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Xylem’s acquisition of Evoqua creates new water-management titan.

Acquisition Overview

Finalised in mid-2023, global water technology company Xylem have acquired clean technology firm and local provider of water and wastewater treatment products and services: Evoqua Water Technologies Corporation. Consolidating on Xylem’s global leadership in water solutions, the combined company will be unique within the industry in its capacity to develop and deliver an even more comprehensive offering of innovative solutions. The acquisition will give Xylem advanced water treatment capabilities and access to customers in the electronics, energy and food industry- expanding Xylem’s business from the commercial and residential sectors to industrial customers too. Ultimately, the new combined company will be more diversified and powerful, allowing it to provide innovative digital solutions and advanced technologies across the water cycle. This will enable Xylem to better address critical markets, particularly industrial water. 


Deal Structure


Finalised in mid-2023, this was an all-stock transaction valued at approximately $7.5bn. Evoqua shareholders will receive 0.480 shares of Xylem for each Evoqua share, representing a value of $52.89 per share or a 29% premium based on Xylem and Evoqua closing prices as of 20 January 2023. Upon closing, Xylem shareholders will own approximately 75% and Evoqua shareholders will own approximately 25% of the combined company on a fully diluted basis.


Xylem Overview


Xylem is a water technology company that designs and manufactures products across a wide range of applications, primarily addressing customer needs ranging from water delivery to the collection and treatment of wastewater. It operates in 150 countries and has been recognized for its commitment to sustainability and corporate responsibility, including being named to the Dow Jones Sustainability Index and receiving the U.S. Water Prize for its efforts to advance water sustainability.

The advisors on the deal for Xylem were Lazard, Guggenheim Partners, LLC (Financial) and Gibson, Dunn & Crutcher LLP (Legal)

Founded in 2011

Number of employees: 17,000

EV: $19.5bn

LTM Revenue: $5.5bn


Market Cap: $18.5bn


Evoqua Overview

Founded in 2013

Number of employees: 4500

EV: $6.6bn

LTM Revenue: $1.8bn


Market Cap: $5.8bn


Evoqua Water Technologies is a leading provider of water and wastewater treatment solutions and services, serving customers in a wide range of industrial contexts. Evoqua offers a range of products and services- from ‘Integrated Solutions and Services’ (ISS), which provides application-specific solutions to life-cycle services to process water, to ‘Product Technologies’, which sells a plethora of products including filtration, separation and disinfection for water systems. Other services include ‘Advanced Treatment’- which includes the sale of advanced treatment systems, such as membrane bioreactors and reverse osmosis systems, for use in industrial and municipal applications as well as ‘Treatment & Transport’, which comprises the sale of products and services related to water and wastewater transport and treatment, including pumps, mixers, and aerators. The advisors on the deal for Evoqua were Goldman Sachs & Co. LLC, Bank of America (Financial) and Jones Day (Legal)


Industry Insight


M&A deals in the water-industry have accelerated in the past couple of years with a 34% increase in 2021 from 2020 and similarly fast growth in 2022. This comes as part of a larger acceleration in deals in the US utility market with private US utility investment accounting for 70 new M&A deals in the second half of 2022. As the M&A landscape is increasingly influences by environmental and corporate sustainability, one can predict ongoing activity in the industry into 2024. It is likely that water will not fact eh same extent of decline in deal activity or volume that other industries will experience in today’s recessionary economic climate.


Strategic rationale

"Solving the world’s water challenges has never been more urgent. Our acquisition of Evoqua creates a transformative global platform to address water scarcity, affordability and resilience” - Patrick Decker, President and CEO, Xylem


The strategic rationale for Xylem’s acquisition of Evoqua is to address critical markets, particularly industrial water and to innovate with digital solutions. With increasing momentum in water investment, Xylem is optimistic about achieving growth in 2023 and expanding margins to reach long term growth goals. This is reinforced by optimistic forecasts of combined revenue following the deal. This is because the combines company will be uniquely positioned to develop and deliver an even more comprehensive offering of innovative solutions, unlocking new growth industries and cost synergies: the deal is expected to deliver run rate cost synergies of $140m within three years, driven by scale efficiencies in procurement, network optimisation and corporate costs.


Long-Term Prospects

The acquisition is poised to generate synergies between the companies through two main avenues: enhanced operational efficiencies and cost savings achieved by leveraging shared resources. The merged entity is positioned to offer a comprehensive portfolio of advanced technologies, integrated services, and application expertise spanning the entire water cycle. Beyond cost savings, there is ample opportunity for substantial innovation to generate value and address pressing needs for consumers and communities.


From a geographical standpoint, there is significant potential for Xylem to implement Evoqua's technologies on a global scale. Currently, Evoqua holds a strong presence in North America, while Xylem boasts a global footprint. Through the collaboration of their resources, these technologies can reach customers in new markets worldwide. However, there are uncertainties. News of the $7.5bn deal sent Xylem stock prices down by more than 8%, indicating that the valuation of Evoqua was excessive and there is limited capacity for global expansion.


Lastly, the acquisition is expected to accelerate innovation in the industry. Through leveraging their combined resources, Xylem and Evoqua can create new solutions to tackle challenging needs for consumers and communities. This is particularly important as the global population grows, and demand for clean water continues to increase. According to United Nations projections, global water demand is anticipated to surpass supply by 40% by 2030. The growing focus on sustainability is spurring demand for water technologies that can contribute to the reduction of water consumption, energy usage, and carbon emissions.


Written by Sahil Shah (Lincoln College)

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