Through the first six months of 2014, Morrissey Goodale tracked 101 sales of U.S.-based architecture and engineering (AE) firms, roughly the same amount as during the first six months of 2013, and putting 2014 on pace for another strong year for domestic AE M&A activity. This positive momentum has continued into the second half of the year with AECOM’s recently announced agreement to acquire URS.
The deal is one of the most significant in the history of the AE space and creates a global firm with more than 95,000 employees. International deals, on the other hand, lagged through the first six months, with just 43 sales of internationally-based AE firms so far in 2014 compared to 54 during the first six months of 2013. Overall, activity remains strong and hot spots for dealmaking are tracking broader positive economic trends in the U.S. and abroad.
Domestic M&A Activity on Pace for Strong 2014
Domestic M&A activity through the first six months of 2014 was generally on pace with the first six months of 2013 (Graph 1, top). The pace of domestic AE industry consolidation, which accelerated coming out of the great recession in 2011 and carried forward into 2013, has remained relatively steady into 2014.
Industry firms appear to remain cautiously optimistic, with deal activity in 2014 on pace to rise to levels similar to 2012 and 2013 by year end. Firms continue to make bets on the positive economic climate in the U.S. The question will be whether this momentum continues into the back half of the year, as firms work to integrate recent acquisitions and continue to assess the U.S. market. With six months to go in the year, we anticipate domestic M&A activity to be in the 180 to 200 deal range.
Texas and California Lead States in M&A Activity
Regionally, Texas led all states in deal activity with 16 Texas-based AE firm sales through June 30, 2014 (Graph 2). Deals in the Lone Star State continue to be driven by a combination of strong economic growth and oil and gas activity. California, a perennial top state for industry dealmaking, followed with 12 firm sales. Colorado, which was among the top states for firm sales in 2013 with 11, saw seven firms based in the state sell so far in 2014. Notable among the top states was Washington, where we only observed one firm sale in all of 2013, and by comparison has produced 6 firm sales so far in 2014.
The U.K. and Canada Lead International Destinations
The United Kingdom and Canada were the top destinations for international firm sales through the first half of 2014 (Graph 3). Australia, New Zealand, and South Africa were also bright spots. With the Eurozone and BRIC countries continuing to face economic challenges, buyers looked to more stable markets for M&A opportunities.
The Megadeal is Back
On the heels of several large deals in the back half of 2013, megadeals continued into the first half of 2014. AE firms continued to seek transformational opportunities to differentiate their businesses. A few of the notable large deals so far in 2014 included:
-
AECOM’s agreement to acquire 50,000-person URS
-
AMEC’s agreement to acquire 14,000-person Foster Wheeler
-
3,000-person Conestoga-Rovers’ merger with 5,500-person GHD
-
Cardno’s acquisition of 760-person PPI Group
-
WSP Group’s acquisition of 1,700-person Focus Group
-
Parsons’ acquisition of 800-person Delcan
It remains to be seen how large scale consolidation will play out as the industry landscape continues to evolve.
Oil & Gas Driving Activity
Oil and gas has been a major driver of AE dealmaking, particularly in the U.S. Industry firms have sought to capitalize on a boom in domestic production and transportation of fossil fuels in places like Texas, Pennsylvania, Ohio, Colorado, and North Dakota. Just a few of the notable oil and gas related deals through June 30th included: Jacobs’ acquisition of Eagleton Engineering, Halff Associates’ acquisition of TriTex Technologies, Zachry’s acquisition of Commonwealth Engineering and Construction, NV5’s acquisition of AK Environmental, and GZA’s acquisition of Laurel Oil and Gas Corp.
One of the largest deals in the space was defense contractor Huntington Ingalls Industries’ acquisition of Universal Pegasus – a play to further diversify into the red hot oil and gas market.
Related Stories
Architects | Mar 5, 2019
Arata Isozaki named 2019 Pritzker Architecture Prize Laureate
The Japanese architect, city planner, and theorist is known for his deep commitment to the “art of space” and transnational methodology.
Education Facilities | Feb 25, 2019
Fallingwater Institute’s summer residency programs have a new educational hub
Bohlin Cywinski Jackson designed the project.
Architects | Feb 14, 2019
Amazon will not build HQ2 in New York City
The tech giant walks away from a deal, succumbing to opposition over huge tax breaks.
Architects | Feb 12, 2019
The basics of building commissioning
As building system technology increases in complexity and sustainability remains at the forefront of design, the need for commissioning continues to rise. This is the first post in our series examining the basics, benefits and boundaries of building commissioning.
Architects | Jan 28, 2019
9 tech trends to track in 2019
Innovations in voice recognition, cognitive neuroscience, and biometrics are among the trending tech topics for 2019, according to CallisonRTKL's Kristin Tilley.
AEC Tech | Jan 9, 2019
Our robotic future: Assessing AI's impact on the AEC profession and the built environment
This is the first in a series by Lance Hosey, FAIA, on how automation is disrupting design and construction.
Architects | Dec 17, 2018
New toolkit helps architect achieve high-performance buildings
Architects can download a copy of the toolkit online.
Architects | Dec 13, 2018
Social media synergy: Revving up your AEC firm’s content engine
Design firms know that just having a website and a blog aren’t enough, but social media complicates how they communicate.
Architects | Dec 10, 2018
The art and science of drawing: Humanizing the design process with a bit of controlled mayhem
Hand drawing reveals a dimension beyond those available in a CAD drawing or digital rendering.
Architects | Dec 7, 2018
2019 AIA Gold Medal awarded to Lord Richard Rogers, Hon. FAIA
The Gold Medal honors an individual whose significant body of work has had a lasting influence on the theory and practice of architecture.