TIC market overview

Tic Exec Summary

Building on strong foundations, the Testing, Inspection and Certification sector is poised to capitalise on a host of potential growth opportunities in 2018.

The TIC industry enjoys some key advantages. Operators generally deliver higher margins and require relatively lower capital expenditure than other business services sectors. And financial performance is typically underpinned by excellent revenue visibility, due to longer-term contracts and framework agreements – supplemented by regulation.

These sound fundamentals ensured the TIC sector remained strong in 2017. In fact, despite much political uncertainty, the entire TIC industry has remained resilient through the economic cycle.

It is true that the previous three years had seen a slowing of CAGRs across the industry. In 2017, however, this trend began to reverse. That coincided with a stabilisation of leverage and an improvement in liquidity – pointing to a positive outlook for 2018.

M&A returns

The sector’s merger and acquisition scene had a healthy 2017. The key players continued to support low to mid-teen EV/EBITDA ratios, providing opportunities to drive returns through M&A. We expect that picture to persist.

With no material issues resulting from the larger leveraged buyouts, financing confidence is high. And as a still fragmented sector able to augment financial performance with strategic acquisitions, the opportunity for returns on investment remains buoyant.

Supporting success

In this report we reflect on the events of the past year in the sector and highlight the key factors we see shaping its development in 2018. We consider the opportunities and threats posed by digital advances, and we look in detail at M&A prospects for the next year.

The firms best placed for success will be those with scalable operating models, unique market positioning and a digitally enabled growth agenda – allowing them to deliver fast-paced, integrated solutions for their clients.

We have continued to support TIC investment throughout 2017, and we remain excited about opportunities to support our clients’ growth ambitions.

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