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
| Jul 18, 2014
2014 Giants 300 Report
Building Design+Construction magazine's annual ranking the nation's largest architecture, engineering, and construction firms in the U.S.
| Jul 17, 2014
A new, vibrant waterfront for the capital
Plans to improve Washington D.C.'s Potomac River waterfront by Maine Ave. have been discussed for years. Finally, The Wharf has started its first phase of construction.
| Jul 17, 2014
A harmful trade-off many U.S. green buildings make
The Urban Green Council addresses a concern that many "green" buildings in the U.S. have: poor insulation.
| Jul 17, 2014
A high-rise with outdoor, vertical community space? It's possible! [slideshow]
Danish design firm C.F. Møller has developed a novel way to increase community space without compromising privacy or indoor space.
| Jul 17, 2014
How the 'pop-up' retail concept can be applied to workplace design
“Pop-up” has rapidly become one of the most pervasive design trends in recent years. It has given us pop-up shops and pop-up restaurants, but can it be applied to the professional work environment?
Sponsored | | Jul 17, 2014
A major hop forward
The construction of efficient metal buildings has helped Perrault Farms expand its hops-harvesting business.
| Jul 17, 2014
22 land questions to decide if your build site works
When you’re ready to build, land needs a serious amount of attention. Since it can singlehandedly shift your building plans, land must be investigated, questioned, and eyed from every angle. SPONSORED CONTENT
| Jul 16, 2014
Ware Malcomb announces New Jersey office expansion
Architecture and design firm also honored for commercial real estate projects in New Jersey.
| Jul 16, 2014
Learning design fundamentals in the digital age – How to balance learning and technology
My colleague and I were once asked an insightful question by a Civil Engineering Professor that sparked an interesting conversation. He’d been told about our software by some of his students who had used it during their summer internship. SPONSORED CONTENT
| Jul 16, 2014
Check out this tree-like skyscraper concept for vertical farming
Aprilli Design Studio has stepped forward with a new idea for a vertical farm, which is intended to resemble a giant tree. It uses lightweight decks as outdoor growing space, adding up to about 25 acres of space.
