Competitive Study Supports Sale of Leading Electrical Power Services Provider

Background and challenge

Power utilities in the U.S. are facing four overall challenges:

• An aging U.S. power grid, including increased service and maintenance expenses due to the operation of older assets
   
• Grid modernization, including a demand for “smart grids” that is causing utility companies to rethink and update systems 
   
• A stringent regulatory environment, which is causing assets to be carefully monitored due to severe penalties for noncompliance
   
• Scarcity of engineering labor, which is increasing the tendency to outsource engineering and field services to third-party providers

The client, a power systems field and engineering provider whose primary services include protection and control, testing and maintenance, commissioning, compliance support, and design engineering services, has been successful in tackling these challenges while also providing exceptional customer service to its industrial, commercial and government customers. While the company was able to meet the increasing demands for its electrical power services, it had outgrown its own market. 

To help validate the client’s value proposition and execute its sale, L.E.K. Consulting provided the client with a fact-based assessment of the outsourced power grid services market and an analysis of its customer dynamics and competitive position across its end markets. 

Approach and recommendations

After we conducted a rigorous analysis to evaluate our client’s addressable market and identify its positioning, we let management know of key emerging trends they could take advantage of and articulated a strong case for the company’s sale.

To make our case, we estimated the company’s addressable end market, including identifying any subsegments that could outpace the broader electrical power systems fields and engineering services. We conducted more than 50 interviews and gathered insights into how our client differentiates itself from the competition and how it could adapt to an increasingly competitive environment. We concluded that our client was resistant to macroeconomic fluctuations, given its focus on mission-critical end markets and the nondiscretionary nature of its services, and that while the client’s challenges were increasing, COVID-19 only caused a short-term delay in projects.

We also concluded that its core market was well structured, and determined that, combined with significant tailwinds and our client’s ability to show competitive differentiation through its customer service and breadth of services, its business had a significant runway for growth.

Results

Our analysis indicated that our client’s market has significant tailwinds and will grow at a double-digit CAGR through 2024. It validated our client’s value proposition and its ability to provide the necessary service offerings to remain competitive and ensure market outperformance. It also identified areas where the company could improve or offer additional services to retain existing customers or add new ones, and mapped and analyzed competitors’ offerings, by segment, to identify any gaps that it could fill going forward. That analysis — and its implications — was subsequently used to help facilitate its ultimate sale.