Engineering Inc. - May/June 2012 - (Page 36)

Mergers and Acquisitions Pace of M&A Mirrors Economy’s Fragile Recovery BY M I C K M O R R I SS EY I n speaking with ACEC Member Firm owners and managers across the nation, there’s a near-unanimous consensus: The first quarter of 2012 was markedly better businesswise than the same period in 2011. This year’s unusually mild winter, compared with last year’s deep freeze, resulted in an earnings windfall from field operations in the first three months of the year with much-improved bottom lines, and—perhaps more important—stronger backlogs. Firms increasingly are seeing private capital re-enter the buildings and land development sectors. The first quarter also saw continued success for firms with a footprint in the Marcellus, Bakken or Utica shale regions. With so many Member Firms reporting stronger earnings, one might assume that mergers and acquisitions (M&A) activity is on the rise. When the economy is growing, firms are usually stronger and generally more optimistic—there are relatively more buyers in the market with relatively higher deal valuations. The numbers, however, tell a different story. The pace of design firm activity is down 11 percent over the same period last year. This mirrors the larger economy. As of Jan. 20, 221 deals had been announced in North America across all industries, compared with 396 through the same period in 2011, a decline of some 44 percent, according to data from market research firm mergermarket. So, why the slowdown, especially when the economy suggests that the pace of M&A should be increasing? There are two primary reasons: • Buyers are still cautious and are conducting due diligence—particularly when vetting opportunities and backlog as presented by potential sellers. • Sellers are feeling more optimistic about their shortterm outlooks. Many are seeing more opportunities and hearing good news from their clients and owners. The resulting improvement in self-confidence makes sellers less likely to accept conservative offers. Changing expectations and outlooks on the part of potential buyers and sellers are directly attributed to a lack of clarity about the nature of the current economic recovery. US vs Int’l Sellers: Total US Sellers Total Int’l Sellers US Sellers to Int’l Firms Int’l Sellers to US Firms 40 31 2 61 Both camps recognize the recovery is occurring, but one is more skeptical than the other about its pace and risks. Watch for the pace of M&A to pick up again in the second and third quarters as confidence in the economic recovery builds. Also, expect a spike in activity in the fourth quarter, as firms move quickly to consummate deals prior to the end of the calendar year in anticipation of tax increases in 2013. ACEC Member Spotlight In March, ACEC member McKim & Creed (Raleigh, N.C.) acquired a 31-person AECOM survey operation, formerly known as SURVCON (Houston). SURVCON is a full-service professional land surveying and aerial mapping firm. It will operate under the name SURVCON, a Division of McKim & Creed. In February, ACEC member Spalding DeDecker Associates (SDA; Rochester Hills, 2012 MERGER AND ACQUISITION ACTIVITY Firm Sales by State through March 29, 2012 States by Total Activity: 21 or more Transactions 16 to 20 Transactions 11 to 15 Transactions 6 to 10 Transactions 1 to 5 Transactions No Transactions 1 WA 1 1 MT 2 ND 1 ME VT MN NH WI MI 2 OR ID WY SD NY MA CT RI 2 NE 5 IA 2 PA OH IN WV VA KY 1 NV UT 2 IL KS MO NJ MD DE DC MD CA CO 1 TN 3 NC OK AZ NM AR 2 7 Mich.) acquired fellow ACEC member firm Coyle Engineering (San Antonio). Coyle Engineering will operate under the name Coyle-SDA. To view the most up-to-date and “live” versions of the M&A heat maps accompanying this article, and to see who the buyers and sellers are in each state, go to www.morrisseygoodale. com. Mick Morrissey is managing principal of Morrissey Goodale LLC—a strategy, M&A and human capital solutions firm serving the A/E/C industry. He can be reached at mmorrissey@ SC AL MS 2 GA AK TX LA 4 FL © Morrissey Goodale LLC 2012 All Rights Reserved 1 HI 36 ENGINEERING INC. MAY / JUNE 2012

Table of Contents for the Digital Edition of Engineering Inc. - May/June 2012

Engineering Inc. - May/June 2012
From ACEC to You
Market Watch
Legislative Action
2012 Engineering Excellence Awards
2012 Annual Convention Wrap-Up
Taking the Lead
Decision Makers
Business Insights
Members in the News
Mergers and Acquisitions

Engineering Inc. - May/June 2012