Private Equity firm KKR makes deal for environment consultancy REEL
International investment firm KKR has reached an agreement with Ramky Enviro Engineers Limited (REEL), a leading provider of environmental services and solutions in India and overseas. The deal will see KKR acquire a 60% majority stake in the company for an estimated US$530 million.
According to the 2018 Environmental Performance Index – the green rankings released during the World Economic Forum summit in Davos, Switzerland – India is the fourth worst country in the world when it comes to handling environmental issues. Out of 180 countries, India ranked 177, only bettering the Democratic Republic of Congo, Bangladesh and Burundi in terms of environmental performance. While for some time, environmental policy has been sacrificed by growing economic giants China and India in favour of financial performance, two years ago, India's rank was 141, and the worrying slide has many experts anticipating that businesses will have to change to make India’s economic success sustainable in the future.
In the lead up to this likely tipping point, environmental engineering consultancy REEL has established itself as a leading and trusted provider of environmental services across India, due to its focus on sustainability and commitment to continuous improvement. As part of this commitment, REEL uses a number of systems to monitor its procedures to ensure adherence to best environmental management standards. Meanwhile, the company frequently samples and analyses its business’ impact on the air, soil and water in the areas in which it operates, managing community outreach and engagement programs to counter those impacts.
REEL has a presence in over 60 locations across 20 Indian states, as well as in certain Southeast Asian, Middle Eastern and African markets. The firm’s suite of comprehensive offerings has also seen its services increasingly tapped across India’s market, making it an attractive prospect for acquisition. REEL’s offerings includes the management, collection, transport and processing of hazardous, municipal, biomedical and e-waste, as well as the recycling of paper, plastic and chemicals, as well as focusing on renewable energy generation.
This eventually led to KKR, a global investment company, dipping into its Asian Fund III to bid for ownership of the company, which it places an enterprise value of US$925 million upon. KKR’s investment in REEL subsequently marks one of the largest buyouts in India, as well as making itself the first private equity firm to complete a buyout in the country’s increasingly attractive environmental services sector. Barclays and Big Four firm EY acted as REEL and KKR’s M&A advisors, respectively, while Link Legal has served as REEL’s legal counsel, and fellow Big Four member PwC and Transaction Square acted as REEL’s tax advisor. Cyril Amarchand Mangaldas and Simpson Thacher & Bartlett served as KKR’s legal counsel, while Deloitte India acted as accounting and tax advisor. Environmental Resources Management served as environmental management advisor to the deal.
The deal comes as Prime Minister Narendra Modi’s administration looks to improve India’s focus on environmental management via its Swachh Bharat (Clean India) Mission. The initiative to reduce pollution and improve critical sanitation infrastructure to boost living standards in cities, towns and rural villages nationwide will cost billions – with a number of lucrative consulting contracts likely to be put to tender throughout its duration. As a result, it would not be surprising to see more deals of this nature following KKR’s lead in the coming period. While KKR will hope to benefit from this in the meantime, as the workload of environmental consultants in India looks set to rise dramatically, REEL will also hope to leverage the investment to expand its capacity to respond to said demand.
M. Goutham Reddy, Managing Director & CEO of REEL, commented on the firm’s purchase: “With KKR as our new partner, we look forward to advancing our mission of responsibly addressing the environmental issues that emerging economies including India are facing today. Today marks the beginning of the next stage of REEL’s evolution towards serving society.”
Sanjay Nayar, Member & CEO of KKR India, added, “REEL’s work uniquely supports the Swachh Bharat Mission, and our team is pleased to invest in the growth of a company that provides critical services and infrastructure to reduce pollution and address the needs of India’s expanding urban population. We look forward to leveraging our resources to enhance REEL’s operational best practices and add value by focusing on engineering innovation, attracting managerial talent and boosting efficiency, in addition to building on REEL’s rigorous focus on environmental, health and safety initiatives.”
