Engineering Inc. - Winter 2020 - 46

MERGERSANDACQUISITIONS

Party On, Deal-Makers!
BY NICK BELITZ

choing the U.S. economy's record expansion-
business activity, employment rate, consumer
confidence, and gross domestic product (GDP)
growth for more than 126 consecutive months-
engineering and environmental sector investments are reaching new peaks.
Morrissey Goodale tracked 294 M&A transactions completed by domestic U.S. deal-makers through December
of 2019, up slightly over the 292 deals completed through the
same period in 2018. While final numbers will not be available
until later in 2020, the number of transactions in the U.S. in
2019 is on pace to exceed 300 deals for the first time, breaking the
record of 297 set only 12 months earlier.
For additional party-planning context, consider this: Firms
in the A/E industry generated gross revenue of more than
$339 billion in full-year 2018, a 5 percent increase over the
prior year, according to SelectUSA, a program run as part of the
U.S. Department of Commerce. With the near-term outlook
rosy given a growing economy and rising demand for services,
the volume of firms in the A/E industry stands tall at nearly
100,000, per SelectUSA. Most of those firms are small businesses, generating design revenue of less than the $25 million
earned by firms at the small end of Engineering News-Record's
(ENR) Top 500 Design Firms list. Concurrently, Morrissey Goodale data shows the size of the median seller in the industry to
range from $3 million to $4 million in top-line revenue. Which
means the industry is heavily populated by small firms, making a
high number of them eligible to be considered sellers in a transaction. Despite the record number of deals in recent years, there

Deals

Global Deals

500
450
400
350
300
250
200
150
100
50
0

356

2016

Deals

409

423

2018

YTD 12/12/2019

297

294

2018

YTD 12/12/2019

U.S. Deals

350
300
250
200

223

224

2016

2017

150
100
50
0

ENGINEERING INC.

WINTER 2020

30%

60
50

18%

30 10%
20
10
0

23%

20%
14%

15%

10%

18
2013

25%

5%
2014

2015
2016
U.S. PE backed deals

2017
2018
% of U.S. deals

YTD 2019

is plenty of room for the consolidation party to continue.
With that in mind, below is the activity that rounded out 2019.
THE PERENNIAL PARTYGOERS HELD THEIR OWN...

The usual suspects have been at work over the course of 2019,
led by ACEC member NV5 (Hollywood, Fla.). NV5 closed
nine transactions in 2019 as of this writing, including the firm's
November agreement to acquire the largest full-service geospatial
solutions provider in North America, Quantum Spatial, Inc.
(Sheboygan Falls, Wis.), for $300 million. NV5 continues to be
one of the A/E industry's most prolific buyers, with 31 transactions since 2015, driving the firm's annual top-line revenues over
the same period from $150 million to more than $500 million.
ACEC members Salas O'Brien (Santa Ana, Calif.), Gannett
Fleming (Camp Hill, Pa.), CHA Consulting, Inc. (Albany,
N.Y.), Terracon (Olathe, Kan.), and TRC Companies, Inc.
(Lowell, Mass.), all continued to use acquisitions as a critical
component of their growth strategies and to build reputations
as industry leaders in M&A. Each firm completed at least three
acquisitions apiece in 2019.
...WHILE NEWCOMERS CRASHED THE GATES

324

2017

Influence of Private Equity

As the demand for engineering and design services has expanded,
so too has interest in deal-making from firms not traditionally
part of the acquisition push. On the strength of economic growth
and ongoing optimism in the industry, multiple well-recognized
industry brand names joined the party, including ENR Top 500
firms LHB (Duluth, Minn.), Murraysmith (Portland, Ore.),
PS&S (Warren, N.J.), and Core States Group (Duluth, Ga.),
who all completed their first acquisitions in 2019. For their part,
LHB and Murraysmith each completed two.
Adding to the ranks of buyers over the past year is the increasing number of private equity firms knocking on doors in search of
an investment platform-meaning a profitable, growing engineering firm-by which to enter the space. Following Kleinfelder's
(San Diego) headline transaction with Wind Point Partners
(Chicago) in 2018, 2019 has seen six ENR Top 500 firms transact, or announce a transaction, as of this writing. Four of these

Engineering Inc. - Winter 2020

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