international supply chain security standards to protect against malware, as software originating in sanctioned countries faces particular scrutiny.

Facilities managers should also ensure that energy is addressed. As regulation and governance focus on clean energy, facilities managers should encourage this transition to maximise energy efficiency, minimise energy costs, and ensure resilience for the future as governments favour a move away from fossil fuels. This strategy is also favoured by investors, as fossil fuel indexes are underperforming compared to renewables.

Various disruptions present a unique opportunity for improving operations. Ensuring resilience across the board will inevitably generate trade-offs, but facilities managers should revisit their strategy, consider their options, diversify where needed, and ensure they prioritise clearly in order to emerge stronger.

For more insight and guidance, get in touch with Chris Williams.

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Employee interaction and energy and space usage are only a few examples of the data that facilities generate. Analysis tools capture this raw material and use it to provide rich insights for facility managers to make informed decisions. 

Your people are your competitive advantage and, usually, your most expensive asset. Empowering them to leverage your data and digital tools is critical to achieving the desired impact from technology investments while getting the most from your workforce. 

Getting their buy-in to your digital strategy, and retaining highly sought-after digital talent, requires consideration in every aspect of approaching your people.

A comprehensive data skills framework across your whole organisation, a clear sight of the skill gaps, and a pragmatic talent strategy will cultivate and develop the right capabilities. 

Your data analytics journey - where do you want to be?

DS4143 FM Q4 2022 - MA graphs-06.svg

Developing data skills in the cut back economy 

We've partnered with BPP to develop apprenticeship programmes that bring together the strengths of both organisations. 

Our blended experience and expertise have resulted in the creation of two high-quality data apprenticeships that amalgamate the technical skills requirements of data analytics with extensive real-world business insight. These programmes deliver practical applications and commercial impact from the outset. 

They're funded via the Apprenticeship Levy, enabling organisations to develop their team’s data skills, increase their individual resilience, and help advance their career opportunities. The Data Citizen programme addresses the data literacy skills gap and enables organisations to build a data-driven culture. The Data Analyst programme provides the starting point for a career in data, providing specialists with the expertise to create an innovative function within the business.

Reskilling your team with data academies 

Given the transformative nature of data skills, many organisations are choosing to set up data academies that not only demonstrate their commitment to digital transformation but also reshape their brands around talent development. 

Data academies are best suited for broader employee bases, helping them achieve more value out of the data they work with. They build on the data apprenticeship programmes, with exciting curriculums tailored to their needs, providing more opportunities for learners to share ideas and bring them into the workplace. 

Our planning for growth research shows that high-growth businesses see access to talent and skills as a true accelerator.

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Get in touch with our experts

Usman Malik
Usman Malik
Head of Business services, Corporate...
London
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