Where AEC meets IT: Tech services M&A is driving industry growth

Architecture, engineering, and environmental consulting (AEC) firms are adding technology-driven capabilities at an increasingly rapid pace.

By Neil Churman, 7 Mile Advisors May 29, 2018

Traditional architecture, engineering, and environmental consulting (AEC) firms are in the middle of a makeover, with calculators and spreadsheets taking a backseat to big data, software, and technology. At an increasingly rapid pace, AEC firms are adding technology-driven capabilities via M&A to bolster service offerings and improve efficiencies, as well as making strategic investments in technology. Here are three growth areas to watch for industry M&A activity.

Software: The scoop

Software was once just another tool in the box for many AEC firms as a means of getting work done. Several industry firms are flipping that equation on its head and are adding software as part of their revenue mix via M&A. While many AEC firms have built novel software applications, few have been successful in monetizing it. Tetra Tech and SNC-Lavalin both recently acquired software businesses with adjacency to their existing businesses that should provide both another option on the menus they offer their clients, as well as a stream of recurring revenue. Thornton Tomasetti took a different angle recently, investing in OnScale, a “solver as a service” platform, a deal which could both provide first mover advantage, as well as value creation down the road.

Drones: The scoop

Drones, or unmanned aerial vehicles (UAV), are making a major push into the AEC industry due to a combination of technology advancement, customer demand, and regulatory policy. Advances in LiDAR and drone technology have allowed firms to get better data more efficiently and safely than ever before. The applications are nearly endless, ranging from construction monitoring to land surveying to asset management and inspection. Both NV5 and KCI recently made acquisitions in the space. Additionally, the sector is attracting major venture capital funding. Case in point, PrecisionHawk secured $75m in investment to scale their UAV platform.

Cybersecurity: The scoop

The looming threats to our critical infrastructure have moved to top of mind for owners and securing our water systems, ports, power grid, and pipelines, among others, has become a core aspect of infrastructure projects. Several firms have looked to bolster capabilities in cybersecurity via M&A. Jacobs has been a leader in this area, striking two deals in recent years. Hatch Group also made a push into this area, joining with Houston-based Shrader Engineering to form its U.S. center for innovation in digital technologies for power, automation, controls, communication, physical and cyber security, and smart city solutions.

Neil Churman is Director at 7 Mile Advisors focused on M&A advisory and raising private capital for the infrastructure and energy services industries. This article originally appeared on 7 Mile Advisors’ blog. 7 Mile Advisors is a CFE Media content partner.

Original content can be found at blog.7mileadvisors.com.