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KKR buys ESG consulting powerhouse

The deal for consultancy ERM – which marks an exit for OMERS PE and AIMCo – values the business at $2.85bn.

Sustainability consultancy firm ERM has changed hands. The firm, which is understood to have generated nearly $800 million in revenue in the year to March 2020, has been sold by Canadian pension funds Ontario Municipal Employees Retirement System and the Alberta Investment Management Corporation to KKR.

OMERS, AIMCo and KKR declined to comment on financial details, but a source with knowledge of the deal told New Private Markets that the deal valued the business at $2.85 billion – or 19.6x EBITDA. The firm was valued at $1.7 billion in 2015 when OMERS PE – the pension fund’s private equity investment arm – and AIMCo invested directly in ERM. OMERS had just over a 40 percent stake and AIMCo had just under a 20 percent stake in ERM, while the firm’s management owned the balance, said the source.

KKR will draw capital from its own balance sheet and dedicated funds through its “core private equity” strategy – platform for longer-term investments of up to fifteen years – a representative from KKR said. The sale will be completed during the third quarter of 2021, KKR said in a statement.

Competition for ERM was higher than in 2015, said Jonathan Musselwhite, European head of OMERS PE and a non-executive director at ERM. “Between 2015 and today, everyone has woken up to the importance of ESG and that good sustainability equals good business. ERM inevitably attracted more interest today than in 2015, when fewer people saw that opportunity.”

OMERS PE will redeploy the capital into European direct private equity investments, said Musselwhite. It is also considering re-investing in ERM under KKR’s deal.

Musselwhite and James Frankish, a director at OMERS PE, have sat on ERM’s board of directors since 2015 but will step down when the buyout completes.