Channeling the high energy of 2019 that helped drive transactions to record levels, ACEC dealmakers started 2020 carrying the same hectic pace. But that momentum—driven by years of sustained profits, robust backlogs, and optimism created by the demand for engineering services—ran into a wall of uncertainty in the form of the COVID-19 pandemic.
While deal-making in the U.S. in the first quarter of 2020 actually outpaced the activity in the first quarter of 2019—Morrissey Goodale tracked 104 deals this year as compared to 95 deals last year—the widespread uncertainty spurred by the collapse of economic activity caught up to deal-makers in the second quarter. Between April and June of 2020, Morrissey Goodale tracked 40 deals in the U.S., which represents a more than 50 percent decrease from the 84 deals tracked over the same period a year earlier.
Despite this downturn in deal-making, early indications show the lull may be temporary as transactions begin to come back. Industry mergers and acquisitions were down 19 percent year over year for much of July but, as of this writing, activity is down 18 percent, and the 12-month rolling average of industry deals in the U.S. has begun to rise.
Based on that leading indicator and conversations with contacts around the engineering world, Morrissey Goodale anticipates we will begin to see more deals in the latter part of 2020. Why? The long-term drivers of M&As—buyers’ need to expand into new markets and capture new applications of technology plus sellers’ need to transition owners and find opportunities to differentiate themselves in a competitive market—are still very much at work and, in some cases, intensified by the pandemic.
Also, relative to other sectors of the economy, the engineering industry is in many ways living in an alternate economic reality in the time of COVID-19, with firms enjoying high utilization, projects deemed essential, and backlog being maintained. Even now, amid a worldwide pandemic, leaders of well-performing firms in a range of markets have chosen to explore sales, and savvy buyers are actively pursuing them.
As the engineering industry—and the world around it—adjusts to the new reality of life in the time of COVID-19, two critical fundamentals will drive M&As in 2020 and the next several years:
While there is no question COVID-19 has affected the entire industry and will continue to reshape the way ACEC firms do business and deals, the pandemic also offers firms a unique opportunity to position themselves for the post-COVID future.
Process Results (Saline, Mich.), a process engineering firm with proficiency in the chemical, pharmaceutical, specialty process, industrial, and consumer product industries, joined IMEG Corp. (Rock Island, Ill.). IMEG Corp. is an ACEC member.
ACEC member IMEG Corp. (Rock Island, Ill.) announced geotechnical engineering services provider Whitney & Associates (Peoria, Ill.) joined the firm.
Private equity firm Round Table Capital Partners (New York) completed an investment in leading environmental and engineering consulting firm Hull & Associates (Dublin, Ohio), an ACEC member.
ACEC member KCI Technologies (Sparks, Md.) acquired civil and environmental engineering company Hulsey McCormick & Wallace (Piedmont, S.C.).
ACEC member David Evans and Associates (Portland, Ore.), a recognized leader in the design and management of complex transportation, land development, water resources, and energy projects, acquired the assets of CHS Engineers (Bellevue, Wash.).
ACEC member WSP (Montreal) and Altus Group (Toronto), a leading provider of software, data solutions, and independent advisory services, finalized the combination of their respective geomatics businesses to form GeoVerra.
Urban planning consultant Team Better Block (Dallas) joined industry leader WGI (West Palm Beach, Fla.), which is an ACEC member.
IMEG Corp. (Rock Island, Ill.) acquired Cardno Structural Engineering (Houston). Both firms are ACEC members.
LRE Water (Denver) acquired Resource Engineering (Glenwood Springs, Colo.), an eight-person firm providing water resources engineering and hydrologic consulting services to municipalities, water districts, and private clients throughout the West. Both firms are ACEC members.
ACEC member Wunderlich-Malec Engineering (Eden Prairie, Minn.) acquired the staff and patented mGrid technology of IPP Connect (Elmhurst, Ill.), a firm focused on providing innovative solutions, technology, and tools for achieving aggressive energy cost reduction, efficiency, and renewable goals.
ACEC member Stanford White (Raleigh, N.C.) joined industry-leading facilities planning and design firm Salas O’Brien (Santa Ana, Calif.)
ACEC member Towill (Concord, Calif.), a leading provider of geomatics services and technologies in the western U.S., acquired Cunha Engineering (Pinole, Calif.). The acquisition will augment and diversify Towill’s land surveying services in the San Francisco Bay Area and throughout the state of California.
ACEC member P2S (Long Beach, Calif.), a provider of professional engineering, commissioning, and construction management services, acquired mechanical design firm Notkin Mechanical Engineers (Seattle).
ACEC member RESPEC (Rapid City, S.D.), a leading North American specialist in mining, energy, water, environment, and technology, acquired PDC Engineers (Fairbanks, Alaska).
Nova Geotechnical & Inspection Services (Las Vegas) joined Universal Engineering Sciences (UES) (Orlando, Fla.), a move that initiates the westward expansion of UES. Both firms are ACEC members.
ACEC member EPS Group (Mesa, Ariz.), a full-service consulting firm offering a broad range of land development, design, and infrastructure solutions, acquired civil engineering and land surveying firm Azimi & Associates (Fountain Valley, Calif.).
ACEC member Volkert acquired Bolt Underwater Services (St. Petersburg, Fla.), expanding its underwater diving bridge inspection services.
DeSimone Consulting Engineers (New York) aligned with ACEC member firm Henderson Rogers Structural Engineers (Houston), a structural engineering firm specializing in aviation, education, and health care facilities.
Power engineering consultant Sargent & Lundy (Chicago) acquired Summit Engineering Services (Englewood, Colo.), an independent multidiscipline design engineering firm dedicated to the oil and gas industry. Both firms are ACEC members.
ACEC member ISG (Mankato, Minn.) expanded its pre-K to 12 education design offerings through the acquisition of Architects Rego + Youngquist (St. Louis Park, Minn.).
ACEC member P.W. Grosser Consulting (Bohemia, N.Y.) acquired environmental and land consulting services provider KGO Consulting (Uniondale, N.Y.).
ACEC member Schnabel Engineering (Glen Allen, Va.) acquired Deere & Ault Consultants (Longmont, Colo.), a water resources, civil, and geotechnical engineering services firm.
ACEC member Maser Consulting (Red Bank, N.J.), a national multidiscipline engineering design firm, entered into an agreement to partner with Colliers International (Toronto), a global commercial real estate services and investment management firm.
ACEC member ECS (Chantilly, Va.) acquired geotechnical, environmental, and materials testing firm Solar Testing Laboratories (Brooklyn Heights, Ohio).
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 management consulting firm that specializes in the A/E industry and provides strategic business planning, merger and acquisition, valuation, executive coaching, leadership development and executive search services. He can be reached at nbelitz@morrisseygoodale.com.