Carbon Accounting M&A: Market Opportunities, Expansion & Key Players
The carbon accounting industry has witnessed the emergence of major players and companies that offer comprehensive cloud-based and on-premise carbon accounting solutions, with the carbon accounting software market predicted to exhibit a CAGR of 22.8% during the forecast period (2023-2030).
These companies have successfully raised substantial capital, often surpassing the $100 million mark, indicating not only investor confidence but also the potential for significant market expansion.
In this article, we will explore the dynamics of this industry, highlighting the presence of major players, M&A as a potential growth strategy and the strategic considerations for businesses aiming to enter this sector.
Heightened Interest from Technology Players and Investors
As sustainability takes centre stage on businesses’ agendas, both internal and external stakeholders are demanding enhanced scrutiny of environmental impact. This growing emphasis on sustainability has attracted the interest of large-scale technology players like SAP, Salesforce, and ERM, as well as financial investors.
The carbon footprint management market is concentrated, with a few large players, due to an existence of several local players in the market. The key global companies of carbon accounting software include Net0, Envizi, Carbon Analytics, Sphera, CarbonetiX, BraveGen, Simble Solutions, Plan A, Normative and Emitwise.
Other major players include independent carbon accounting companies such as climate management platform Persefoni, data-driven ESG reporting platform Sweep, carbon accounting start-up Watershed who acquired VitalMetrics back in April 2023, and carbon management solutions provider, Carbon Direct. Carbon accounting and ESG reporting platform Plan A also recently secured $27M to expand across Europe from Lightspeed Venture Partners, Visa, and other VC’s. Specialist players that have built up proprietary databases therefore presents a huge value pool and those with advanced data offerings are seen as being prime acquisition targets.
Their entry into the market intensifies competition and raises the likelihood of consolidation. We believe these market dynamics will result in an increase in M&A activity for the carbon accounting sector over the next several years.
Market Consolidation and Strategic Partnerships
The carbon accounting market remains a highly fragmented space, comprising numerous firms that have successfully raised meaningful amounts of capital. However, these firms find themselves at a competitive disadvantage compared to the leading providers.
Raising future funding may become increasingly difficult for them unless they can clearly differentiate themselves from the competition. This can be achieved by creating and maintaining superior intellectual property or by becoming a leader in a niche specialty. As a result, we expect to witness a surge in consolidation through mergers and acquisitions. Smaller companies striving to stay competitive will either need to carve out a niche for themselves or seek strategic alliances with better-capitalised firms.
M&A as a Growth Strategy
For those ambitious in scaling their carbon accounting endeavours, collaboration with established businesses can be a game-changer. Businesses that possess extensive resources, such as Enterprise Resource Planning (ERP) or Environmental Resource Management (ERM) systems but lack a dedicated carbon accounting product, present a golden opportunity. By joining forces, specialists can tap into existing infrastructure and customer bases, unlocking new dimensions of growth and influence.
Market Opportunity for Buyers
In a rapidly evolving landscape, the acquisition of a carbon accounting company presents a strategic advantage for businesses seeking to make an impact, expand their market presence and global reach. By integrating a specialized carbon accounting arm, companies can seamlessly extend their product portfolio, catering to the escalating demand for robust environmental management tools. This strategic manoeuvre not only enhances the buyer’s value proposition but also positions them as a frontrunner in carbon accounting industry.
William Berrington, ESG M&A Advisor at Goldenhill International says:
“The convergence of specialists and major players, coupled with substantial capital raises, signifies a market ripe for strategic M&A activity. Businesses eyeing expansion should consider the strategic acquisition of a carbon accounting firm.”
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The carbon accounting market is undergoing a period of significant transformation, characterized by intense competition, technological innovation, and a surge in M&A activity. While major players dominate with substantial resources and strategic manoeuvres, smaller entrants can thrive through strategic partnerships, niche focuses, and a commitment to innovation.
If you are looking to explore a potential sales process, then book a consultation with one of our ESG M&A Advisors here.
Author: William Berrington
William is a highly experienced M&A advisor with a particular emphasis on ESG and HR Technology globally. His previous assignments include working with leading businesses in ESG (Environmental, Social and Governance) software and data and HR Technology (HR Tech).
William has previously advised on Technology sector M&A transactions in more than 12 countries, working on transactions on the sell-side and buy-side. He was a Chartered Accountant and before Goldenhill and worked in several corporate development roles for blue chip technology companies and also for a private markets firm.
If you are an owner or senior executive of a Technology business interested to discuss how M&A could help you accomplish your objectives – please get in touch with William below.