Propelled by burgeoning backlogs, a resilient economy, and a federal funding windfall, A/E industry deal-making remained red-hot in the first half of 2023. Morrissey Goodale tracked 226 U.S. mergers and acquisitions in the first six months of 2023, a figure only surpassed by the blistering pace of 263 deals announced over the same time period in 2022.
The interstate deal activity index—the percentage of transactions that take place across state lines—is an excellent indicator of how confident buyers are feeling about their businesses. An index near 50 percent reflects risk-averse buyers and an industry in recession. Figures above 60 percent indicate a thriving industry with buyers willing to invest beyond their home states. For the first half of 2023, the interstate deal activity index reached a record 70.8 percent, a sign that buyers are feeling remarkably optimistic.
The outlook is especially bullish for engineering firms serving infrastructure markets as buyers follow the money to sectors that are expected to receive massive public-sector funding infusions. Onethird of all domestic deals in the first half of 2023 involved sellers providing water and wastewater services, an increase of 27 percent from the first six months of 2022 and the largest year-over-year growth of any market sector. Sellers serving transportation markets accounted for one-quarter of transactions, while sellers providing services to the power market represented one-eighth of deals.
Larger, more capitalized firms that have the financial strength to weather economic storms have become more aggressive in the current M&A environment. The median acquirer through the first six months of the year had revenues of $91 million—up over 50 percent from the median size of $60 million for the same period last year.
With deeper pockets, bigger buyers are better positioned to take calculated risks to diversify and expand their businesses, gaining a significant advantage over their smaller counterparts. In fact, nearly half (45 percent) of all domestic deals in the first half of 2023 involved an Engineering News-Record (ENR) Top 500 buyer, compared to 35 percent last year.
The most active ENR 500 buyer in the first half of 2023 was Bowman Consulting Group (Reston, Va.), which undertook six acquisitions and continued its buying spree in June with the acquisitions of Infrastructure Engineering (Brea, Calif.) and MTX Surveying (Marshall, Texas). The firm added more than 200 employees in the first six months of the year through acquisitions.
Recapitalized by Peak Rock Capital in 2021, SAM Companies (Austin, Texas) has also been prolific. It added over 90 employees through its five acquisitions in the first half of the year, which included MTPLS Surveying & Mapping (Baltimore) in May and AXIS GeoSpatial and AXIS GeoAviation (Easton, Md.) in June.
Other ENR 500 engineering firms particularly active in the first half of 2023 were NV5 (Hollywood, Fla.), Universal Engineering Sciences (Orlando, Fla.), Salas O’Brien (Irvine, Calif.), IMEG (Rock Island, Ill.), and RMA Companies (Rancho Cucamonga, Calif.), each of which announced four deals through June.
While buyers may be bigger this year, conversely, sellers have gotten smaller. The median-sized seller for the first six months of this year had revenues of $3 million and 19 employees, down from $3.2 million and 21 employees for the same period last year.
We believe this data indicates private equity-backed, publicly traded, and employee-owned acquirers alike are reevaluating and fine-tuning their M&A strategies, opting for smaller acquisitions that offer gateways into untapped markets that may be otherwise elusive due to intense competition, scarcity, and eye-popping valuations for acquisitions of scale. Although undeterred by higher interest rates, many buyers are responding by pursuing smaller deals because they require less leverage. While headline-making transactions involving ENR 500 firms necessitate significant borrowing, larger firms can close smaller deals without relying on the debt markets. Moreover, the ongoing demand for engineering professionals in a tight labor market supports the “acqui-hire” approach to talent acquisition, especially among the industry’s leading firms.
The median acquisition size by private equity-backed acquirers dropped 17 percent through June 2023, compared to 2022. Even the publics, which have historically eyed more transformative strategic acquisitions, completed twice as many acquisitions of firms with under $5 million in revenue in the first half of 2023 as they completed of firms with more than $25 million revenue.
