Despite forecasts of economic storm clouds gathering on the horizon, it was nothing but blue skies for engineering industry deal-makers last summer as the blistering pace of mergers and acquisitions matched the red-hot temperatures that scorched much of the United States.
Balance sheets and backlogs remained robust as engineering firms brushed off the economic headwinds caused by soaring inflation, rising interest rates, and declining consumer confidence. Merger and acquisition activity in the A/E industry reached unparalleled heights in the first half of 2022 with a record 253 transactions that included U.S.-based sellers, surpassing last year’s midpoint total of 209 by more than 21 percent.
Perhaps fittingly, the hottest market activity has centered on states with the warmest climates as buyers cast their eyes to the Sun Belt to make strategic acquisitions. After ranking third out of the 50 states in the number of deals in 2021, Florida surged to the top in the first half of 2022 with 32 firm sales. That six-month figure nearly matched the 37 firm sales in Florida for the entirety of 2021. Texas was second in the number of firm sales with 28—followed closely by California, which was the leading state for deals in 2021.
ACEC firms were among those continuing to expand in the South and West this summer. For example, Universal Engineering Sciences (UES) (Orlando, Fla.) announced two acquisitions in as many weeks this July with its purchases of Rock Engineering & Testing Laboratory (Corpus Christi, Texas) and Speedie and Associates (Phoenix, Ariz.). Bowman Consulting Group (Reston, Va.) also looked to the Sun Belt in acquiring Fabre Engineering (Pensacola, Fla.) and Project Design Consultants (PDC) (San Diego)—its third and fourth acquisitions of the year.
Another trend we’re seeing is that some of the industry’s biggest firms just keep getting bigger. While 37 percent of U.S. deals in 2021 involved Engineering News-Record (ENR) 500 firms, that number grew to surpass 44 percent in the first half of 2022 and showed no signs of slowing down based on summertime acquisitions made by numerous ACEC members. In addition to the pair of deals by UES, summertime transactions made by ENR 100 firms that are detailed below include those by Tetra Tech (Pasadena, Calif.), Stantec (Edmonton, Canada), TRC Companies (Windsor, Conn.), Terracon (Olathe, Kan.), NV5 (Hollywood, Fla.), KCI (Sparks, Md.), LJA Engineering (Houston), Thornton Tomasetti (New York), IMEG Corp. (Rock Island, Ill.), CONSOR Engineers (Houston), and David Evans and Associates (Portland, Ore.)
The industry’s biggest firms weren’t all buyers, however. In fact, a growing number have become acquisition targets themselves. While it has been typical for about 10 ENR 500 firms to sell or recapitalize in any given year, that number ballooned to 26 last year and is on pace to be eclipsed in 2022 with 14 ENR 500 firms having been sold or recapitalized in the first half of the year.
Most of the recent sales or recapitalizations of ENR 500 firms involved private equity firms or private equity-backed buyers. Again in 2022, we are seeing significant interest by private equity in acquiring A/E firms, a trend that began more than four years ago and has accelerated since the pandemic. The number of industry transactions backed by private equity rose from 69 in the first half of 2021 to 76 in the first six months of 2022. Another such deal occurred in July when Copley Equity Partners partnered with the management team of civil and structural engineering firm LJB (Dayton, Ohio) to acquire an equity interest in the company.
As a result, we are seeing industry platforms that didn’t even exist two years ago now poised to join the ranks of the ENR 500 in 2023. For example, Trilon Group, backed by private equity firm Alpine Investors, announced three strategic partnerships in June and July alone. Two of those included ENR 500 firms The Mannik & Smith Group (MSG) (Maumee, Ohio) and CPH (Sanford, Fla.). The HFW Companies, which is backed by private investment firm VSS Capital Partners, and DCCM, backed by private equity firm White Wolf Capital, have also completed a string of acquisitions in the past year.
As long as interest from private equity, a tight labor market, and the largest federal public infrastructure investment in decades continue to make firm acquisitions an attractive growth strategy for many industry players, the forecast shows no signs of cooling down.
The following is a list of recent transactions, with ACEC members highlighted in bold.
Copley Equity Partners (Quincy, Mass.) partnered with the management team of civil and structural engineering firm LJB (Dayton, Ohio) (ENR #432) to acquire an equity interest in the company.
Shive-Hattery (Cedar Rapids, Iowa) (ENR #232) acquired KdG Architects (St. Louis, Mo.), an architecture, engineering, and interior design firm focused on the hospitality, gaming, commercial, and government markets.
The Mannik & Smith Group (MSG) (Maumee, Ohio) (ENR #320) announced a strategic partnership with Trilon Group (Denver). MSG will lead Trilon’s Midwest Platform with a focus on environment, transportation, water, and community infrastructure markets.
