Major transactions in the cleaning sector in 2023

Moderate impact from the economic downturn

Despite the difficulties faced by operators in the cleaning sector and potential obstacles to acquisitions (rising interest rates, wage increases affecting the margins of cleaning companies), the sector proved to be very dynamic in 2023, recording a number of transactions on a par with those recorded in the previous year.

In 2023, activity in the sector remained resilient (+5.5% growth). This growth was again driven by long-term factors, such as the increase in the number of multi-family dwellings to be cleaned in France, as well as the diversification of the services offered by operators. As cleaning services are a recurring business, the impact of the economic downturn on the sector’s revenues was limited. However, for routine cleaning, which accounts for 80% of the sector’s revenue, the increase in business failures in France and the impact of remote working may have affected cleaning demand.

The industrial cleaning business grew by 6.5%, outperforming the whole sector, and this despite the energy crisis that led to temporary plant shutdowns and limited the areas that could be treated during winter time.  Although price increases by operators remained moderate, they pressed ahead with their efforts to diversify services to create new revenue streams and move into higher value-added activities. However, the increase in business failures in the wider economy in recent months has affected the potential client base for companies in the sector.

Key challenges across the sector

Despite the spotlight shone on the cleaning professions following the covid pandemic, cleaning companies face ongoing challenges in recruiting and retaining staff. The first problem is that employees often work odd hours, especially outside office hours in the tertiary sector. Remuneration, which is often perceived as unsatisfactory, is another major obstacle, exacerbating the sector’s difficulties in attracting and retaining talent.

Cleaning companies are facing fierce competition due to a lack of differentiation in their core business. To meet this challenge, the trend is towards diversification, especially for large groups, which are offering more ancillary services, enabling them to broaden their offering and become their clients’ main service provider, while at the same time exploring higher value-added services.

The growing commitment of companies in the sector to CSR is a significant asset for the employer brand. This commitment enables them to achieve a number of objectives, ranging from securing business from contractors, for whom choosing a committed service provider is also part of their own strategy, to improving brand image in the eyes of employees and potential recruits. A strategic partnership between AFNOR and the FEP aims to support cleaning companies in their commitment to CSR, embodied in the “Committed to CSR” label.

Inorganic growth as a lever

Due to fierce competition in the sector, a number of cleaning companies are adopting an inorganic growth strategy. This trend applies to market leaders as well as to smaller companies looking to step up their development. The main objective is to reach critical mass more quickly so that fixed costs can be spread over a larger volume of revenue. This strategy also aims to raise the profile of companies, add new skills and absorb competitors.

The year was marked by major transactions involving the French leaders in the sector (ATALIAN and GSF). The merger between DERICHEBOURG and ELIOR in 2023 was also a striking example of the sector’s dynamism. Inorganic growth operations are motivated by the same imperatives as in previous years, i.e. increasing geographical coverage and acquiring new skills, as illustrated by CHALLANCIN’s acquisition of OXYGENE in September 2023, enabling the group to extend its network in the Hauts-de-France region, and NICOLLIN’s acquisition of CARONET, a major waste management company, continuing its diversification into industrial cleaning and glazing.

To support their growth strategy, cleaning companies have also opened up their capital to investment funds. This is the case for the MILLENIUM group, which specialises in cleaning event venues and welcomed UI Investissement and ESFIN Gestion to its capital in October 2023. This move is designed to enable the group to grow, particularly in the field of sporting events linked to the 2024 Olympic Games, as well as cultural or atypical events, while expanding its activities in the regions. 2024 is shaping up to be a promising year, with a number of mergers underway, including some high-profile ones such as ONET and ISS France.

Mergers and acquisitions overview

Sources: Le Monde de la Propreté, Services Propreté, Xerfi forecasts