Despite the nonstop parade of disruptors that have occurred in the last several years, U.S. engineering, architecture, and environmental consulting firms are as financially healthy as they have ever been. Revenues and profits are up. Backlogs are robust. Valuations are at historic highs. ACEC firm leaders have taken that rosy picture and used it to drive deal-making of all sorts. And indications are that there is even more growth on the horizon—particularly for firms working in the transportation, water/wastewater, and power markets.
Flush balance sheets have sparked a period of unprecedented consolidation that shows no signs of abating. Annual mergers and acquisitions (M&A) activity in the A/E and environmental industry have more than tripled since 2010—with the last three years bringing an even more dramatic acceleration of deal-making.
Sharp interest rate hikes and widespread predictions of a recession caused a slight decrease in A/E and environmental industry M&A activity in 2023. Still, the 437 deals tracked by Morrissey Goodale last year marked the third-highest count on record, trailing only the all-time high of 483 deals in 2022 and 444 transactions in 2021.
Employee-owned buyers accounted for the largest share of deals in 2023—53 percent of all domestic acquisitions—followed by private equity-backed buyers at 39 percent and publicly traded buyers at 8 percent. The median acquirer reported revenue of $96 million, while the median seller reported revenue of $3 million. Florida, Texas, and California witnessed the most consolidation, in line with trends observed over the past few years.
Initial indications are that 2024 will be another near-record year for A/E and environmental industry deal-making. Morrissey Goodale forecasts an uptick in M&A activity this year to 450 transactions. Undeterred by geopolitical conflicts abroad and political uncertainty at home as the U.S. presidential election approaches, decision-makers remain extremely bullish. Eighty percent of the attendees at Morrissey Goodale’s Southeast M&A and Business Symposium in March were optimistic about business conditions in 2024, and most intended to continue with their level of planned M&A activities.
Even the darkest cloud hovering over the engineering industry—the talent crunch—carries with it a silver lining for deal-making. As engineering firms struggle to staff all the projects coming through their doors, they are responding not just by investing more in people and technology but also in acquisitions to quickly boost head counts.
The pressure to realize these staffing benefits as quickly as possible has contributed to compressed deal timelines. While the time from Letter of Intent to close averaged between 60 days and 90 days only two years ago, buyers are now often seeking to close in as little as half that time.
Private equity firms continued to make sizable investments in the engineering industry in the first quarter of 2024. Global alternative investment firm H.I.G. Capital (Miami) acquired CHA (Albany, N.Y.), and private equity firm CIVC Partners (Chicago) invested in HR Green (Cedar Rapids, Iowa). After Blackstone (New York City) announced a minority growth investment in Salas O’Brien (Irvine, Calif.), the engineering firm welcomed I.C. Thomasson (Nashville, Tenn.) to the company, as well as made acquisitions in Alabama and Wisconsin.
Other ACEC member firms that were particularly active in the first quarter of 2024 included LJA Engineering (Houston) and IMEG (Rock Island, Ill.), which each made four acquisitions, and Verdantas (Dublin, Ohio), which closed three transactions. Bowman Consulting Group (Reston, Va.), recipient of Morrissey Goodale’s Most Prolific and Proficient Acquirer Award at this year’s Southeast M&A and Business Symposium, continued its deal-making streak with a pair of purchases. Other Engineering News-Record (ENR) Top 500 member firms that made multiple acquisitions in the first quarter of 2024 included Atwell (Southfield, Mich.), Gannett Fleming (Camp Hill, Pa.), Pape-Dawson Engineers (San Antonio, Texas), Woolpert (Dayton, Ohio), DLR Group (Omaha, Neb.), NV5 (Hollywood, Fla.), DCCM (Houston), Pennoni (Philadelphia), and SAM Companies (Austin, Texas).
With government funding and incentives focused on infrastructure, A/E and environmental consulting firms with proven records in the water/wastewater, transportation, and power markets continue to draw the most interest from industry buyers and investors. Firms serving the water/wastewater market accounted for 27 percent of all sales in 2023, while those providing services to the transportation and power markets represented 25 percent and 15 percent of selling firms, respectively. Firms operating in these sectors are well-positioned to negotiate favorable terms in potential acquisitions, capitalizing on the increasing market demand and governmental support for infrastructure and energy-transition projects.
