By Philip Herrmann
The number of companies that can be classified as part of the technical building equipment industry (hereinafter referred to as the “TBE industry”) has been declining since 2016. In contrast, average revenue per company is developing extremely positively in the years 2018-2021, with growth of 21.3%. This is an initial indication of ongoing market consolidation.
One of the most interesting sub-sectors in the TGA environment is the fire protection industry, with a global market volume of €78 billion. Comparatively high barriers to entry – due to legal regulations and requirements – make it difficult to enter this sub-sector. This increases its attractiveness for financial investors and stimulates M&A activity. In addition, like most areas of TGA, the industry is burdened by a shortage of skilled workers and rising prices.
These circumstances have led to an increase in transaction volume in this sub-sector in recent years and months. Below, we provide an overview of current market developments. We also take a look at some example transactions to shed more light on the development of M&A activity in the sub-sector. Among other things, we examine the key roles played by private equity firms. Finally, we attempt to provide an outlook on the development of the sector.
The fire protection industry
The fire protection sub-sector can be divided into markets for passive and active fire protection. Active fire protection includes all defensive measures to combat an outbreak of fire, while passive fire protection encompasses all preventive measures.
The market volume for active fire protection in Germany amounted to around €5.1 billion in 2020. Between 2016 and 2019, the active fire protection market recorded average annual growth of approx. 4.8%. Growth was primarily driven by technical fire protection during these years. Due to the Covid-19 pandemic, the market contracted by around 1.9% between 2019 and 2020. Key reasons included a partly declining order situation caused by the pandemic, as well as an ongoing shortage of skilled labor and stricter regulations. Nevertheless, the industry weathered the crisis relatively well. It is expected that the market will have fully recovered from the pandemic’s effects by 2022. Experts forecast average annual growth of around 3.9% through 2025. The current market situation and outlook suggest that both strategic and financial investors have attractive opportunities for acquisitions and investments.
The same applies to the passive fire protection market. Here, annual growth of around 3% is expected through 2025. Market volume in Germany in 2020 was roughly €3.5–4 billion, making it the largest national market in Europe. Passive fire protection particularly benefits from new technological innovations and stricter fire safety regulations, which further increase its importance. The market for passive fire protection consists of the products themselves and their installation. Installations account for the slightly larger share of market revenues at around 54%. Among products, doors and closures generate the largest revenue share, at 52%.
Practical example – CWS acquires Hefas
In June 2021, CWS Fire Safety GmbH took another step in its growth strategy by acquiring the Dutch company Hefas Brandbeveiliging. In 2020, Hefas generated revenues of €6.5 million and employed around 40 people. CWS Fire Safety GmbH is part of the CWS Group, which belongs to the portfolio of the family office Haniel. Haniel supports the CWS companies in their transactions and growth strategy. Through the acquisition of Hefas, CWS Fire Safety GmbH can expand abroad and broaden its customer base. All Hefas employees were retained, and the Dutch site is to be strategically expanded further. CWS Fire Safety GmbH has declared its intention to carry out additional transactions in Europe in the future.
Practical example – DBAG invests in Multimon AG
In August 2020, Deutsche Beteiligungs AG (hereinafter “DBAG”) acquired a majority stake in Multimon AG for a total of €42.6 million. Multimon AG has since been renamed Fire Holding Group. Following its conversion into a GmbH, Multimon continues to operate as an independent company within the group and primarily manufactures various types of fire extinguishing systems.
Together with the Fire Holding Group, DBAG pursues a strategy of both organic and inorganic growth to increase service revenues and expand the product portfolio. As part of this strategy, DBAG supported Fire Holding GmbH in acquiring TBS Bauschutzanlagen GmbH in March 2021. The acquisition aims to expand the company’s site network. TBS Bauschutzanlagen GmbH employs 300 people and is a solution provider for turnkey fire extinguishing systems.
In October 2021, the shares of the Belgian ABBS Group were acquired to strengthen Fire Holding GmbH’s international competitiveness. ABBS Group is a Belgian provider of automated fire extinguishing systems. In addition, Fire Holding Group also acquires companies outside the fire protection industry to broaden its product portfolio and expand its vertical value chain.
Outlook on Market Development
The current outlook for the industry can be considered positive. Demand for fire protection solutions is steadily increasing, with regulatory requirements as well as customer expectations rising continuously. This environment favors large and broadly positioned players that pursue an integrated approach and can offer everything from a single source. The ongoing trend toward system providers that cover the entire value chain—from products and installation to service—will continue. Profitability is primarily driven by service revenues, while products and installations secure the customer relationship and service contracts.
Combined with the acute shortage of skilled labor, this results in a highly attractive and dynamic M&A environment, which will further accelerate industry consolidation. Financial investors with a buy-and-build focus will remain key drivers of this consolidation.
For small and medium-sized enterprises, there is strategic pressure to act in order to remain competitive in the long term. Unless they are specialized in a niche, these companies will come under increasing pressure in the medium term. Early action and the search for a strong partner are therefore recommended.
i-capital GmbH – Your M&A Expert
As part of the i-unit group, i-capital GmbH is an experienced advisor with in-depth industry expertise in the building services (TGA) sector and has already guided numerous clients through successful transactions. We support medium-sized companies and financial investors both in their growth strategies and in sales within the framework of business succession.
Through our unique network in the TGA sector, we provide extensive access to strategic investors as well as a broad range of financing partners. In addition, under the umbrella of the i-unit group, we offer a unique multidisciplinary team for the Mittelstand, enabling us to provide targeted support well beyond the transaction process itself.
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Tel. +49 151 14 33 96 02
Philip Herrmann – Partner
