Engineering Inc. - January/February 2014 - (Page 48)

Mergers and Acquisitions BY N E I L C H U R M A N Industry M&A Outlook for 2014 L ast year was expected to be a banner year for engineering industry mergers and acquisitions (M&As), but the latest data indicate that M&A activity will track down from 2012's record year. The economy has, by and large, climbed out of the depths of the Great Recession. Many industry firms saw their businesses turn the corner in 2012 and return to the performance levels they experienced prior to the economic downturn. But through the first three quarters of 2013, we observed 150 domestic M&A transactions, compared with 155 in 2012-a decline of about 3 percent. Several firms that had their sights set on ownership transition during the recession chose to hold off until performance improved. Many of these firms then returned to test the M&A waters once the outlook improved in late 2011 and early 2012. So what to expect for 2014? We anticipate sustained to slightly increased M&A activ- ity due in part to concerns among sellers. Key sell-side drivers include: * Owners want to go out on top. Many baby boomers who sought to transition ownership of their firms were stymied by the recession. But now that many firms have had an opportunity to build a track record of several years of solid performance, owners will likely seek to exit at what may be a high-water mark for their business. * Talent is migrating in waves. Many of the best and brightest engineers are being wooed away to other industries-energy in particular. As firm owners lose sight of their next generation of managers and leaders, internal ownership transition is less likely to be a viable option. Owners will increasingly look to M&A as a means of ownership and leadership transition. * The squeeze is on. Continued industry consolidation, particularly among the largest firms, has resulted in 2013 REPORTED M&A ACTIVITY 2013 REPORTED M&A ACTIVITY States by Total Activity: States by Total Activity: 21 or more Transactions 21 or more Transactions 16 to 20 Transactions 16 to 20 Transactions 11 to 15 Transactions 11 to 15 Transactions 6 to 10 Transactions 6 to 10 Transactions 1 to 5 Transactions 1 to 5 Transactions No Transactions No Transactions Firm Sales by State through December 2013 Firm Sales by State through December 1,1, 2013 1 WA 1 WI 10 3 IL 7 2 CO CA OH IN WV 2 2 AR 3 MS 12 5 AL SC GA 3 TX AK LA 12 FL © Morrissey Goodale LLC 2013 All Rights Reserved ENGINEERING INC. MA NJ 2 MD DE 1 DE DC MD 5 VA 2 6 TN OK NM 4 KY 2 1 1 PA 5 2 MO KS 48 17 12 NH CT RI 9 IA NE 1 UT NY MI 1 1 96 VT 1 7 3 WY 1 156 ME 1 MN AZ Total US Sellers 156 Total US Sellers Total Int'l Sellers 96 Total Int'l Sellers US Sellers to Int'l Firms 17 US Sellers to Int'l Firms Int'l Sellers to US Firms 12 Int'l Sellers to US Firms 7 SD ID NV November 2013 ACEC Member DLZ (Columbus, Ohio) acquired the assets of American Drilling & Testing (Melvindale, Mich.). ACEC Member KimleyHorn (Raleigh, N.C.) joined forces with ACEC Member Southern Civil Engineers (SCE) (Alpharetta, Ga.). US vs Int'l Sellers: US vs Int'l Sellers: 2 ND OR 17 Recent ACEC Deal-Makers 3 2 MT 3 a pressure cooker of competition for smaller firms. Project owners increasingly seek the full suite of integrated services; many specialized firms find it tough to compete with the largest players. As competition continues to bear down on small firms, firm owners will join larger entities to remain competitive. Given these and other considerations, we anticipate M&A will continue to be an attractive vehicle for firms to execute ownership and leadership transition and will continue to drive industry M&A activity into 2014. HI JANUARY / FEBRUARY 2014 NC 2 October 2013 ACEC Member KLJ (Bismarck, N.D.) acquired ACEC Member Stelling Engineers (Great Falls, Mont.). ACEC Member HDR (Omaha, Neb.) acquired architecture, planning and design firm Rice Daubney (Sydney, Australia). The combined firm will operate as HDR|Rice Daubney. ACEC Member Woodard & Curran (Portland, Maine) acquired environmental engineering and management firm TREC (Bozeman, Mont.). ACEC Member Cardno (Brisbane, Australia) signed an agreement to acquire Haynes Whaley Associates (Houston). The firm will operate as Cardno Haynes Whaley, Inc. ACEC Member Hardesty & Hanover (New York, N.Y.) acquired Lawrie & Associates (L&A) (Alexandria, Va.), which specializes in complex bridge engineering including concrete segmental and cable-supported bridge design. ACEC Member GEC (Baton Rouge, La.) acquired 10-person coastal, harbor and water engineering firm Noble Consultants (Novato, Calif.). T o view the most up-to-date and "live" versions of the M&A heat maps accompanying this article and see who are the buyers and sellers in each state, go to www.morrissey Watch the M&A Takeaway video that accompanies this article, presented by Mick Morrissey at www.morrisseygoodale. com/ACECMergers/ JanFeb2014. Neil Churman is principal consultant of Morrissey Goodale LLC-a strategy, M&A and human capital solutions firm serving the A/E/C industry. Churman, who is based in the firm's Houston, Texas, office, can be reached at nchurman@

Table of Contents for the Digital Edition of Engineering Inc. - January/February 2014

Engineering Inc. - January/February 2014
From ACEC to You
Market Watch
Legislative Action
Extreme Weather Resistance
2014 Legislative Outlook
Model Infrastructure
The Hard Market That Never Came
2013 Fall Conference Highlights
Mirrored Concerns
Risk Management
Business Insights
Members in the News
Mergers and Acquisitions

Engineering Inc. - January/February 2014