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    Business Services Q4 2020

    Q4 2020 Business Services

    Industry Trends

    COVID-19 Impact on M&A

    Business Services' monthly M&A activity in December 2020 (63 transactions) exceeded December 2019 M&A activity (57 transactions). Research and Consulting Service transactions continue to lead the sectors transaction volume making up 60% of the deals closed between March 22 – December 31 (231 transactions). Strategic buyers drove over 91% of all transactions completed between March 22 – December 31 (342 transactions). This is comparable to 2019, which saw nearly 89% of transactions (392 transactions) closed by strategic buyers within the same period.

    Digital Farming Services Key to Ag Success

    The agriculture industry continues to experience digital transformation pressure. Digital farming collaborations between farmers and service providers, introducing everything from precision equipment to farm management software, will create new opportunities as the platforms are fully integrated. As macro technology initiatives like 5g and the expansion of rural broadband strengthen, digital transformation will become more attainable. This is especially key for mitigating overproduction or the effects of bad harvests. Zero-waste initiatives and perfect planning goals will be catalysts for meaningful digital farming collaborations.1 2

    Glass Recycling Demand Continues to Increase

    Glass comprises more than 20% of curbside recycling by tonnage in single-family households. Rising glass standards for recovered fiber grades and National Sword export restrictions have driven a reduction in facilities capable of recycling these products. End markets continue to seek a consistent supply of quality recycled glass. Some material recovery facilities have added on-site beneficiation and revamped transportation infrastructure to better support industry needs. As glass recycling opportunities continue to grow, those facilities with the personnel and capabilities to meet these end needs will be poised to secure much of that growth.3

    Solid Waste Management Industry Expects Active 2021

    The solid Waste Management industry had an active 2020 year. It is expected that 2021 could continue with robust activity furthered by cost savings extracted in 2020. Compressed natural gas (CNG) tax credits expect to be extended, which coupled with continued rising demand for services, should result in fast-paced M&A activity. Waste Connections, Earth First Aid, Capital Waste, and Lakeshore Recycling have already made acquisitions in 2021.4

    Staffing Industry Can Partner With Clients to Successfully Navigate Post-Pandemic Office Return

    The solid Waste Management industry had an active 2020 year. It is expected that 2021 could continue with robust activity furthered by cost savings extracted in 2020. Compressed natural gas (CNG) tax credits expect to be extended, which coupled with continued rising demand for services, should result in fast-paced M&A activity. Waste Connections, Earth First Aid, Capital Waste, and Lakeshore Recycling have already made acquisitions in 2021.5 6

    Technology to Aid Consulting Industry Retain Clients

    As companies and employees seek cost-cutting measures, decisions typically outsourced may become responsibilities undertaken at the corporate level. Consulting firms will need to ensure that clients' services are difficult to replicate internally to ensure that business is not lost. These efforts should include robust technological and digital offerings, including automated, asset-based models relying on predictive analytics and codeless software. These offerings can help retain clients and produce premiums offered for enhanced services.7

    Largest Transactions Closed

    • Target
    • Buyer
    • Value($mm)
    • Credit Karma, Inc.
    • Intuit Inc.
    • $7,828.00
    • Advanced Disposal Services, Inc.
    • Waste Management, Inc.
    • $4,656.00
    • WCA Waste Corporation
    • GFL Environmental Inc.
    • $1,212.00
    • Transaction Tax Resources, Inc.
    • Avalara, Inc.
    • $377.00
    • InnerWorkings, Inc.
    • HH Global Limited
    • $331.00
    • HYLA Mobile, Inc.
    • Assurant, Inc.
    • $325.00
    • Contract Management Division of American Institute of Architects
    • True Wind Capital Management, L.P.
    • $185.00
    • poppin inc.
    • Kimball International, Inc.
    • $180.00
    • ALG, Inc.
    • J.D. Power
    • $135.00
    • Zenetex, LLC
    • Vectrus Systems Corporation
    • $125.00

     

    Source S&P Capital IQ as of 1/12/2021 and PCE Proprietary Data

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    Data Assumptions

    This report represents transaction activity as mergers & acquisitions, consolidations, restructurings and spin-offs. Targets are defined as U.S. Based companies with either foreign or U.S. based buyers. Transaction information provided is based on closed dates only.

    Glossary

    EBIT - Earnings Before Interest and Taxes
    EBITDA - Earnings Before Interest, Taxes, Depreciation, Amortization
    LTM - Last Twelve Months
    TEV - Total Enterprise Value

    Sources:

    1. Speck, Scott. “Top 3 Trends to Watch in Digital Agriculture in 2021.” Precision Ag, Meister Media Worldwide, 8 Jan. 2021.
    2. Itzhaky, Raviv. “Demand-Driven Agriculture: Where Profitability Meets Sustainability .” Precision Ag, Meister Media Worldwide, 14 Jan. 2021.
    3. Segundo, Marissa, and Laura Dobroski. “Glass Recycling Markets and Opportunities.” Waste Today, Waste Today, 15 Oct. 2020.
    4. Hoffman, Michael. “Solid Waste 2021 Outlook: Positive Organic Growth, Normal Course M&A and Cost Discipline Drive Operating Leverage of EBITDA and FCF.” Solid Waste - Industry Update, Stifel, 18 Dec. 2020.
    5. Stone, Adam. “Top 10 Trends for Staffing in 2021.” American Staffing Association, 16 Dec. 2020.
    6. Martin, Jenn. “What 2020 Taught Us About the Future of Staffing.” Recruiting Brief, TimeSaved, 8 Jan. 2021.
    7. Methi, Vaibhav. “Consulting Trends in 2021.” Acuity Knowledge Partners, 18 Dec. 2020.

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