KKR & Co.’s Majority Purchase Of ERM Highlights Growing Interest Of Private Equity For Sustainability-Related Opportunities

KKR & Co.’s Majority Purchase Of ERM Highlights Growing Interest Of Private Equity For Sustainability-Related Opportunities

On May 17^th, 2021 global investment firm KKR & Co. has agreed to buy global EHS services and sustainability consultancy firm ERM. KKR & Co. acquired a majority stake in ERM from Canada’s Omers Private Equity and Alberta Investment Management Corp, which had purchased ERM in 2015 for $1.7 billion from Charterhouse Capital Partners. ERM’s management team and partners will remain minority investors. Financial details of the transaction were not publicly disclosed though sources close to the deal value ERM at about $2.7 billion, including debt.

This investment will provide new capital for ERM to expand upon its sustainability business and incorporate new capabilities and technologies. As of 2021, ERM employs more than 5,500 people in over 40 countries servicing customers across multiple industry verticals in environmental and safety services. It generated net revenue of $792 million in 2020, 9% more than the previous year. Over the years ERM has steadily leveraged its private equity investments to expand it’s EHS service offering, increase its footprint in sustainability solutions and digitize its service lines. Due to this strategy, ERM was positioned in the Leaders quadrant of the 2020 Green Quadrant for Digital EHS Services.

This investment comes at a time that has seen heightening interest in sustainability-related services. Consultancies have been scrambling to position themselves as leaders in the sustainability space to meet growing ESG interests as firms look to cash in on ESG-backed financial instruments. For example, in December 2020 WSP acquired Golder to strengthen its environmental consulting capabilities and increase its sustainability-related services offering to capitalize on the growing trend. In the latest global corporate survey, 27% of the 301 EHS decision-makers stated their firm would be increasing spend on ESG and sustainability reporting advisory. This deal puts a face on the increased visibility of stakeholders and investors on sustainability services and signals the direction in which capital will continue to flow.