Historically, consolidation increases in the second half of the year, positioning the A/E industry for more than 450 transactions in 2023. Although the likelihood of witnessing a third consecutive record year for domestic M&A activity seems ambitious, the signals from industry buyers, sellers, and investors are unambiguous. Expect dealmakers to continue to pursue deals in 2023 and beyond.
Following is a list of recent transactions, with ACEC members highlighted in bold.
Gannett Fleming (Camp Hill, Pa.) (ENR #26) made a game-changing move in the national power and utility markets through the acquisition of 120-person power delivery solutions provider DiGioia Gray (Monroeville, Pa.).
AEG and strategic consulting firm Woolpert (Dayton, Ohio) (ENR #56) acquired Cooperative Strategies (Irvine, Calif.), a firm that specializes in school facility management, assessments, educational program planning, demographic analyses and enrollment projections, capital planning, and community engagement.
Civil, structural, land surveying, and geospatial services firm TWM (Swansea, Ill.) acquired land planning and surveying firm Medders Surveying (Athens, Tenn.).
A2H (Memphis, Tenn.), an architecture, engineering, and planning firm, acquired King Engineering Consultants (Memphis, Tenn.). The acquisition expands A2H’s services in the public sector, particularly for municipal clients in waste and wastewater improvement projects.
Architecture, engineering, energy efficiency, and CM firm Wendel (Williamsville, N.Y.) (ENR #492) acquired Mitchell Associates Architects (Albany, N.Y.), a firm that works exclusively on public service facilities, including fire stations, EMS, police, and shared facilities.
Sustainable infrastructure engineering, planning, and environmental science services firm Verdantas (Dublin, Ohio) (ENR #149) acquired Clemson Engineering Hydraulics (Anderson, S.C.), a physical hydraulic modeling services firm with experience in water and wastewater, power generation, flood control, and industrial/manufacturing cooling applications.
Fast-growing engineering and consulting firm Universal Engineering Services (UES) (Orlando, Fla.) (ENR #36) acquired GEO Solutions (Huntsville, Ala.), a full-service geotechnical engineering, environmental consulting, and materials testing firm.
Multidisciplinary firm MSA Professional Services (Baraboo, Wis.) (ENR #312) acquired Fredericksen Engineering (Mequon, Wis.), a firm that offers HVAC engineering design to architects, municipalities, county governments, school districts, and public and private business owners.
Planning and architectural design firm BHH Architecture (Perham, Minn.) merged with architecture, engineering, environmental, and surveying firm Widseth (Baxter, Minn.).
Dunaway (Fort Worth, Texas), a civil and structural engineering, planning, landscape architecture, and environmental firm, acquired civil and structural engineering firm BEC Engineers and Consultants (Houston).
Employee-owned industry leader Terracon (Olathe, Kan.) (ENR #20) acquired engineering and environmental services firm Pollution Management (Little Rock, Ark.).
AKS Engineering & Forestry (Tualatin, Ore.), a civil engineering, water resources, surveying, and land use planning firm, merged with Tenneson Engineering Corporation (The Dalles, Ore.), a firm that offers civil engineering, land surveying, structural engineering, land use planning, water rights, and construction support services.
Western States Reclamation (Frederick, Colo.), an environmental, stormwater management, land reclamation and restoration, and heavy civil services firm, acquired engineering and ecological science firm Ecological Resource Consultants (Lakewood, Colo.).
Fibersmith (Blooming Prairie, Minn.), an engineering, fiber network design, and software services firm serving the telecommunications market, acquired civil and structural engineering firm Ahneman Kirby (Riverside, Conn.).
Sunrise Engineering (Fillmore, Utah) (ENR #348) expanded its presence in Idaho with the acquisition of engineering and surveying firm Rocky Mountain Engineering and Survey (Pocatello, Idaho).
Structural engineering firms Bennett & Pless (Atlanta) and Hees & Associates (Sarasota, Fla.) merged. The merger allows both teams to offer a larger structural consulting strength with broader experience in complex structures.
