In our discussions with A/E and environmental consulting Presidents and Principals across a variety of disciplines and sizes, the overwhelming response to our question of “What’s your biggest organizational challenge today?” is a quick and straightforward: “Growing our firm again.”
Compare that answer to the biggest issues facing the design and construction industry just a few years ago. Back then overstressed executives declared to us, “We just can’t find enough people,” and “I’m not sure how we’re going to get all this work done.” My how times have changed.
And while recruiters we talk to say they are busier than ever trying to find those elusive “right people” for organizations short on emerging leaders. And business development professionals are networking and selling their firm’s capabilities more than ever, it still feels like proposals and projects have been coming in dispiriting fits and starts. Mega projects seem to be fewer and far between, and bankers are only now dipping their toes back into selective construction lending again. A sign of the times, state and local agencies are facing headwinds of tighter budgets and austerity measures. Competition for work is as fierce as we can recall, with larger firms chasing down smaller projects and practically every A/E and environmental firm is taking on lower margin work just so their “loyal” clients won’t think twice of using another design or consulting firm!
It was recently reported that economists believe it could take almost four more years for the construction industry to fully recover from the housing bubble and lingering recession. As a result, many A/E firms are trying to position themselves in growing, or resilient, markets (such as green building, energy, shale development, industrial, compliance, etc.) by any means necessary. Many leaders apologetically tell us their short-run growth and business planning exercise has been boiled down to one slogan: “We’re chasing the money.”
In this economic and design climate where we can’t rely on a broad based recovery (yet!) to lift the tide once again, many A/E leaders now realize that growth will come from taking market share away from others and/or penetrating new markets and clients. And more often than not, acquisitions are a faster way to accomplish that goal.
Serial buyers, as well as first time acquirers, have been stirring again. They are on the prowl for small to mid-size targets that immediately bolster their top line rather than risk the opportunity cost of patiently cold-starting offices (add to that the cold reality that many professionals can’t readily sell their houses and relocate to open a new branch office anyway). Small to mid-size firms, particularly in architecture, continue to evaluate regional mergers for scalability and survivability.
So if your organization is contemplating the M&A path to spur growth, here are some key objectives and strategies one should be mindful of in putting a successful combination together:
The path to success in an acquisition program is to have a viable pipeline of numerous target firms that meet your M&A criteria and then actively engage with them in a manageable and efficient manner. Our experienced team has led the efforts and processes of dozens of A/E and environmental M&A acquisition programs and buyside engagements over the years.
Table: Representative Transactions: March 2011 – June 2011
|AMEC||MACTEC||2,600||$280MM||Environmental Planning; Assessment and Remediation; Infrastructure Engineering; Water Resources|
|Jacobs||Majority Ownership of Consulting Eng Services (India) Ltd.||2,000||N/A||Infrastructure Development; Planning; Engineering; CM|
|URS||Apptis Holdings, Inc.||1,000||$260MM||Government IT|
|HanmiGlobal||Majority Ownership of Otak||300||$13MM||Urban Design; Architecture, Planning; Engineering; Transportation; Water/Natural Resources|
|SAIC||Patrick Energy Services (Division of Patrick Engineering)||200||N/A||Power Generation; Transmission; Substations; Distribution; Renewable Energy|
|TRC Companies||The Environmental Business Unit of RMT||200||$13.3MM||Remediation and Restoration; Environmental; Health and Safety; Air Pollution Control; Solid Waste|
|Stantec||The Caltech Group||180||N/A||EPCM; Oil/Gas; Utilities|
|Terracon||Nodarse & Associates||150||N/A||Environmental Consulting; Geotechnical; Construction Materials Engineering and Testing|
|CH2M HILL||Booz Allen Hamilton’s Transportation Consulting Business||150||$28.5MM||Management Consulting; System Engineering; Asset Management; System Safety Consulting|
At Rusk O’Brien Gido + Partners, we put our clients together with multiple, motivated and qualified targets in a coordinated manner so that they can select from the best acquisition candidates from a strategic and cultural fit perspective. We possess years of experience navigating A/E and environmental buyers and sellers through the M&A process and towards winning combinations. Please contact me with any thoughts or observations on M&A activity or if we can ever assist your organization.