Q1 AEC M&A activity
M&A activity slows in Q1 of 2012: Industry consolidation slowed markedly in the first quarter of the year, both domestically and globally.
Domestic Report – Q1 activity down 11% compared to Q1 2011
Domestically, there were just 42 deals involving architecture/engineering (AE) and environmental consulting firms in the U.S. in the first quarter of the year, down from 47 for the same period last year and well off the anticipated pace of 54 deals for January through March (Figure 1). Note: for details on all industry transactions that occurred in the first quarter of 2012, visit Morrissey Goodale.
Why the slowdown? There are two answers. While acquirers remain keenly interested, they are still ultra-cautious about the overall economic outlook and are demonstrating a greater willingness to walk away from deals if they are uncomfortable with the answers they get in due diligence. On the flip side, sellers are viewing deals through the lens of what they view as a recovering economy and are having second thoughts about giving up control at the offers that buyers are putting on the table.
Texas and California are among the leaders in firm sales at the end of Q1, continuing a trend we have seen over the past few years. Other states with notable firm sale activity in the first quarter include Florida and South Carolina. (Figure 2)
In another sign that the industry recovery is slow at best in the wake of the Great Recession, interstate merger and acquisition (M&A) activity fell to a pedestrian pace of 55% compared with 62% for the same period in 2011 (Figure 3). With just over half of all domestic deals taking place across state lines, the industry remains far less optimistic than prior to the recession, when between two-thirds and three-quarters of all transactions were interstate.
The domestic market saw continued weakness in demand from overseas buyers in Q1, with just under 5% of all domestic transactions involving an international buyer, down from 8.5% for the same period last year. (Figure 4)
Publicly traded buyers were also relatively less active in shaping the domestic industry through acquisitions in the first quarter. Only 9.5% of all deals involved a publicly traded buyer compared with almost 15% for the same period last year. (Figure 5)
International Report – Q1 activity down 25% year-over-year
Internationally, deal activity slowed at an even greater pace than the fall-off seen domestically. Q1 deals fell 25%, down to 35 announced deals from 47 announced for the same period last year. (Figure 6)
Canada was by far the most active international market for M and A activity in the first quarter with eleven deals in total. (Figure 7)
In the first three months of the year, U.S. firms were more active in seeking overseas opportunities through acquisitions in comparison to their international counterparts doing the same in the US. In the first quarter, U.S. firms made seven acquisitions of international firms compared to international firms making just two acquisitions of U.S. firms in the same period. (Figure 8)
Content provided by Morrissey Goodale.
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