• Acquired 60-year-old water business on 27 August
• Top 3 provider in Texas
• Water platform could acquire in adjacent states

Betting on a spending surge as Texas battles a water crisis, Coltala Holdings has launched a new water infrastructure platform with the acquisition of 60-year-old Houston-based Alsay.

The deal closed on 27 August, marking one of Coltala’s largest transactions to date, according to Edward Crawford, co-founder and co-CEO of the Dallas-based independent sponsor.

Alsay now operates under Coltala Water, the firm’s third platform alongside existing mission-critical holdings in healthcare and aerospace and defense. Founded about eight years ago, Coltala researched targets in water for about three years, most of them in testing and measurement, before discovering Alsay.

Alsay ranks among the top three providers of water well drilling and services in Texas, with approximately 150 employees and operations spanning the state. The company primarily serves municipal, industrial, and agricultural clients, with well drilling as its largest revenue stream, said Joe Slavik, Alsay’s president. It also rehabilitates existing wells and installs booster pumps to support water delivery systems. The deal was sourced off-market, with no formal auction process. Alsay had been backed by Lone Star CRA Fund and Venquest Capital Partners since 2009. Crawford said the deal also attracted wealthy individuals as co-investors and was financed by lenders BankUnited and Gladstone.

“We do each deal ourselves. We are the core of every deal,” he said.

Platform ambitions 

Coltala typically targets platforms with USD 2m to USD 15m of EBITDA, writing equity checks of USD 10m to USD 50m or more, Crawford said. Alsay’s financials were not disclosed, but according to a previous report by this news service, Alsay had trailing-12-month revenue of USD 45m and its EBITDA doubled to USD 11m in the last two years.

Crawford noted the company has grown fast, exceeds EBIT margins of 20% and gross margins of 40%-50%.  “Joe has doubled this business,” over the last five years, Crawford said.

Alsay could build out its pumps business through M&A, said Crawford. It could look at providers of booster pumps and systems to deliver water to the public and industry, he added. There are also opportunities in stormwater, well drilling in Texas and providers in adjacent states, he said. Houston and San Antonio are the top priority for geography of targets but down the road, Alsay could also look at Dallas-Fort Worth and Louisiana, he said.

“We work with engineers and hydrogeologists. It’s an important business relationship to provide an engineer-specified product,” Slavik said. Future acquisitions for Alsay can be in the USD 3m to USD 10m EBITDA range. Targets should be profitable, with 20% or higher EBIT margins and 40% to 50% gross margins, Crawford said.

Competitors, according to Slavik, include Weisinger, which is focused on Texas, and Hydro Resources, a national player. While sector M&A has been limited, Crawford pointed to Granite’s acquisition of Layne Christensen in 2018 as a key deal in the Texas water space.

Infrastructure tailwinds

The acquisition comes amid a growing sense of urgency to address Texas’s water infrastructure.The state, which has only one natural lake, is confronting an escalating water crisis, with projections showing that by 2070 the state’s usable supply could drop by 18% while demand rises by 9%, affecting nearly one‑quarter of Texans, according to the deal announcement.

Texas Governor Greg Abbott declared the water situation an emergency and signed legislation authorizing a USD 20 bn investment into both new supply development and critical infrastructure repairs. The plan includes a USD 2.5bn immediate allocation to the Texas Water Fund and, pending voter approval this November, up to USD 1bn annually starting in 2027 from dedicated sales tax revenue, according to Coltala.

Advisers on the deal included Hallet Perin, which provided legal counsel to Coltala. HigganBotham provided insurance. Quality of earnings was provided by Bennett Thrasher. Lone Star was advised by McGuire Woods and Egan Nelson, Crawford said.