Testing & Inspection

The provision of inspection, audit and certification of goods and services in relation to regulatory or voluntary standards is one of the most attractive niches in the business services sector. Favourable macro-trends such as increasing global trade, increasing regulation, complexity and standards and shorter product life cycles underpin strong sector growth.

There is a broad distinction between companies focused on ‘supply chain certification’, such as Lloyds Register, and those involved in ‘product conformity’, like Intertek.

The defensive nature of the market and the strong growth that characteristics the sector continues to attract private equity interest. Private equity is focused on sector or product mergers (‘roll-ups’) with the aim of achieving global scale. The sector remains fragmented and consolidation is likely to continue for some time.

There has been considerable investment in the sector. Examples include Charterhouse’s investment in Intertek in 1996, the Wendel-backed, French headquartered Bureau Veritas, Candover’s acquisition of Alcontrol, the Close Brothers Private Equity investments in Moody International and Alex Stewart, Bridgepoint’s acquisition of ERM, Carlyle Group’s acquisition of Spanish-based Applus and the 3i take-private of Inspicio.