As access to fresh water grows increasingly scarce globally, water technology giant Xylem Inc. announced plans to acquire water treatment company Evoqua Water Technologies Corp. for $7.5 billion. Xylem plans to use the acquisition in its bid to confront the “world’s water challenges.”
“As water risks rise in global importance, this transaction unites two companies with a shared focus on solving the worlds water challenges by addressing customers and communities most critical needs,” according to the companies’ joint press release. “Building on Xylems global leadership in water solutions and Evoqua’s leadership in advanced treatment solutions and services, the combined company will be uniquely positioned to develop and deliver an even more comprehensive offering of innovative solutions.”
Freshwater accounts for just 2.5% of the globe’s water supply, with only a fraction of that readily accessible. With fluctuating rainfall and shifting population centers, as much as 25% of the globe suffers from severe water scarcity at least one month each year.
According to National Geographic, it is not that the earth’s supply of freshwater fluctuates “but the population has exploded, leaving the world’s water resources in crisis” – and those additional people are using even more water per capita. Water usage grew at over twice the rate of the population during the last century.
According to the World Economic Forum, “Over half of the world’s major aquifers are being rapidly drained because rates of groundwater withdrawals far surpass rates of replenishment,” The organization warns, “the continents, with the exception of Greenland and Antarctica, are drying. Water for all uses – for people, environment, food and energy production, industry and economic growth – is becoming far more scarce, as regional sources disappear or are depleted.”
Water scarcity has boiled over into geopolitical turmoil. According to the BBC, “Unprecedented levels of dam building and water extraction by nations on great rivers are leaving countries further downstream increasingly thirsty, increasing the risk of conflicts.” The Water Conflict Chronology has logged 925 water conflicts over the course of history, and analysts predict water related violence is indeed increasing over time.
Companies such as Xylem have turned to technology to serve populations’ need for water, including by desalinization processes that convert abundant salt water into fresh. Xylem predicts, “[o]ur acquisition of Evoqua creates a transformative global platform to address water scarcity, affordability and resilience.”
According to Matterhorn’s M&A database, which tracks publicly-announced deals over $25 million in value, Evoqua is advised by Jones Day and financial advisers Goldman Sachs & Co. LLC and BofA Securities, Inc. Xylem is advised by Gibson, Dunn & Crutcher LLP and financial advisers Lazard Frères & Co LLC and Guggenheim Securities, LLC.