Following is a list of recent transactions, with ACEC member firms highlighted in bold.
Apex Companies (Rockville, Md.) acquired PBS Engineering and Environmental (Portland, Ore.) (ENR #360) a regional leader in environmental consulting and engineering services across infrastructure, private, public, education, and industrial markets.
HCS Engineering (Decatur, Ala.), a multidisciplined engineering and design firm serving industrial customers, joined Salas O’Brien (Irvine, Calif.) (ENR #54).
Prominent Texas water and transportation engineering firm DEC (Houston) (ENR #350) joined fast-growing industry leader Gannett Fleming (Camp Hill, Pa.).
RaganSmith (Nashville, Tenn.), a civil engineering, surveying, land planning, landscape architecture, transportation, and environmental services firm, joined Pape-Dawson Engineers (San Antonio, Texas) (ENR #112), a civil engineering, environmental, and surveying services firm.
Langan Engineering & Environmental Services (Parsippany, N.J.) (ENR #46), an environmental and engineering consulting firm, acquired JPH Land Surveying (Hurst, Texas), Langan’s second acquisition in Texas.
Technology, conformity assessment, and consulting solutions firm NV5 (Hollywood, Fla.) (ENR #22), acquired Fluhrer Reed (Raleigh, N.C.), a firm that provides structural engineering and forensics engineering services.
Green Companies (Cedar Rapids, Iowa), the parent company of the HR Green (Cedar Rapids, Iowa) (ENR #168) family of engineering firms, acquired Y.S. Mantri and Associates (Tempe, Ariz.), a traffic, transportation, and telecommunications engineering firm.
To view the most up-to-date and “live” versions of the M&A heat maps, and to see who are the buyers and sellers in each state, go to www.morrisseygoodale.com.
Nick Belitz is a principal with Morrissey Goodale LLC, a specialized, full-service management consulting and research services firm that offers strategic business planning, leadership training and development, mergers and acquisitions advisory, valuation and ownership transition, market research, and marketing and business development consulting services. He can be reached at nbelitz@morrisseygoodale.com.
I.C. Thomasson Associates (Nashville, Tenn.) (ENR #265), a multidisciplinary firm providing expertise in mechanical, electrical, controls, plumbing, fire protection, information technology, energy efficiency, and environmental services, joined facilities planning and design firm Salas O’Brien (Irvine, Calif.) (ENR #54).
Full-service engineering consulting firm CHA (Albany, N.Y.) (ENR #69) acquired D’Huy Engineering (Bethlehem, Pa.), an engineering and project management firm serving educational, municipal, commercial, and industrial clients.
GdB Geospatial (Melville, N.Y.), a geomatics, geographic information system, and spatial data management firm, joined geospatial and inspection solutions firm SAM Companies (Austin, Texas) (ENR #88).
The HFW Companies (St. Louis) (ENR #281), an expanding professional services firm in the A/E industry, entered into a new strategic growth partnership with civil engineering and surveying firm Kuo & Associates (Houston). This is the eighth A/E firm to join HFW’s national network of partner firms.
Verdantas (Dublin, Ohio) (ENR #149) acquired Lewandowski Engineers (Toledo, Ohio), a surveying, site civil engineering, and municipal services firm.
Employee-owned firm LJA Engineering (Houston) (ENR #64) expanded its transportation group through the addition of Lonestar Program Controls Group (New Braunfels, Texas), a firm that offers program controls, construction engineering, and contract management services.
Insight Group (North Charleston, S.C.), a geotechnical, environmental, and construction materials engineering consulting firm, joined industry leader RMA Companies (Rancho Cucamonga, Calif.) (ENR #146), a materials testing, inspection, certification, environmental, and geotechnical consulting firm.
TF Bernier (Concord, N.H.), a surveying and consulting firm providing environmental permitting, stormwater design, and drone capabilities, joined civil engineering firm Hoyle Tanner (Manchester, N.H.).
In its second deal of the week, LJA Engineering (Houston) (ENR #64) strengthened its presence in South Carolina with the addition of Freeland & Kauffman (Greenville, S.C.), a site development, civil engineering, and landscape architecture services firm.
