Engineering Inc. - May/June 2008 - 15

E xecutives at larger companies understand that [M&As are] one of the biggest drivers for building market share, increasing revenue and expanding a market presence. toDD Kenner PBS&J explains Kogan. If these executives decide to leave early, they might be required to forfeit part of their cash or compensation from the sale. Acquiring firms also must adjust the pay structure for former principals to reflect employee as opposed to ownership status. The change means former owners might have to go without bonuses, perks and equity they were accustomed to in the past. The due diligence period, which usually lasts 90 to 120 days, is an intense and critical time for these transactions. Internal teams and swarms of outside accountants, attorneys and consultants likely will descend on target firms to pore over every aspect of the business. In the wake of devastating accounting scandals, from Enron to WorldCom, firms are increasingly wary of suspect bookkeeping, and the evaluation process can sometimes be tedious. A majority of large engineering firms are privately owned, which means they aren’t always subject to the same accounting standards as public companies. Still, financial review and valuation is a difficult and often timeconsuming endeavor. “It can become extremely nit-picky and impersonal,” cautions Matheson. “The buyer and seller must be significantly committed to the deal in order for it to survive.” Constructing a Future ment, there remains the onerous task of structuring the financing (usually through operational cash, borrowing, stock or some combination of these methods) and creating the new business. The process can prove both exhilarating and terrifying as elements of risk and opportunity collide. “It’s all about moving forward in a way that minimizes disruptions, distractions and obstacles,” says Gordon Meurer, vice president at Lakewood, Colo.–based Kennedy/Jenks Consultants. Meurer speaks from experience. In June 2007, his 25-person firm, Meurer & Associates, was bought by Kennedy/Jenks. “We had been talking about succession planning and opportunities for our staff. We had examined how we could best serve the Denver market better,” says Meurer. “Although I’m 62, I still have energy and enthusiasm. I want to continue to work. Selling the company wasn’t a retirement strategy. It was a way to maximize the company’s value and expertise.” When Kennedy/Jenks approached him in fall 2005, Meurer already had begun weighing his options, including a sale to someone who would keep the 28-year-old company independent. I t’s all about moving forward in a way that minimizes disruptions, distractions and obstacles. GorDon c. Meurer KenneDy/JenKS conSultantS But the executive team ultimately agreed that an external acquisition would pay greater dividends. After a couple of years of discussions, meetings, negotiations and due diligence (including nine months of cultural analysis), the companies decided to make a deal. The two entities faced myriad challenges, from getting used to different procedural systems, to morphing accounting methods, to syncing human resources processes and handling other business functions. But, so far, the marriage has worked. “One of the keys was that Kennedy/Jenks welcomed our input and didn’t minimize or marginalize our experience,” says Meurer. “Although the deal was an acquisition, it really felt like a merger between two equals.” Today, the former Meurer & Associates office operates independently and retains its own name, which is widely known in Colorado. “What really has changed,” says Meurer, “is our ability to work with clients that we, as a smaller firm, weren’t equipped to handle. Employees and customers have recognized that the new structure is beneficial. Our people have been able to grow and expand their careers beyond what would have been possible as a separate company.” Although some firms, such as Kennedy/ Jenks, allow acquisitions to operate under their existing name, others firms do not. Stantec and PBS&J, for example, absorb sellers and fully integrate them into their respective organizations—usually within a few months. “We believe in a single company with a single mission. Autonomous operations run contrary to this approach,” says PBS&J’s Kenner. Despite enormous challenges and all the risks, M&As remain viable options for many engineering firms. Says Sherman: “If you do your homework, manage the process and have realistic expectations, a merger or acquisition can deliver impressive results. It can create new business opportunities and income streams within a much shorter time frame.” n Samuel Greengard is a freelance business writer living in West Linn, Ore. MAY / JUNE 2008 ENGINEERING INC. Once cultural analysis and due diligence are complete and companies sign an agree- 15

Engineering Inc. - May/June 2008

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