Overview:
The middle-market focused private equity team Morgan Stanley Capital Partners (MSCP)
recently acquired Apex Companies, a provider of environmental consulting, engineering and
compliance services. The company was previously owned by the private equity firm Sentinel
Capital Partners, which will maintain a minority stake in Apex post-closing. MSCP is
partnering with the current management team, particularly the CEO Dave Fabianski, who
will remain at his current position under the new ownership. Financial terms of the deal
have not been disclosed.
Acquirer:
Morgan Stanley Capital Partners is part of the Investment Management division in Morgan
Stanley. The team focuses on privately negotiated equity deals. MSCP adds value to its
investments through management and operational improvements, capitalisation, and
strategic acquisitions. Targets of the private equity arm are mainly in the business services,
consumer, healthcare, and industrial markets in North America. Before the most recent
acquisition MSCP had only one investment in an environmental services company – the
2021 acquisition of Allienance Technical Group, a leader in air quality testing and monitoring
solutions. Financial advisors for MSCP were Harris Williams and Raymond James, Latham & Watkins was responsible for the legal counsel, and Carlyle and Churchill Asset Management arranged financing and administrative issues.
Acquiree:
Apex Companies is a multidisciplinary consulting and engineering firm with capabilities in
water, environmental, infrastructure, transportation, construction management, health and
safety, and compliance and assurance. Its clients range from the public sector – at federal,
state, and municipal levels – to the private sector – in retail, industrial, real estate,
technology, financial services, and energy end markets. The company, established in 1988,
was acquired by Sentinel in 2018. Since then, it has completed 4 successful add-on
acquisitions and has showcased its striving for innovation and growth both organically and
through M&As. Advisors for Apex in the latest transaction with Morgan Stanley’s private
equity arm are Robert W. Baird &Co., Houlihan Lokey, and AEC Advisors.
Potential risks:
A factor that could negatively affect future growth of Apex is the not so extensive
experience of MSCP in infrastructure and environmental engineering and consulting
businesses. Although broadly Morgan Stanley is deeply committed to ESG investing, the
private equity team of the bank has had only one similar investment in the past, as
compared to 4 prior investments in the sector by Sentinel Capital Partners, the previous
owner of Apex. Nevertheless, MSCP is keen on establishing itself in the environmental
services industry, which is constantly growing in significance.
Prospects:
This acquisition, however, brings potential benefits to both parties. On one hand, being
owned by Morgan Stanley Capital Partners, Apex Companies will access additional resources
that will boost its growth even more. Apart from operational optimisation, MSCP is planning
strategic mergers to increase the geographic presence, service capabilities and customer
diversity of the leader in environmental services and stormwater compliance. Due to the
significance of Apex’s operations, innovation and efficiency are crucial, especially since it
provides key services in areas such as Aerospace & Aviation, Education, Healthcare, Energy and more.
On the other hand, as this is just the second investment of MSCP in environmental services
companies, it serves as a key diversifier in Morgan Stanley’s portfolio. Not only does the
consulting and engineering company have promising growth prospects, but it also
contributes to the ongoing commitment to ESG of the bank with its services and products
such as the real time environmental management information system ARTEMIS, which
captures and manages critical environmental and ESG data.
The deal outlines the trend for developing sustainable infrastructure, increasing living
standards through improvements in education and healthcare, and providing environmental
advisory in order to raise consciousness and improve well-being. ESG investing is becoming
an increasingly important part of all portfolios today due to the widely spread focus on
environmental and ethical issues The environmental, social, and governance non-financial
factors are bound to continue growing in popularity as society is shifting towards green
energy.