“I think the water sector has caught the eye of investors and is really seeing an uptick in activity.” said a water industry CEO.
Looking at the recent M&A and IPO activity, I found it hard to disagree. Suez acquiring GE Water. Evoqua going public. JWC Environmental being acquired by Sulzer. The landscape of the industry has changed dramatically over the last 24 months as a result of many ownership changing transactions.
Yet, all of this activity should be considered in the context of the broader economy to understand if water is truly “hot”. The S&P has gained over 30% in that last two years and while overall M&A activity was down, this follows a nearly unprecedented level of action during the four years prior.
Water is a lagging industry with respect to economic cycles and it should not be surprising that water and wastewater treatment needs are directly in response of growth. Pardon the pun, but it is a downstream industry.
So what does this all mean?
Well, no one knows, certainly not me, but I think the point is that even though many of us live within the microcosm of the water and wastewater industry, the industry itself lives within the macrocosm of the world economy, being the lagging industry that responds but does not lead growth. It may be enjoying a surge in activity but that could just be the result of where we are in the economic cycle.
The question then becomes......what happens next?
Written by: Austin Meyermann, Founder and President of Hunter Crown, LLC
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