The European facility (management) services market comprises companies that provide single or multiple (integrated) support services to businesses and institutions. Overall, the market can be split into hard (e.g. technical installation, building maintenance) and soft services (e.g. cleaning, landscaping, security). Herein, hard services relate to the fabric (i.e. exterior) of the building, while soft services relate to services performed in or around the building. This research excludes pure-play hard services providers and thus focuses on soft services only. As such, we segmented the market into: (i) generalist, (ii) cleaning, (iii) catering, (iv) security and (v) landscaping.

The European market has a fragmented but top-heavy nature, comprising a handful of industry giants (e.g. Compass Group, Sodexo, ISS) acting globally, single-country champions (e.g. CSU Holding, Westbury Street Holdings) and a long tail of small, local players. Industry experts (interviews by Gain.pro) indicate that although the market is poised for consolidation, this will remain limited due to the low barriers to entry. The increasing complexity of client requests, technological advancements and tight local labour markets primarily drive this need for consolidation. Simultaneously, the less complex lower-end of the market offers sufficient room for small actors to serve local SMEs into the foreseeable future.

Sponsor-led interest has been limited, with <30% of identified assets being backed by financial sponsors (January 2023). We see the market's cyclical nature, limited profitability and difficulty in expanding organically across borders as the largest detractors for investors. On the other hand, incumbents that can leverage long-term contracts might attract interest from financial sponsors. The landscaping segment sees the most sponsor activity, with >60% of identified assets receiving financial backing. We expect the segment's higher-than-average profitability to be the primary reason for this.

ESG topics primarily relate to potential environmental and social issues. Herein, environmental matters mainly constitute the use of biodegradable and non-damaging products (e.g. cleaning agents, pesticides) for the cleaning and landscaping segments, while food waste is top of mind for caterers. At the same time, incumbents try to minimise their CO2 emissions of i.a. their corporate fleet through the selection of vehicles with limited pollution and through the use of routing software for optimised movement between locations. In terms of social responsibility, players must ensure adequate working conditions and fair wages as they primarily work with less-educated employees. Additionally, facility (management) services can positively impact the well-being of clients' employees through clean working spaces and gentle nudging (e.g. taking the stairs instead of the elevator; interviews by Gain.pro).