What can we learn from the thirteen most prolific acquirers in the A/E industry?
If you see some of these characteristics in the suitor you are talking to, then there’s a better chance that you will get your transaction across the finish line.
Last week’s article Coaching session for sellers: initial meeting “dos” and “don’ts” received a lot of feedback and questions. The most frequent question was “How do I know who a ‘real’ buyer is versus a time-wasting ‘tire-kicker’?” Great question.
We can learn a lot by taking a look at the most prolific buyers of A/E firms in the U.S. and seeing what traits are common to them – because these are real buyers. If you see some of these characteristics in the suitor you are talking to, then there’s a better chance that you will get your transaction across the finish line.
Who are the most active buyers of A/E firms in the U.S.? Since the beginning of 2018, these thirteen firms have each made nine or more acquisitions. Combined, they have acquired 154 firms (And counting, some we cannot reveal yet!) over the past three and a half years.
A motley crew – notable for what’s missing: The three capitalization models deployed by these thirteen most prolific acquirers are Private Equity/Family Office (8), Publicly-traded (3), ESOP/KSOP (2). What’s missing? Pure non-outside capital, non-ESOP employee-owned firms. They are all headquartered in the United States. What’s missing? Canada and six other continents, that’s what. Where has all the overseas capital gone? Collectively they are proactively pursuing growth in the facilities, infrastructure, geospatial, CM/PM, environmental, geotechnical, and technology arenas. What’s missing? Architecture.
100%, all-in committed to growth: Each of these thirteen leadership teams has a clear vision for the future. In that future envisioned state, their firm is both bigger and better. It’s not just growth for growth’s sake. But growth to serve more clients. To create more expansive and meaningful opportunities for employees. To have a greater positive impact on the communities with which they engage. To improve how they work. And, of course, to create more value for shareholders. To do all of these things, leadership teams look to acquisitions not just to grow their top lines (which too many unskilled unsuccessful buyers do) but to also improve bottom line performance along the way. Many non-prolific buyers never figure out how to increase profits.
Next-level deal teams: These firms bring experience to every step of the acquisition process. They have a defined process to screen opportunities against strategic imperatives. They deploy knowledgeable corporate and business unit or regional leaders to first and subsequent meetings with sellers. They have well-oiled due diligence teams that can within 60 days complete due diligence on every aspect of a seller – no matter what size. They perform a rigorous financial assessment on target firms (known by sellers alternatively as a Quality of Earnings or Colonoscopy) – often carried out by a national accounting firm. They have multiple law firms on retainer to “do their deals” and protect them. They learn from every transaction and institutionalize that knowledge. They get better and better at doing deals, driving down the cost per acquisition and eliminating wasteful processes/actions. This continuous improvement is another one of the reasons they are so prolific.
They don’t waste time: They know what types (services, locations, sizes) of firms they need or want to acquire (note to sellers: “need to have” acquisitions generally see higher values than “want to have” ones) to move the needle toward their vision. They expend little if any energy engaging with firms that do not meet their M&A criteria. They have limited bandwidth to process acquisitions, so they are super-efficient in how they deploy their M&A resources.
They date a lot but fall in love rarely (there’s a country song in there somewhere): Well actually they’ve fallen in love 154 times since 2018. With 40,000 plus firms in the industry there are plenty of targets for these acquirers to consider. They are NEVER courting just one firm at a time. They are ALWAYS screening multiple firms. They are air traffic controllers – they have a line of targets stacked up that they are bringing in to land. These leadership teams have remarkable people skills. They bring it all – emotion, knowledge, expertise, vision – to every single meeting with sellers. And I guarantee that in each meeting the seller believes that they are the only one being courted. Wrong. It’s a safe bet that to make these 154 acquisitions, these buyers spoke with at least 1,540 firms (10 frogs kissed for 1 deal done is the current amphibious M&A/Cinderella ratio.)
Great firms, even better acquirers: This group of thirteen have strong industry brands for technical expertise, client service, innovation, and being great places to work. In that regard their brand awareness is similar to many of the ENR Top 500. However, what sets them apart from their competition and peers, is their core competency in executing acquisitions. If you want to know what a “real” buyer looks like, then look no further than these thirteen.
This article originally appeared on Morrissey Goodale’s website. Morrissey Goodale is a CFE Media content partner.
Original content can be found at www.morrisseygoodale.com.