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
Mixed-Use | Jun 12, 2023
Goettsch Partners completes its largest China project to date: a mixed-used, five-tower complex
Chicago-based global architecture firm Goettsch Partners (GP) recently announced the completion of its largest project in China to date: the China Resources Qianhai Center, a mixed-use complex in the Qianhai district of Shenzhen. Developed by CR Land, the project includes five towers totaling almost 472,000 square meters (4.6 million sf).
Engineers | Jun 12, 2023
Stantec to acquire Environmental Systems Design
Stantec, a global leader in sustainable design and engineering, has signed an agreement to acquire Environmental Systems Design, Inc. (ESD), a 270-person engineering firm headquartered in Chicago. Founded in 1967, ESD has built a reputation for excellence and innovation in high-performance design with a roster of industry-leading clients. The terms of the transaction are not disclosed.
University Buildings | Jun 9, 2023
Cornell’s new information science building will foster dynamic exchange of ideas and quiet, focused research
Construction recently began on Cornell University’s new 135,000-sf building for the Cornell Ann S. Bowers College of Computing and Information Science (Cornell Bowers CIS). The structure will bring together the departments of Computer Science, Information Science, and Statistics and Data Science for the first time in one complex.
Museums | Jun 6, 2023
New wing of Natural History Museums of Los Angeles to be a destination and portal
NHM Commons, a new wing and community hub under construction at The Natural History Museums (NHM) of Los Angeles County, was designed to be both a destination and a portal into the building and to the surrounding grounds.
Performing Arts Centers | Jun 6, 2023
Mumbai, India’s new Nita Mukesh Ambani Cultural Centre has three performing arts venues
In Mumbai, India, the recently completed Nita Mukesh Ambani Cultural Centre (NMACC) will showcase music, theater, and fine arts from India and from across the globe. Atlanta’s TVS Design served as the principal architect and interior designer of both the cultural center and the larger, adjacent Jio World Centre.
Architects | Jun 6, 2023
Taking storytelling to a new level in building design, with Gensler's Bob Weis and Andy Cohen
Bob Weis, formerly the head of Disney Imagineering, was recently hired by Gensler as its Global Immersive Experience Design Leader. He joins the firm's co-CEO Andy Cohen to discuss how Gensler will focus on storytelling to connect people to its projects.
Codes and Standards | Jun 6, 2023
California’s new power grid modernization plan furthers ambitious climate goals
California’s new $7.3 billion grid modernization plan is a crucial step in furthering its ambitious climate goals. The board of governors for the California Independent System Operator (CAISO), the state’s grid operator, recently approved a strategy to build thousands of miles of new high-voltage transmission lines.
Mixed-Use | Jun 6, 2023
Public-private partnerships crucial to central business district revitalization
Central Business Districts are under pressure to keep themselves relevant as they face competition from new, vibrant mixed-use neighborhoods emerging across the world’s largest cities.
Multifamily Housing | Jun 6, 2023
Minnesota expected to adopt building code that would cut energy use by 80%
Minnesota Gov. Tim Walz is expected to soon sign a bill that would change the state’s commercial building code so that new structures would use 80% less energy when compared to a 2004 baseline standard. The legislation aims for full implementation of the new code by 2036.
Healthcare Facilities | Jun 5, 2023
Modernizing mental health care in emergency departments: Improving patient outcomes
In today’s mental health crisis, there is a widespread shortage of beds to handle certain populations. Patients may languish in the ED for hours or days before they can be linked to an appropriate inpatient program.