NETA & Other High-Value Electrical Services – Market Overview

Industry Overview

Heightened electrical demands resulting from trends in data centers, shift to electrical vehicles, and an overall push toward industrial electrification have put electric grid reliance at the forefront of public discussion.

• With increased demands and stringent regulatory standards, critical power systems require frequent testing and maintenance.
• Experienced NETA technicians, particularly those at levels III and IV, play a crucial role in the electrical testing and commissioning market, which is projected to reach $79 billion by 2027.
• Other high-value electrical services, such as power system design and engineering or automation and control solutions, are also in high demand.

While NETA remains the gold standard, companies that offer complementary services provide an attractive avenue for strategic growth due to their larger scale relative to the more constrained market of NETA companies. For example, Qualus added software and system integration capabilities through the October 2023 acquisition of GridBright, and Saber Power expanded its electrical engineering and instrumentation / control capabilities through the July 2023 acquisition of Bath Group.

Value Drivers

Size (NETA Specific) – The NETA testing market is fragmented, with a scarcity of mid-sized businesses that have sizable pools of certified technicians. Companies with EBITDA of $3mm or more typically receive EBITDA multiple valuations in the high single digits. Scaled NETA businesses ($10mm of EBITDA or more) with large pools of certified technicians are likely to be valued at double-digit to mid-teens EBITDA multiples.

End Market Exposure – Acquirers prefer end markets that benefit from industrial electrification and require recurring testing and maintenance due to regulation or high costs of failure / downtime of systems, such as hospitals, data centers, and critical infrastructure.

Human Capital – Investors in both the NETA testing market and the high-value electrical services industry view acquisitions as a means of growing their labor force.

• For NETA companies, the number of level III and IV NETA technicians and demonstrated in-house training capabilities are viewed as strategic assets, adding value for both strategic and financial acquirers.
• For other electrical service providers, the number of engineers and the quality of management teams are viewed as indicators of value.

M&A Update

Various private equity backed platforms are deploying capital to grow through the acquisition of both NETA certified and other complementary high-value electrical services companies. By compiling a database of valuation data for over 40 transactions in the space, Industria’s observed that NETA platform acquisitions are trading at premium multiples while add-ons are receiving lower, yet healthy valuations.

Note: Group averages and medians for NETA and Other High-Value Electrical Services based on 40+ transactions with publicly available and proprietarily sourced valuation data.

With various private equity backed platforms pursuing aggressive acquisition strategies, it may be an optimal time for owners to contemplate an exit. Valuations are being driven higher, and platform companies are actively seeking add-ons across the electrical services value chain to increase scale and market share.

Please contact Chris Haymons (chaymons@industria-partners.com) or Koen Browning (koen@industria-partners.com) to discuss value drivers and market dynamics of your specific business or other market insights gained from our current and recent transaction experience.

Industria Partners was formed by a team of highly experienced strategic advisors in early 2016 to focus on the M&A and capital needs of entrepreneurs, family-owned businesses, and private company investors. Industria services industrial, climate, infrastructure, and energy companies at every point across the business cycle. Through industry connectivity, transaction experience, and expert execution, Industria delivers superior outcomes to its clients.