The Sale Of 3E For A Potential $950 Million Showcases ESG’s Growing Influence In The Product Stewardship Market

The Sale Of 3E For A Potential $950 Million Showcases ESG’s Growing Influence In The Product Stewardship Market

Verisk, a global data analytics provider, has announced that it has entered into a definitive agreement to sell its 3E business to New Mountain Capital for a potential cash consideration of $950 million. 3E, a compliance focused software firm, delivers solutions designed to enable customers to manage regulatory compliance, product stewardship risk, supply chain stewardship risk and drive continuous improvement to support EHS initiatives. This enormous sum is comprised of $630 million of cash consideration paid at closing, up to $50 million of earnout payments based on financial performance, and up to $270 million of additional deferred payments based on New Mountain Capital’s future return on investment.

The purchase of 3E reaffirms the long-term market drivers Verdantix has identified in the product stewardship and chemical management space. 3E’s offering caters to a broad industry set, any firm that utilizes chemicals or regulated substances as part of a product or production process can draw value from its product stewardship, supply chain stewardship and chemical management capabilities. While this has always been the case, two long-term drivers will heighten demand for compliance focused software going forward. Firstly, the regulatory landscape is becoming broader and more stringent. For instance, compliance requirements such as REACH, SCIP, GHS and California Prop 65 are regularly updated, impacting the permits required for their use. Gathering chemical usage data is further complicated when firms rely on numerous suppliers, each attempting to preserve the intellectual property of their offering. Consequently, staying up to date on applicable regulation and collating chemical substance usage is becoming an increasingly demanding exercise. Secondly, better product stewardship is being driven by the focus on ESG and sustainability. Investors care more about the sustainable credentials of products and their supply chains. Thus, the market will be shaped by the demand for compliance software that provides value add and goes beyond meeting the baseline requirement set to include ESG data.

So what does the future hold for 3E? Through the sale, New Mountain Capital hopes to expand 3E’s offering and build long-term capital appreciation, “We are excited to partner with the team to support 3E in its next phase of growth and look forward to investing towards continued product innovation, substantial market expansion, and strategic acquisitions to further expand 3E’s value proposition to its customers and partners” commented Gandharv Bedi, director at New Mountain Capital. Clearly, New Mountain Capital recognizes the growth potential in this space and appears committed to bolstering 3E’s offering.

The purchase of 3E supports the hypothesis that an evolving regulatory landscape and ESG pressures will acts as long-term drivers in the product stewardship and supply chain stewardship space. For more insights on the EHS software and product stewardship markets, visit the Verdantix website.