Bridgepoint goes Environmental

UK-based private equity firm Bridgepoint has notched up its third investment from its latest €2.5bn fund, with a US$535m buyout of Environmental Resources Management (ERM). The deal ranks as the largest transaction so far in the UK professional services sector.

The deal sees Bridgepoint acquire a 52% stake in the company from listed private equity firm 3i, as well as a 48% holding from ERM’s current 400 employee shareholders.

3i backed the initial MBO of the company in 2001, which was led by Robin Bidwell, currently executive chairman of ERM, and Peter Regan, now CEO of the company. Since, then ERM has focused on a handful of core strategic initiatives to create value for its clients and shareholders.

These have included the further development of its global presence. The group has offices in 39 countries and has strengthened its presence in emerging economies such as China, Brazil and Russia. It has also focused on building relationships with global companies.

These initiatives have impacted on the financial performance of ERM. Since 2001, gross revenues have grown from US$289.5m to US$425.4m and earnings from US$26m to US$38m.

The market for ERM’s services continues to be driven by strong fundamentals such as regulation, reputation and risk. The US Sarbanes-Oxley Act requires a greater level of compliance assurance and risk management as they relate to environmental issues.

In the EU, a number of environmental proposals have been agreed and implemented with new chemicals sector regulation (REACH) expected to be finalised in 2006. In addition, the evaluation and management of environmental liabilities and risk has become a fundamental issue in M&A activity, a segment of ERM’s business that generated more than US$40m in revenues in 2004.

One of the other major growth areas for firms such as ERM is providing advice on environmental due diligence and solutions to private equity groups ahead of potential buyouts. However, the potential conflicts of interest associated with private equity ownership do not seem to have impacted growth under 3i’s stewardship.