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
| Feb 24, 2014
White Paper: Using social media to build your business
This white paper from Benjamin Moore provides practical guidance for building and sustaining an effective online presence, with the ultimate goal of helping your painting business become more successful.
| Feb 24, 2014
First look: UC San Diego opens net-zero biological research lab
The facility is intended to be "the most sustainable laboratory in the world," and incorporates natural ventilation, passive cooling, high-efficiency plumbing, and sustainably harvested wood.
| Feb 24, 2014
White Paper: The science of color and light
This white paper from Benjamin Moore provides an overview of the properties of color and light, along with practical guidance on how the relationship between the two affects design choices.
| Feb 21, 2014
Naturally ventilated hospital planned in Singapore
The Ng Teng Fong General Hospital will take advantage of the region's prevailing breezes to cool the spaces.
| Feb 21, 2014
Calatrava ordered to pay millions for 'shortcomings in his work' on conference center project
Famed architect Santiago Calatrava must pay 2.9 million euros due to faulty design work on the Palacio de Congresos project in Oviedo, Spain.
| Feb 21, 2014
First look: Goettsch Partners reveals 'lighthouse' tower scheme for China resort
Topped with glowing beacon that will be visible for miles in any direction, the Rosewood Sanya tower is the centerpiece of a new resort and meeting complex on China’s Hainan Island.
| Feb 20, 2014
5 myths about cross laminated timber
A CLT expert clears up several common misconceptions and myths surrounding the use of wood as a building material.
Sponsored | | Feb 20, 2014
Chicago’s historic Wrigley Building renovated to attract tech companies
Purchased in 2011 by a consortium of investors led by BDT Capital Partners, the building’s new owners have recently renovated and reimagined the next life for this architectural landmark—as a hub for tech firms.
| Feb 20, 2014
World's longest desk? Massive, undulating desk accommodates 145 office workers [video]
The desk is built from plywood and one continuous sheet of resin, and can serve all 145 office employees at once.
| Feb 19, 2014
It's a world record! Largest uninterrupted concrete pour kicks off Wilshire Grand project
Guinness World Records verifies the concrete pour as the largest ever