MSCP finds opportunities with environmental labs, scoops up four add-ons to Alliance Technical Group

The four add-ons are Summit Environmental Technologies, Fremont Analytical, Orange Coast Analytical and Chester LabNet.

As demand for environmental and regulatory-driven quality-testing services extends from air-monitoring to other areas such as soil, water and waste, Morgan Stanley Capital Partners-backed Alliance Technical Group is lining up for opportunities with the acquisition of four add-ons around environmental labs.

The acquisition, to be announced this morning, includes Summit Environmental Technologies, Fremont Analytical, Orange Coast Analytical and Chester LabNet, all environmental laboratories located in various parts of the country and each carrying different regulatory certificates.

PE Hub caught up with MSCP’s managing director, Eric Kanter, as well as Chris LeMay and Scott Williams, Alliance CEO and chief revenue officer, respectively, to detail their plans for scaling the company with these four add-ons.

Eric Kanter, Morgan Stanley Capital Partners

“We have more than doubled the company in two years through strong organic growth and strategic M&A, and the lab service line gives Alliance another really attractive leg of growth,” said Kanter, adding that when MSCP invested in Alliance, it was looking for businesses with a strong regulatory tailwind.

MSCP initially invested in Alliance in 2021. Since then, Alliance has completed 17 add-ons, including the four announced today.

Alliance provides a suite of services focusing on environmental testing, monitoring and consulting services to a variety of customers, ranging from municipalities to industrials, universities and hospitals and businesses that have environmental regulatory requirements.

Some of its services include stack testing, leak detection and repair, continuous emission monitoring systems, analytical and laboratory services, ambient air monitoring, software and technology, and environmental consulting.

Alliance was solely focused on air testing and monitoring for its first 20 years, said LeMay “but after partnering with Morgan Stanley Capital Partners in 2021, we identified naturally adjacent and strategic verticals.”

Those adjacent markets included teeing on the environmental labs with soil, water and waste-focused services that will keep the company on the growth trajectory.

“We expanded to water and soil, which are very similar to our core air testing and monitoring business. They are regulatory driven, non-discretionary and have a recurring revenue model. It gives us a new customer base, and the ability to cross-sell all of our services,” explained LeMay.

Going into 2024, the four add-ons will also allow the company to enhance its national network of labs with specialized analytical services. “We are going to provide the newly acquired labs with the resources to take them from strong but smaller businesses, and really scale each one of them into regional hubs,” LeMay said.

The biggest driver for demand is rooted in national regulations coming from the Environmental Protection Agency, local requirements and other specific industrial requirements in different markets, explained LeMay.

Besides the regulatory driven markets, climate change also plays a part.

“Greenhouse gases in the air, emerging contaminants (such as PFAS) in water and soil and other climate related challenges are driving increased regulations and an increased need for our services,” said LeMay.

“Leveraging our integrated technology and field services allows us to partner with our customers and provide actionable data that can deliver insight on how to report and reduce emissions, which in the end helps ensure a sustainable environmental footprint,” he added.

M&A is also in the picture. “We look to buy and build companies by investing in growth,” Williams said, adding that their strategy is to acquire strong companies and then accelerate the growth through organic strategies. “We are going to continue to look for those strategic opportunities and make acquisitions and then apply our commercial functions to help grow customers as well as career path opportunities for employees,” he said.

MSCP strategy

“We look for businesses where there is a solid core, stable customer base and large market and where there are opportunities for meaningful organic growth and significant M&A,” explained Kanter.

Part of that strategy is weighted towards businesses that perform well even in economic uncertainty. “We have focused at Morgan Stanley Capital Partners on more resilient, defensive businesses that are not going to be as correlated to the economy,” he said, adding that: “Even though Alliance focuses on the industrial sector, because of the requirements on those entities from both federal and state regulations, there are not a lot of economic headwinds.”

In February this year, MSCP acquired Apex Companies, a Rockville, Maryland-based provider of end-to-end environmental and infrastructure consulting and engineering services from Sentinel Capital Partners.

The four add-ons:

  • Summit Environmental Technologies, a Cuyahoga Falls, Ohio-based company serving manufacturing facilities, waste disposal, paper mills and wastewater. Summit holds more than 30 regulatory certifications for hundreds of analytical parameters, including PFAS, RadChem, drinking water, soil, wastewater, groundwater, hazardous waste and air.
  • Fremont Analytical, a Seattle-based company that serves the Pacific Northwest with various organic and inorganic analyses for soil, water, hazardous waste and air. The laboratory holds TNI accreditation in Oregon and separate accreditations from Washington and Alaska state agencies. It specializes in remediation, hazardous waste and stormwater.
  • Orange Coast Analytical, a company based in Los Angeles and Phoenix, with a team of chemists, biologists and engineers covering soil, non-potable water, wastewater, stormwater, hazardous waste and groundwater.
  • Chester LabNet, a Portland, Oregon-based company whose Oregon TNI accreditation covers a suite of inorganic analyses with a particular specialty in hex-chrome analysis and XRF elemental identification.