The M&A World through the Eyes of Buyers and Sellers (Part 2—The Buyers)

Jon Escobar, vice president of Morrissey Goodale’s buy-side engagements, gives readers a glimpse into the minds of buyers.

By Mark Goodale February 20, 2023
Courtesy: Morrissey Goodale.

Last week, we heard from Morrissey Goodale’s Brendon Cussio about what sellers of AE and environmental consulting firms are thinking and experiencing in the current market. This week, Jon Escobar, Vice President of Morrissey Goodale’s buy-side engagements, gives us a glimpse into the minds of buyers. Here’s what we covered:

MG: Jon, are buyers cooling their heels?

JE: No, not really. There’s been no slowing of interest. But while the market still favors sellers, there has been more scrutiny of some deals.

MG: Which markets are most attractive to buyers right now?

JE: Significant growth in funding will be seen in markets like aviation, environmental, transportation, water infrastructure, and broadband power. Buyers are very aware that they will run into fierce competition when pursuing AE firms that serve those markets. There’s been no shift in leverage in deals that happen in these arenas.

MG: Where has there been a shift, if anywhere?

JE: We are starting to see a temperature change in deals involving sellers that serve markets heavily reliant on private funding. Land developers are a good example—their level of activity is often tied to lending and interest rates. Because of slowing demand in those areas, buyers are showing more caution in pursuing AE firms that derive a large portion of their revenue from those sectors. Buyers are even noticing sellers becoming wary of their own outlooks.

MG: Are buyers finding that these firms are reluctant to sell?

JE: No. Sometimes it’s the opposite. Many of these firms are eager to capitalize on their last two very strong years while taking some of their chips off the table before their fortunes potentially change.

MG: Do transition and retirement goals factor into their interest in selling?

JE: They certainly do. Sellers who have seven to ten years to go before retirement are more likely to want to hold on and ride things out from a valuation perspective. Sellers who plan to retire in three to five years are looking harder at external transition.

MG: Why would buyers be interested at all in firms that primarily serve potentially softening markets?

JE: There were 317 unique industry buyers—an all-time high—completing more than 460 deals last year. Deal activity was up 20% compared to 2021, and valuations—which were also at an all-time high—priced many buyers out of the market. Now is their chance to get in. The belief among some of these buyers is if more and more investors and strategic buyers steer clear, they can acquire a quality firm at a lower price. And to them, the upside outweighs the potential short-term impacts on their business.

MG: How fierce is the competition for firms serving the booming markets you referenced earlier?

JE: Five years ago, there were dozens of firms with hundreds of employees serving attractive markets in growing regions. But by now, the market has largely been combed over, and the resulting scarcity of in-demand assets has resulted in super-heated competition for the remaining target firms. Only the naïve, or perhaps the arrogant, think they are the first to knock on the door of just about any AE firm in the industry these days. Last week, the CEO of a water infrastructure firm in Texas told us we were the 10th firm to approach them since the start of the year. That’s about two inquiries a week. With immense demand comes immense competition. If you think you are the only game in town, you are sorely wrong.

MG: How do buyers succeed in this kind of environment?

JE: The false belief many buyers have is that by putting an M&A strategy to paper, they can expect to have a deal done in six to nine months. But the most successful buyers in the industry will tell you all M&A is built on relationships, and that means kissing the most frogs and meeting with the most firms in the pipeline because you know deals in the works could fall through at any moment. Successful buyers often build relationships with target firms for two or three years by teaming on projects, entering into joint ventures, and so on. It requires patience and endurance.

MG: And opening the wallet?

JE: Yes. And that, too.

MG: Speaking of opening the wallet, what have we seen with valuations? Are they starting to sag?

JE: Valuations have been largely holding for the last 12 months. But bear in mind that multiples as a whole are bifurcated. The most desirable firms—those that serve well-funded end markets and are based in the Sun Belt or other attractive, high-growth geographies—will continue to see valuations remain strong or even rise as the result of their scarcity. Firms outside of that bracket will be more heavily impacted by macro headwinds. For these firms, valuations will likely decline as fewer and fewer buyers approach them.

MG: Are the daily warnings of a recession wearing down buyers?

JE: We haven’t had a single buy-side client tell us they are putting their M&A plans on pause or pulling back. For the first 35 days this year, there have already been 60 transactions in the U.S. That puts the AE industry on pace with 2022, which was a record-breaking year. Buyers are staying active—there’s no question about it.

To learn more about how Morrissey Goodale can help your firm make successful acquisitions in a hyper-competitive market, call Jon Escobar at 224.577.8595 or send an email to

Author Bio: Mark Goodale is principal at Morrissey Goodale, a specialized management consulting and research firm serving the architecture, engineering and environmental consulting industries. Morrissey Goodale is a CFE Media content partner.