Engineering Inc. - November/December 2019 - 47

MERGERSANDACQUISITIONS

ACEC Deal-Makers Staying Local

BY NICK BELITZ

or the past few years, the concept of "staying
local" has proven popular with restaurants from
coast to coast. Locally sourced ingredients-and
the hope of better, healthier options-have
become common in the American food industry.
Judging by some of the recent deals in the engineering industry, the notion of locally sourced
offerings has spread beyond the dinner plates of
ACEC deal-makers and into engineering firm boardrooms.
First, some context: As we have seen throughout the year, all
indications are that 2019 will be another record-breaking year
for industry consolidations. The engineering world globally and
domestically is on track for 425 and 300 transactions, respectively.
In comparison, the number of transactions in 2018 resulted in
400 global and 293 domestic deals, as tracked by Morrissey Goodale, LLC. Deal-making continues at an intense pace, and it is no
surprise that buyers are looking all over the country to find the
deals that best suit their strategic plans.
However, in the latest spate of deals reported by ACEC members, one surprise involves the number of interstate transactions-
or those with buyer and seller headquartered in different states-
compared with more deals that are intrastate-or those with the
buyer and seller headquartered in the same state. For the purposes
in the world of engineering firm deal-making, a transaction with a
firm across town or across the state qualifies as "local."
As listed below, multiple firms based in the same states came
together in the latter half of 2019. Notably, Maser Consulting
(Red Bank, N.J.) acquired Craig Testing Laboratories, Inc. (Mays
Landing, N.J.), BCC Engineering (Miami) partnered with capital
investment firm Trivest Partners (Coral Gables, Fla.), AH2 (Lakeland, Tenn.) acquired Red Chair Architects (Knoxville, Tenn.),
and Watkins Associated Industries (Atlanta) acquired NOVA
Engineering and Environmental (Kennesaw, Ga.). Even Parsons
Corp. (Centreville, Va.), one of the largest firms in the industry,
stayed close to home with the acquisition of QRC Technologies
(Fredericksburg, Va.) as part of a deal with DC Capital Partners
(Alexandria, Va.).
While it may be too early to declare a trend, the pattern also
runs contrary to the typical activity seen in recent years, which
supports a rise in interstate transactions. As shown in the accompanying charts, interstate deal flow is on the rise, from a recessionary low of just above 50 percent in 2012 to more than 65 percent
of all deals today.
As a result, with so many deals happening throughout the
industry, and the fact that mergers and acquisitions have often
been used to make the leap from one tried-and-true geography to
a new one, why would deal-makers stay within the same state or
region? Based on our experience, we see the following reasons for
staying close to home:
1. You know people. Whether as a buyer or seller, conducting
a deal presents a degree of risk economically, strategically, and
culturally. To mitigate risk, deal-makers often find a degree

of comfort by staying in the same geography or state with its
familiar laws, employment regulations, local economy, and client mix. As an added layer of comfort, both parties may also
have local advisors such as attorneys and accountants to help
facilitate the transaction that make in-person meetings-which
tend to be much more productive-easier to arrange.
2. Your people know people. Financial considerations of a deal
aside, a critically important factor in the potential success of an
M&A deal is the cultural compatibility of the two firms. With
Deals

Global Q1 Deals

450
400
350
300
250
200
150
100
50
0

352

2016

400
316

311

2017

2019

2018

U.S. Deals

Deals

350

293

300
250

219

217

2016

2017

220

200
150
100
50
0

Percent of Deals
Across State Lines

2018

Interstate Deal Flow

70%

65.5%

65%
60%
55%

2019

59.8%
56.6%
56.1%

50%
45%
40%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD

NOVEMBER / DECEMBER 2019

ENGINEERING INC.

Engineering Inc. - November/December 2019

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