Boston, MA – Capstone Headwaters released its February 2021 Building Energy Management Update today, reporting that merger & acquisition (M&A) activity declined 35%, driven by a rapid decline in deal volume in Q2. Deal volume dropped from 129 announced or completed transactions in 2019, to 84 in all of 2020. As the pandemic swept across global economies, strategic buyers refocused priorities on internal risk remediation and COVID-impacts while private equity buyers pivoted to support portfolio companies’ risk mitigation. Despite the sharp decline in Q2, deal activity quickly normalized in Q3 and Q4, tracking 2019 levels, presenting a favorable backdrop as we enter 2021.
“We expect a surge in M&A activity next year driven by pent-up demand and excess capital that potential buyers are eager to deploy. Access to buildings was constrained in 2020 and property owners were distracted, both of which negatively impacted BEMS Companies. Those that remained relatively stable or grew during the pandemic will be viewed favorably from a valuation perspective,” commented Ted Polk, Managing Director at Capstone Headwaters and lead contributor to the report.
In 2020, Building Energy Management (BEM) companies continued to accelerate the convergence of operation technology (OT) and information technology (IT), creating competitive advantages for those that provide technology-driven platforms and solutions. The shift toward digitized offerings has played a significant role in sustainability initiatives and has fostered significant investment from strategic buyers looking to utilize real-time data analytics and automation to effectively reduce utility costs and deliver eco-friendly energy utilization.
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Capstone Headwaters is one of the largest and most active independent investment banking firms in the United States. The firm has a rich, 20-year history of achieving extraordinary results for middle market entrepreneurs, business owners, investors, and creditors. Capstone offers a fully integrated suite of corporate finance services, including M&A, debt and equity placement, corporate restructuring, valuation and fairness opinions, financial advisory, and ESOP advisory services. Headquartered in Boston, the firm has 175+ professionals across 17 offices in the U.S., with an international presence including over 450 professionals in 40 countries. With 16 dedicated industry groups, the firm delivers sector-specific expertise through large, cross-functional teams on a global basis. For more information, visit www.capstoneheadwaters.com.
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