• Globally, the water industry is moderately attractive

o Large market (US$554b) with strong historical secular   growth trend of 5.6% CAGR

o Companies in water and wastewater treatment are considered privileged assets, and average industry profitability is high at 12% (2013)

 

• Within the industry, Wastewater Treatment and Equipment and    Consumables are the most attractive segments

o Wastewater Treatment enjoys the highest profitability at 10%

o Equipment and Consumables form the largest unregulated segment with a market size of US$153b in 2013 with a CAGR of 6%

 

• In Asia, Singapore and China have the most potential

o Strong regulatory backing promotes water        technologies and local enterprises

o Proximity to untapped market for treatment and equipment suppliers

o Favourable policies by state and local governments that favour Asian players

 

• These five potential targets have strong market positions and       potential growth upside

o Untapped growth potential through unrealised concessions and young technologies

o Strong market position and brand in respective sub-segments

 

 

There have seven buyout deals in the segment since 2005 and most of these involved acquisitions of companies that have been awarded exclusive concessions for water and wastewater treatment. An analysis of global private equity deals reveals the following themes and lead to a copycat deal in Asia.

 

• Private equity deals have been concentrated in Western                countries with acquisitions of privatised water treatment                companies in UK and consolidation among players in the US.

 

• Asia, on the other hand, has seen lower deal activity targeting      companies awarded concessions in large domestic countries

 

• Recommended exit options (in order of priority) are:

o Trade sale to strategic buyer looking for market access of technology

o IPO

o Secondary sale to private equity funds