Industry-leading firm Westwood Professional Services (Minnetonka, Minn.) (ENR #79) acquired Peloton Land Solutions (Fort Worth, Texas), a firm that provides engineering, surveying, landscape architecture, hydraulics, hydrology, and environmental solutions.
Engineering, planning, and environmental firm GAI Consultants (Homestead, Pa.) (ENR #173) acquired Eland Engineering (Fort Lauderdale, Fla.), a firm that offers engineering consulting and field maintenance services for Intelligent Transportation Systems and traffic signal systems.
Global digital, cloud, and security services firm Accenture (New York City) entered into an agreement to acquire ENR’s #20 ranked construction management-for-fee firm, Anser Advisory (Santa Ana, Calif.).
Ferguson Risk Management (Palm Coast, Fla.), an environmental risk control services firm, joined employee-owned industry leader Terracon (Olathe, Kan.) (ENR #20).
Byce & Associates (Kalamazoo, Mich.), an architecture, engineering, and project management services firm, joined civil engineering firm Abonmarche (Benton Harbor, Mich.). The firm will be renamed Abonmarche Byce and will be staffed by existing team members of both firms.
Transportation consulting firm TranSystems (Kansas City, Mo.) (ENR #65) acquired Whitney Bailey Cox & Magnani (Baltimore) (ENR #433), a transportation and infrastructure engineering consulting firm.
Geospatial and inspection solutions firm SAM Companies (Austin, Texas) (ENR #88) acquired AXIS GeoSpatial and AXIS GeoAviation (Easton, Md.), which collectively operate as a national geospatial solutions firm.
Multidisciplinary infrastructure, environmental, energy, and real estate consulting firm Bowman Consulting Group (Reston, Va.) (ENR #87) acquired Infrastructure Engineering (Brea, Calif.), a firm that offers engineering, planning, environmental, geospatial, and municipal infrastructure services.
Industry leader Huitt-Zollars (Dallas) (ENR #188) expanded its public works practice with the acquisition of Gavan & Barker (Phoenix), a design group with expertise in civil engineering and landscape architecture.
Industry leader STV (New York City) (ENR #37) acquired American Engineers, Inc. (Glasgow, Ky.), a full-service civil engineering firm with a staff of more than 120 professionals in Kentucky and Georgia servicing clients throughout the southeast U.S.
ENR’s #11 ranked global design firm, Stantec (Edmonton, Canada), acquired Environmental Systems Design (Chicago), a mechanical, electrical, plumbing, and structural engineering firm that specializes in mission-critical facilities and data center design.
Schneider Geospatial (Indianapolis), a portfolio company of Align Capital Partners (Dallas), acquired PeopleGIS (Woburn, Mass.), an asset management SaaS solutions firm focused on public works and permitting/licensing.
Infrastructure consulting firm TYLin (San Francisco) (ENR #32) acquired Tunnelconsult Engineering (Barcelona, Spain), a consulting and engineering firm specializing in underground works.
TRC Companies (Windsor, Conn.) (ENR #16) acquired Gladstein, Neandross, & Associates (GNA) (Santa Monica, Calif.), a consulting firm that specializes in low-and zero-emission transportation technologies, infrastructure, and ultra-low carbon fuels for commercial transportation.
Acoustical consulting firm RGD Acoustics (Larkspur, Calif.) executed a letter of intent to join multidisciplined engineering firm Coffman Engineers (Seattle) (ENR #161). The companies plan to finalize the asset purchase agreement in July 2023.
Aspect Consulting (Bainbridge Island, Wash.), an earth science and engineering consulting firm, joined Geosyntec (Boca Raton, Fla.) (ENR #40).
Bowman Consulting Group (Reston, Va.) (ENR #87), a multidisciplinary infrastructure, environmental, energy, and real estate consulting firm, acquired geospatial, land surveying, and project management firm MTX Surveying (Marshall, Texas).