M&A Update: Global Testing, Inspection & Certification (TIC) – Perfect time for sellers in highly acquisitive market
The global testing, inspection and certification (TIC) market is valued at €100 billion. Globalisation and the widespread implementation of tougher rules and regulations in product safety and efficiency are driving its development. These factors combined with the greater use of outsourcing means the industry is growing faster than most other service sectors.
Whilst the industry is highly fragmented, consolidation is under way, as the market leaders and mid-sized players continue to pursue acquisition strategies. This presents a great opportunity for sellers.
The key observations from our research:
The TIC industry is characterized by high growth rates, double digit operating margins and a non-cyclical nature.
The ten largest companies worldwide are all headquartered in Europe but all operate globally. The combined geographical revenue breakdown of the top three is 45% EMEA*, 31% Asia Pacific and 24% Americas.
All of the major players and midsized challengers have been highly acquisitive. SGS has completed 32 deals since 2010 and Bureau Veritas has acquired 50 businesses in the last five years.
Transaction multiples have averaged 8x operating profit for small cap businesses and have reached 10x to 12x for mid-sized companies.
Valuations are even higher for businesses offering established positions in sectors with high barriers to entry.