Insight

A growing market comes of age

As service industries mature, they often take on a barbell shape – a few big full-service players at one end and, a larger number of smallish specialists at the other. The current round of consolidation among German FM firms is no exception, as market share continues to consolidate around a few major players.

All over Europe, facilities management is coming of age. A strengthening economy in the Eurozone and the growing popularity of outsourcing arrangements has led to rapid growth of facilities management everywhere, but particularly in Germany.

By: Dr. André Schröer

In the future, requirements for FM services are expected to increase in complexity, making it difficult for smaller players to survive competition.

Dr. André Schröer is a Partner in the Düsseldorf office of Livingstone Partners, with a focus on business services and industrials. Prior to Livingstone, he built up a leverage finance team at Investkredit Bank AG in France, he has international transaction experience across a wide variety of sectors. 

German facilities management services consolidation continues

For example, epex group, a German nationwide business services provider in the facility management services space, has been involved in two M&A transactions in the last three years. In June 2015 the company acquired Dornseif Winterdienst GmbH, a firm active in the winter services sector out of insolvency. Livingstone advised the insolvency administrator and Dornseif on the sell-side.

epex, headquartered in Neu-Ulm, employs more than 1,900 employees, embedding a partner network of 1,600 firms¹. The overall turnover of the group reached a sales volume of approximately EUR 40mm in 2017². The core business of epex comprises the cleaning of facilities and the maintenance of roads in the winter³.

Two years later, in June 2017, epex’ owner sold the majority shares to the French company, Samsic Group⁴, one of Europe’s leading firms in FM, generating an annual turnover of roughly EUR 2bn per year⁵.  Driven by initial contact in 2015, Livingstone’s Düsseldorf sector team Business Services successfully advised the shareholders of epex group⁶.

However, in business, no good opportunity goes unpunished; a growing market is not necessarily an easy one.  Although there has been tremendous growth in the FM sector in recent years – with the main drivers being positive economic developments in the EURO zone and a high degree of outsourcing of services – the FM market shows a separation between large nationwide multi-service providers and smaller specialists.

In the future, requirements for FM services are expected to increase in complexity, making it difficult for smaller players to survive competition.   Furthermore, large Anglo-Saxon companies are deemed to expand and invest in the German FM market. While high market growth is assumed, a high degree of competitive pressure, reflected in low margins, is expected as well. 

Reasons include:

• Further cost reductions - main driver for customers - especially in the public sector
• Relatively low market entry barriers, especially for small and medium-sized companies
• Differentiations within the service portfolio are difficult to demonstrate in tendering processes
• Increased cost pressure resulting from increasing health and safety requirements⁷

Apart from trends within the FM market, there are other trends to note within its subsectors.  One in particular is winter maintenance management, where online portals such as Glätte24 store data for ice detection systems, adding analytics to the otherwise routine business of scattering salt, optimising routing, and prioritising and processing winter maintenance orders. The advanced monitoring of Glätte24 and others makes more accurate forecasts possible by measuring the temperature and condition of pavements through remote GPS-monitoring sensors in real-time.

Beyond these advances, some analysts expect that the next frontier for ice and snow removal will be autonomous snow removal vehicles. Such vehicles will probably be rolled out first at airports and then gradually extend their range as the technology develops.

However, despite these innovations, gains are not expected to halt a declining growth rate in the winter services sub-sector. After a rapid annual CAGR run of 8.4% from 2010 to 2015, a five-year stretch in which the sector grew from EUR 850mm to EUR 1.3bn, growth is expected to slow to EUR 1.45bn in 2020, reflecting a decline in CAGR to 2.18%⁸.

1. http://www.epex-group.de/unternehmen/daten-und-fakten
2. Bundesanzeiger
3. http://www.epex-group.de/leistungen
4. Mergermarket
5. https://www.facility-manager.de/aktuelles/samsic-uebernimmt-epex-group
6. Livingstonepartners.com
7. https://www.zhaw.ch/storage/lsfm/institute-zentren/ifm/fachtagungen/2016-tagungsband-symposium-fm-here-we-go.pdf
8. Statistisches Bundesamt

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