Mergers and acquisitions transform engineering sector [2013 Giants 300 Report]

Merger and acquisition deals by MEP, commissioning, structural, and specialty engineering firms were up 14% nationwide in 2012 compared with 2011, according to consulting firm Morrissey Goodale (morrisseygoodale.com). Since the beginning of 2013, the consultant has reported more than 60 M&A transactions involving North American engineering firms, including interstate, intrastate, and international deals.

As economic recovery generates new business, engineering and engineering/architecture firms continue to seek M&A targets that offer an expanded employee base, a geographic springboard, or simply a broader mix of skills. A typical example: the November acquisition of Energy Ace, a Georgia-based commissioning and sustainability specialist, to beef up the green expertise of global engineering, architecture, design-build, surveying, and geospatial solutions firm Merrick & Company.

During the recession, multiple architecture and architecture/engineering firms also sought to broaden their client appeal by going on an engineering talent hunt. A third of AIA member firms now identify as “multidisciplinary,” including engineering services, compared with about 25% a decade ago, according to Morrissey Goodale.

SSOE Group is among the companies capitalizing on the volatile business climate. “We closed on three M&A transactions in 2012, so our emphasis in 2013 is on integration and realizing the synergies from the combined companies,” says CEO Tony Damon, AIA, LEED AP. “Our merger with Evergreen EDC in December should be transformative, allowing us to diversify our business and leverage our combined resources for new clients, in new markets and geographic locations.”

TOP ENGINEERING FIRMS

2012 Total Revenue ($)

1 Fluor $221,231,200

2 Arup $149,738,587

3 Affiliated Engineers $105,503,000

4 WSP USA $105,362,352

5 KPFF Consulting Engineers $91,000,000

6 Syska Hennessy Group $82,097,502

7 Henderson Engineers $63,485,775

8 Smith Seckman Reid $52,919,312

9 KJWW Engineering Consultants $51,092,154

10 Vanderweil Engineers $50,552,200

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TOP ENGINEERING/ARCHITECTURE FIRMS

2012 Total Revenue ($)

1 Jacobs Engineering Group $2,715,210,000

2 AECOM Technology Corp. $1,610,390,000

3 Parsons Brinckerhoff $337,900,000

4 URS Corp. $314,266,757

5 Buro Happold Consulting Engineers $194,220,000

6 Burns & McDonnell $160,645,000

7 Thornton Tomasetti $124,575,393

8 Science Applications International Corp. $120,249,686

9 Merrick & Co. $103,998,000

10 SSOE Group $103,708,918

SEE FULL LIST

Damon credits a rebound in business from manufacturing and automotive clients, especially in the Southeast, for some of SSOE’s bullish attitude. Other hot prospects identified by Damon include the semiconductor industry in the West, and international markets, especially China, India, Mexico, and Brazil.

Steven Strauss, President of Glumac, reports good business from domestic micorelectronics companies and from Chinese clients, some of whom are developing entire new cities. Strauss has also seen an uptick in medical office buildings, mission critical, hospitality, and mixed-use commercial. “Projects that have been on the back burner are now re-emerging, and developer clients are more able to get financing through banks and institutional investors.”

For Bergmann Associates, the retail sector has been a bright spot. “The growth has been primarily with corporate retailers—big boxes, grocery stores, banks, restaurants—in New England and the Mid-Atlantic region,” says CEO Thomas C. Mitchell, PE. Property development companies in the East and Midwest have also been hiring the firm, and Bergmann has won new clients in science and technology, replacing some who have stopped building. The company recently added personnel in Michigan, Ohio, and the Carolinas.

In the West, Spectrum Engineers is getting a steady flow of work from retail, mission critical, and private commercial development, as well as some government clients. However, K-12 is “slow,” according to President and Principal Electrical Engineer Dave Wesemann, PE, LEED AP, ATD.

Considerable hustle is still required, even as the market improves. “Business continues to be challenging overall in the Southeast,” says Mark A. Gelfo, PE, LEED AP BD+C, LEED AP O+M, CxA, EMP, Director of Business Development and Sustainability at TLC Engineering for Architecture. “Competition remains high, and clients want more and more for less and less. During the past few years we have made significant initiatives in energy services, federal—though that market’s definitely on a downward track—mission critical, and hospitality, while maintaining our historically major markets such as healthcare, commercial office, and higher education.”

Like many engineering pros, Gelfo expects energy services—from commissioning, auditing, and retro-Cx to high-performance MEP design—to generate significant revenues for the foreseeable future. Spectrum’s Wesemann says advances in green technology, including LED lighting and variable-refrigerant flow HVAC, are persuading some clients to seek a more integrated delivery model to take advantage of all the potential savings.

According to Kenneth G. Diehl, Jr., PE, Senior Vice President at Smith Seckman Reid, building owners increasingly understand the high long-term ROI of green upgrades—a trend that can only be good news for engineers. “The biggest mover in this area is currently existing buildings that are using retrocommissioning to significantly lower utility costs,” he says. “The market is continuing to move toward a model that supports high-performance building operations.”

Read BD+C's full Giants 300 Report

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| Apr 26, 2011

Ed Mazria on how NYC can achieve carbon neutrality in buildings by 2030

The New York Chapter of the American Institute of Architects invited Mr. Mazria to present a keynote lecture to launch its 2030 training program. In advance of that lecture, Jacob Slevin, co-founder of DesignerPages.com and a contributor to The Huffington Post, interviewed Mazria about creating a sustainable vision for the future and how New York City's architects and designers can rise to the occasion.

| Apr 26, 2011

Video: Are China's ghost cities a bubble waiting to burst?

It's estimated that 10 new cities are being built in China every year, but many are virtually deserted. Retail space remains empty and hundreds of apartments are vacant, but the Chinese government is more concerned with maintaining economic growth—and building cities is one way of achieving that goal.

| Apr 25, 2011

Earn $300 million by NOT hiring Frank Gehry

An Iowa philanthropist and architecture aficionado—who wishes to remain anonymous—is offering a $300 million “reward” to any city anywhere in the world that’s brave enough to hire someone other than Frank Gehry to design its new art museum.

| Apr 20, 2011

Marketing firm Funtion: to host “Construct. Build. Evolve.”

Function:, an integrated marketing agency that specializes in reaching the architecture, building and design community, is hosting an interactive art event, “Construct. Build. Evolve.” in Atlanta’s Piedmont Park on Thursday April 21, 2011 at 11:00AM EDT. During the event attendees will be asked to answer the question, “how would you build the future?” to rouse dialogue and discover fresh ideas for the future of the built environment.

| Apr 20, 2011

Architecture Billings Index: new projects inquiry index up significantly from February

The American Institute of Architects (AIA) reported the March ABI score was 50.5, a negligible decrease from a reading of 50.6 the previous month. This score reflects a modest increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 58.7, up significantly from a mark of 56.4 in February.

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