Engineering Inc. - March/April 2016 - (Page 46)

Mergers and Acquisitions BY N E I L C H U R M A N 2015 Another Record Year for M&A Deals L ast year turned out to be the busiest year yet for industry mergers and acquisitions (M&A) activity. Sales of U.S.-based firms in 2015 increased by more than 5 percent, with 234 deals announced last year, compared to 222 the previous year. The scale of deal making, however, was smaller than in 2014, which saw a flood of megadeals among some of the industry's largest players. The median size of a firm sold in 2015 decreased to $3 million in revenue and a staff of 23 employees from $4 million and 30 staff the prior year. In 2015, industry firms seemed to focus on filling strategic gaps, bolting on new offices and adding resources. For the second straight year, Texas topped the list of states for industry firm sales with 31, followed by California with 24. Prior to last year, California had dominated in deal activity, but continued population and economic growth appear to have moved Texas to the head of the pack. Other states with doubledigit firm sales included New York and Illinois with 14 each, North Carolina with 11 and Florida with 10. Buyers appeared to focus on states with large, diversified economies, where population growth, infrastructure needs and funding sources create a nexus. In 2015, private equity played a major role in industry deal making, with a num- 2016 REPORTED M&A ACTIVITY ber of significant deals involving outside capital. Private equity's interest in the engineering industry appears to be increasing, as firms invest in high-quality businesses with the opportunity for growth. Among the most noteworthy deals was CH2M's announcement of a major investment from Apollo Global Management. Gryphon Investors was also active in the industry last year, announcing majority investment in fire-protection engineering firm JENSEN HUGHES as well as the sale of environmental consulting firm Trinity Consultants to an affiliate of Levine Leichtman Capital Partners. Bernhard Capital Partners, a private equity firm founded by former Shaw Group CEO Jim States by Total Activity: Firm Sales by State through February 1, 2016 US vs Int'l Sellers: Total US Sellers 21 or more Transactions 16 to 20 Transactions 11 to 15 Transactions 6 to 10 Transactions 1 to 5 Transactions No Transactions 2 15 Total Int'l Sellers 8 US Sellers to Int'l Firms 1 Int'l Sellers to US Firms 1 WA ME MT ND 1 VT MN OR ID NH 1 SD NY WI WY MI MA CT RI 1 NV 1 PA IA NE 1 UT IL OH IN WV CO CA VA MO KS KY 2 AZ 2 TN OK 1 AR NM MS 1 TX AK AL Recent ACEC Deal-Makers JANUARY 2016 ACEC Member Johnson, Mirmiran & Thompson 4 (Sparks, Md.) announced an agreement to acquire ACEC Member Kennedy Consulting (McKinney, Texas). ACEC Member Morrison- GA LA © Morrissey Goodale LLC 2016 All Rights Reserved 46 ENGINEERING INC. MARCH / APRIL 2016 NC SC FL HI NJ MD DE DC MD Bernhard, announced multiple transactions in the engineering and construction sector, including the acquisition of ATC Associates from Cardno. In early 2016, Keystone Capital announced it had invested in and partnered with engineering and construction management firm Target Engineering Group. Last year, Keystone also invested in health care-focused architectural firm MorrisSwitzer. Private equity's interest in the engineering industry signals that the investment community sees strong growth potential in the sector. It remains to be seen how deal activity will shape up in 2016, but the economy is sending mixed signals for the engineering industry early in the year. On one hand, the new five-year highway bill is welcome news for firms heavily involved in transportation. On the other, oil prices below $30 per barrel could hurt firms that have benefited from the energy industry's recent growth, particularly in North Dakota, Pennsylvania, Ohio, West Virginia and Texas. Firms that can remain nimble and diversified will be best positioned to adapt to a constantly changing economic and competitive environment.

Table of Contents for the Digital Edition of Engineering Inc. - March/April 2016

Engineering Inc. - March/april 2016
Contents
From ACEC to You
Market Watch
Legislative Action
Congressman Fred Upton
Public vs. Private Clients
Navigating the P3 Landscape
One Person, One Hour at a Time
Million-Dollar Clout
2016 Annual Convention Preview
Mergers and Acquisitions
Members in the News
Business Insights

Engineering Inc. - March/April 2016