Mergers and acquisitions are back among MEP Giants

After a brief pause last year, MEP leaders are back in the M+A game.

08/15/2013


If mergers and acquisitions are an indicator of economic health—and they are—then a sense of optimism appears to have returned to the Consulting-Specifying Engineer MEP Giants. Over the past year, 17 of the MEP Giants were involved in a merger or acquisition (M&A), up from 12 the prior year. The MEP Giants took a look around, made a judgment call that the worst of the storm had passed, and stepped back into the M&A game. 

Domestic deals outpacing international deals

Figure 1: Domestic M&A activity was up 3% in 2012 over 2011. Courtesy: Morrissey Goodale LLCThe uptick in M&A activity among the MEP Giants reflected a resurgence in overall U.S. domestic M&A activity for architecture, engineering, and construction (AEC) firms in all sectors. The total number of domestic M&A deals (deals involving a U.S.-based seller) grew 3% to a record 180 last year (see Figure 1)—its highest level since before the Great Recession. A growing stock market, increased housing starts, and lower unemployment figures all contributed to the positive economic picture in the United States. Firms that struggled to survive during the recession began to hit their stride and thrive over the most recent years. Many firms that were considering M&A prior to the recession placed those plans on hold until economic conditions and company performance improved. Conditions have now changed, with many firms seeing more project opportunities and positive indicators from clients—particularly in the private sector. 

As more project opportunities and private sector dollars flowed into the market, the MEP Giants were among the firms that were ready to take advantage of the new normal. The MEP Giants deepened their mechanical, electrical, plumbing (MEP), or fire protection engineering competencies through acquisitions of specialized services firms and also expanded their services portfolio and geographic reach with some smart mergers.

Some MEP Giants that made deals in the past year included:

  • Henderson Engineers (No. 13; Kansas City, Mo.) acquired acoustic and audio visual design firm Acoustical Design Group (Kansas City, Mo.)
  • Greenman-Pedersen (No. 68; Babylon, N.Y.) acquired multi-discipline engineering, surveying, and environmental service firm Abate Associates Engineers and Surveyors (Buffalo, N.Y.). 

Uptick in interstate deals

Figure 2: Interstate M&A activity is back up to higher than 60% in 2013. Courtesy: Morrissey Goodale LLCIf the increase in M&A activity is clue that the MEP Giants are feeling more bullish on the economy, then the uptick in deals taking place across state lines confirms it. Through the first 6 months of 2013, almost two-thirds of all deals have been interstate—that is, firms from two different states merging (see Figure 2). This is an important indicator of economic health. Deals that take place across state lines tend to be a result of a firm’s expansion strategy and an indicator of confidence in the future. During the recession and through the recovery, we tracked interstate M&A activity at record lows in the 54% to 57% range. But the first half of 2013 has seen an end to that. 

The prevailing sense of optimism has created a shift to an offensive M&A approach as buyers seek firms that will allow them to grow (not just defend or maintain) revenue and market share.  

MEP Giant EYP (No. 31; Albany, N.Y.) has been notable for its expansion through M&A recently, completing two deals beyond its home state in 2012 and early 2013. One deal saw the merger of its energy and sustainability services division, EYP Energy, with The Weidt Group (Minnetonka, Minn.), a leading building energy and software consultancy. In another expansion—this time into the resurgent Southeast—EYP also acquired certain assets of 20-person architectural design, programming, master planning, health care planning, and interior design firm BJAC (Raleigh, N.C.).


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