David Evans and Associates (Portland, Ore.) (ENR #99) acquired Civil Works Engineers (Costa Mesa, Calif.), a planning, design, and project management services firm.
Godspeed Capital (Washington, D.C.) and its strategic platform, Huckabee (Fort Worth, Texas) (ENR #212), submitted an offer to acquire 100 percent of Hill International (Philadelphia), ENR’s number 10 CM/PM-For Fee firm.
Project Design Consultants (PDC) (San Diego), a leading Southern California civil engineering, surveying, planning, and landscape architecture firm, joined Bowman (Reston, Va.) (ENR #118).
Employee-owned industry leader Terracon (Olathe, Kan.) (ENR #21) expanded its drilling services with the acquisition of Drilling Engineers (Fort Collins, Colo.).
Ardurra Group (Tampa, Fla.) (ENR #114) acquired and merged with 300 Engineering Group (Miami), a water and wastewater and public works engineering firm.
Civil engineering consulting firm CDG (Andalusia, Ala.) (ENR #461) acquired Shield Engineering (Charlotte, N.C.), an environmental, civil design, geotechnical, and construction engineering services firm.
Christopher Consultants (Fairfax, Va.), a civil engineering, surveying, planning, and landscape architecture firm, agreed to join IMEG Corp. (Rock Island, Ill.) (ENR #71).
Universal Engineering Sciences (UES) (Orlando, Fla.) (ENR #42) acquired Rock Engineering & Testing Laboratory (Corpus Christi, Texas), a geotechnical engineering, geotechnical drilling, and construction materials testing firm.
TRC Companies (Windsor, Conn.) (ENR #17) expanded its renewable energy capabilities with the acquisition of Blue Oak Energy (Sacramento, Calif.), a firm that specializes in engineering for utility-scale photovoltaic and solar energy storage projects.
WGI (West Palm Beach, Fla.) (ENR #167) acquired The Atlantic Group (Huntsville, Ala.), adding strength and new services in the geospatial aerial mapping, remote sensing, and photogrammetry markets.
Planning, environmental design, and engineering firm Environmental Design Group (EDG) (Akron, Ohio) acquired Spagnuolo & Associates (Fairlawn, Ohio), a civil engineering and land survey consulting firm. The acquisition expands EDG’s land development, survey, geospatial, data collection, and mapping services in Ohio.
Tetra Tech (Pasadena, Calif.) (ENR #4) expanded its digital water practice through the acquisition of systems integration and engineering services company The Integration Group of Americas (Houston).
BDY Environmental (Nashville, Tenn.) joined natural resource planning and management firm Davey Resource Group (Kent, Ohio).
Universal Engineering Sciences (UES) (Orlando, Fla.) (ENR #42) acquired Speedie and Associates (Phoenix, Ariz.), a geotechnical, environmental, construction materials testing, and inspection services firm.
Farr West Engineering (Reno, Nev.), a specialist in municipal engineering and public works, merged with planning, surveying, civil and transportation, and environmental services firm DOWL (Redmond, Wash.) (ENR #204).
CM/PM firm Fountainhead Consulting (Anaheim, Calif.) acquired PPM Group (Fontana, Calif.), a transportation, public works, and infrastructure construction management firm.
DCCM (Houston) (ENR #174) acquired RQAW (Fishers, Ind.), an engineering and architecture firm serving state and local government entities, educational institutions, and the military, commercial, and health care sectors.
Transportation and infrastructure engineering firm CONSOR Engineers (Houston) (ENR #76) acquired Project Engineering Consultants (West Jordan, Utah), an engineering firm specializing in transportation, water, and CM services.
Forte and Tablada (Baton Rouge, La.) acquired Boyd Holmes Engineering (Baton Rouge, La.), a firm that specializes in engineering design of urban and rural bridges.
KCI (Sparks, Md.) (ENR #48) acquired AmChel Communications (Wylie, Texas), a telecommunications firm with expertise in turnkey cellular tower installation.
NV5 (Hollywood, Fla.) (ENR #24) acquired GEO1 (Hawthorne, Calif.), a firm that offers geospatial lidar, aerial imagery, and data analytics solutions to utilities, government agencies, and the environmental sector.
Wilson Environmental Technologies (Grand Island, N.Y.), a firm that specializes in federal and state wetland delineations, wetland mitigation design and monitoring, and regulatory issues, joined natural resource planning and management firm Davey Resource Group (Metairie, La.).
Thornton Tomasetti (New York) (ENR #65) made a notable financial investment in innovative transportation and technology company HyperloopTT (Los Angeles).