CVC Growth Retains Majority Control Of VelocityEHS Targeting ESG Decacorn Status

CVC Growth Retains Majority Control Of VelocityEHS Targeting ESG Decacorn Status

EHS software provider, VelocityEHS announced today that Switzerland-based Partners Group has acquired a significant minority holding in the business. Partners Group has $131 billion of assets under management and 1,600 employees around the world. The deal was priced via 19 separate bids received from PE funds and strategic buyers. In June, Reuters reported that investment bank, William Blair, acting for CVC Growth was aiming for a $2 billion valuation. This high level of interest in VelocityEHS is unsurprising: it has a management team which blends sector expertise with software business growth credentials, an incredible profit engine from its 18,000 chemical compliance customers, and has been assessed by Verdantix as a leader in EHS software (2021), process safety management (2021) and carbon management (2022). 

VelocityEHS, led by CEO John Damgaard and President Matt Airhart went into the sale process with a belief that VelocityEHS can achieve a decacorn valuation ($10 billion or more) as the firm rides a global wave of demand for ESG, product stewardship and EHS solutions. The firm has launched its Accelerate platform to deliver on this vision and will soon be releasing a range of machine learning capabilities. Reflecting the Board’s belief in massive upside over the next five years, CVC Growth was keen to retain a majority share in the business having acquired VelocityEHS in 2017 for $328 million. What does this mean for the competitive landscape? 

Firstly, the long-anticipated roll up of the fragmented EHS software market still isn’t happening. Funds like Apax, Blackstone, Hg Capital and Thoma Bravo are active in the market and have the funds to buy a business like VelocityEHS but the potential synergy from a combination of two 500-employee firms with comparable EHS software platforms is not compelling. The deal would not increase the Total Addressable Market (TAM). The NewCo would have two platforms (potentially with multiple acquired applications hidden underneath) and organizational headaches. Verdantix does not see a rollup strategy as the path to maximize shareholder value creation. 

Secondly, VelocityEHS will expand in two directions: across more geographies and more ESG segments. The EHS software market has historically been skewed towards North America as local firms sought the most efficient way to scale the business. But as these firms aim for more than $500 million in revenue that is no longer a realistic strategy – they need a global TAM. With access to a large pot of cash for acquisitions, VelocityEHS can purchase vendors in ESG categories adjacent to EHS and product compliance such as geo-spatial analytics for physical climate risk, supply chain sustainability and social impact software solutions.

What else is likely on the horizon? Verdantix speculates that to execute on the ESG vision, VelocityEHS will need to go through a rebrand and drop “EHS” from the company name. The big question is whether the firm will auction off the very desirable URL: www.ehs.com.