A/E Merger and Acquisition Activity Still Going Strong
Last year was a banner year for mergers and acquisitions in the A/E and environmental industries, according to researched at Natick, Mass.-based ZweigWhite . They attribute the trend to a strong economy, building and design project activity being strong nationwide, rising valuations and confident firm principals eager to expand.
“By our estimate, there were over 140 deals announced last year, and transaction activity was not defined by one overriding theme, but by a sheer variety of deals and strategic rationale of each,” said Steve Gido, CFA, a principal with ZweigWhite who specializes in financial advisory services. “There are many factors which may make this surge in M&A activity both sensible and sustainable in 2006.”
According to Gido, strategic factors in which firm leaders may want to consider a merger or acquisition are:
Receiving fair value. Due to the strong financial performance of many A/E firms over the last few years, internal valuations have swelled, making firm ownership increasingly unaffordable for many younger professionals. Selling to an outside buyer may achieve a higher price and faster execution.
Achieving strategic growth. The vast majority of transactions in the industry are led by firms who view acquisitions as a critical component of their overall strategic plan. Regardless of the economic environment or competitive pressures, court, pursue, and buy only those firms that meet your company's strategic objectives.
Solve recruiting challenges. Given the difficulties A/E firms are facing in today's cutthroat hiring environment, consider buying rather than filling one position at a time when talent is scarce at the leadership and project manager levels.