Big PE Funds Reshape The Contours Of EHS, Contractor Safety And Supply Chain Markets

Big PE Funds Reshape The Contours Of EHS, Contractor Safety And Supply Chain Markets

Over the last four years, some of the world's biggest private equity (PE) funds have piled into the contiguous - but historically distinct - markets of EHS software, supply chain sustainability and contractor safety. Notable examples include Thoma Bravo becoming the majority investor in Cority in 2019, Blackstone acquiring Sphera for $1.4 billion in 2021, and Partners Group acquiring a majority stake in VelocityEHS in 2022. Also in 2022, EcoVadis raised cash from Blackrock and GP Bullhound Fund VI on the secondary market, bringing total funding to more than $700 million. In June 2022 Apax launched a take-private deal for EcoOnline at a NOK 3,768 million ($360 million) valuation. In February 2022 Apax also bought a controlling stake in Alcumus. In May 2022 Hg Capital announced a definitive agreement to take Ideagen private in a £1.05 billion ($1.33 billion) bid, having bought ProcessMAP in January 2022.

The effects of these big plays in the EHS software market are now spilling over into sustainable supply chain deals and contractor management. Apax-backed EcoOnline acquired sustainability software stalwart Ecometrica in July 2023. Sphera started the expansion of EHS vendors into the sustainable supply chain market by buying riskmethods in September 2022, and has doubled down on this strategy with the recently announced purchase of California-headquartered SupplyShift. Now VelocityEHS has bought Contractor Compliance to strengthen its position in contractor management and permit-to-work processes.

The underlying rationale behind these deals is that PE funds are seeking to enlarge the total addressable market for their EHS portfolio companies. Verdantix research expects the EHS software market to grow from $1.8 billion in 2023 to approximately $3.1 billion by 2028, showcasing its resilience in the face of global economic challenges. Similarly, supply chain sustainability and contractor management specialists present attractive acquisition and investment opportunities, given their 2023 market sizes of $1.5 billion and $2.19 billion, respectively. The combined market for EHS software, contractor management and sustainable supply chain solutions will be $10.9 billion in 2028, according to Verdantix forecasts. What's more, there is potential to leverage contractor networks and supplier sustainability engagement to gather upstream Scope 3 data: a potential treasure trove for SaaS data management and emissions analysis.

Will this be a takeover of the contractor management and sustainable supply chain markets by the big EHS players? Not necessarily. Firms such as Avetta and EcoVadis have the funding and scale to play the convergence game in the opposite direction by picking up EHS platforms or businesses that deliver on one EHS use case, such as GHG emissions, worker safety or waste management.