Environment sector set for deals boom as customers go green

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2007 could become the ‘year of the environment’, with increasing awareness of green issues provoking a shift in consumer spending patterns and the environmental and energy sectors becoming key areas for deals activity, says Clearwater Corporate Finance.

Paul Jones of Clearwater’s Manchester office says that climate change, rising energy prices and shortage of landfill space are pushing environmental issues to the forefront of the public’s attention.

Jones explains: “Environmental concerns are already starting to have an impact on people’s spending patterns. This year that trend could reach a tipping point and lead to a wider revolution in customer buying behaviour.

“The first to be hit are likely to be those industries offering products which have a relatively large carbon footprint but offer low added value, such as electric can openers and toothbrushes. It may be back to the hand whisk for egg whites!

“Habits will be slower to change where products or services play a more integral part in our lives, for example with cars and lightbulbs. However people will look for more efficient alternatives and these will start to steal market share.

“We will see a huge increase in recycling – we are years behind the rest of Europe and a long way from where we need to be. Fortnightly rubbish collections are just the beginning.

“Throughout this people will be looking for a two-fold impact – not only to save the environment but also to save money by reducing energy use and waste. The real winners will be companies that can help consumers, business and the public sector get ‘more for less’.”

Recent research from Mintel reveals that 55 per cent of people said they increased the amount of recycling they did last year, while 53 per cent said they had started to reduce their energy usage by turning off appliances and lights. Some of the major retailers have been quick to respond to public concern, with Marks & Spencer, Tesco and Asda owner Wal-Mart all pledging to slash their carbon footprint.

Jones says the effects of changing spending patterns are already filtering through to the mergers and acquisitions markets: “We are already seeing increased interest in acquisitions in the renewable energy sector which could lead to a deals boom in all areas of environmental technology.

“Long-term investors are paying premium prices for available assets, from energy comparator websites to ‘green’ electricity generators and landfill operators. Astute investors will have to take care to distinguish between the real value-added players, and those that are merely assuming an environmental stance to boost their market value. However, with prices rising investors who delay may miss out.”