Harris Williams investment bankers regularly attend industry conferences and events. On the flight home, they share three key takeaways to help shape your strategy.
Event: WEFTEC 2019
Report by: Giles Tucker, managing director; and Jenson Dunn, vice president, both of the Harris Williams Industrials Group
Event Overview: WEFTEC, the Water Environment Federation's Technical Exhibition and Conference, is the largest conference of its kind in North America. It offers water quality professionals education, training, and access to cutting-edge technologies.
Why is this industry on your radar?
Tucker: There’s an enormous and growing need for water technology around the world. Water is obviously essential to human life, as well as to agriculture, manufacturing, mining, and many other industries. Cleaning and managing the global supply of water is going to continue to gain importance, spur innovation, and attract investment, for years to come.
Dunn: We anticipate major investments in water infrastructure around the world, going forward. Developing countries need to build water systems to support their growing populations, while developed countries have to keep investing in the systems they already have. And, unfortunately, water quality issues continue to proliferate, as we saw recently in Flint, Michigan.
Tucker: While that’s a real challenge, it’s also creating real opportunities for companies and investors, which won’t fluctuate with economic cycles. Governments will continue to invest in water infrastructure, and the world’s commercial entities will continue to use it in countless processes. And, obviously, people will continue to consume water as well. All of that will encourage new technology and investment.
Which trends, companies, or business models were top-of-mind at the event?
Dunn: As we’re seeing across many industries, sensors and systems that actively monitor water quality and water in industrial processes continue to multiply. Municipal and commercial entities are eager to more closely monitor and control water usage and quality, and to do so electronically. They are increasingly using sensors that make a wide range of observations on a continual basis, and that allow human operators to make the right decisions at the right times. The ongoing advent of “smart” water infrastructure, in which automated assets proactively make decisions based on conditions, will drive demand for sensors even further into the future.
Tucker: We saw several companies offering multi-parameter sensor devices. Essentially, such a device is a bundle of sensors tied together in one device that can be placed in a well, a river, or a pipe, and measure and report several things at once—specific chemicals, temperature, or velocity, for example. Those can be coupled with a software layer that a company or a municipality can use to see and manage their entire water system.
What opportunities are they creating for strategic buyers and private equity investors?
Dunn: There’s a good amount of fragmentation in the space, so a real opportunity exists to build platforms out of great private companies that have strong management and R&D capabilities. Well-built platforms in the space will have the potential to expand into adjacent market segments, technologies, or geographies.
Tucker: At the same time, there is a handful of large strategics that are always looking to acquire companies with differentiated technology and value propositions. If an investor is able to build a solid platform within a good-sized market segment, then provide some expertise in professionalization and underlying systems, they’ll have a winner on their hands.
Published October 2019