Engineering Inc. - September/October 2019 - 46

MERGERSANDACQUISITIONS

Long Before Winter, Deal-Makers Head South
BY NICK BELITZ

he flurry of mergers and acquisitions in the engineering industry continued through the heat
of the summer of 2019. Nationwide, ACEC
deal-makers contributed a total of 188 deals
completed in the U.S. through July. This puts the
industry on pace for more than 320 transactions
by year-end, which would exceed the 293 total
deals closed in 2018 and set another record year
for A/E firm marriages.
So far this year, DC Capital Partners (Alexandria, Va.) made
waves in the industry by partnering with ACEC member Pond
& Co. (Peachtree Corners, Ga.), ranked by Engineering NewsRecord as the 107th-largest firm in the industry, and one of the
most recognized Georgia-based engineering firms. As a diversified A/E firm, Pond & Co. brings expertise in the aviation,
facilities, transportation, industrial, defense and energy sectors
to DC Capital's portfolio. CHA Consulting, Inc. (Albany,
N.Y.), also made waves with the acquisition of ACEC member
Wolverton & Associates, Inc. (Atlanta, Ga.), a full-service civil
engineering and transportation firm. These two deals of Georgia-based companies, while notable by themselves, proved to be
part of a larger trend of ACEC deal-makers heading South long
before the onset of cooler weather.
While many see the benefits of the South, with its great hospitality, powerhouse NCAA football in the Southeastern Conference and warm winter months pleasantly free of polar vortexes, it
is important to understand why the South-and the Southeast in
particular-ranks so high on engineering deal-maker wish lists.
U.S. Deals by Year

Deals
350

293

300
250
200

219

188

217

1. Birds of a feather flock together, even if they are not
flying South. Recent transactions have shown a noticeable

150
100
50
0

2016

2017

As of July 2019

2018

U.S. Southeast States Deals by Year

Deals

2016

ENGINEERING INC.

2017

SEPTEMBER / OCTOBER 2019

Consider the following about the Southeastern U.S. states:
From 2013 to 2017, the Southeast U.S. escalated construction spending at a greater rate than that of the nation overall,
according to the U.S. Census Bureau. Specifically, construction
spending by state and local governments plus private-sector
nonresidential spending in North and South Carolina, Georgia
and Florida rose from $47.3 billion in 2013 to $70.3 billion in
2017. That translates to a compound annual growth rate of 10.4
percent and compares with construction spending growth in the
U.S. as a whole of 6.2 percent over the same time period.
Why all the building? Because a lot of people are showing up
in those states, and more are expected to arrive. The University
of Virginia's Weldon Cooper Center for Demographic Research
reports that since 2013, the population growth of the Southeastern U.S. has measured 1.3 percent in terms of the compound
annual growth rate. By comparison, U.S. population grew at a
compound annual growth rate of 0.7 percent over the same time
period. For the Southeast, that translates into less than 50 million people rising to 52 million by 2018-millions more people
in a span of just five years. The center forecasts that by 2030, the
population of the Southeast will rise to nearly 60 million people,
which works out to a compound annual growth rate of 1.1
percent. That figure significantly exceeds the expected annual
growth rate of the entire U.S., which is projected to remain
at 0.7 percent. This is critically important because population
growth is a primary driver of demand for engineering services.
As shown in the construction spending data, more people means
more building in all sectors, and engineering firm executives are
betting heavily this will mean more work for firms of all types.
While the heat of the South has proved attractive thus far in
2019, not all deal-makers sought a new home in warmer climates. As noted below, ACEC members also closed deals in the
West, Midwest and Northeast. That data shows two additional
trends of interest.

2018

As of July 2019

degree of intrastate dealing where the buyer and seller call the
same state home. Notably, buyers in New York (Bergmann
of Rochester), Ohio (DLZ of Columbus) and California (BC
Engineering Group of Santa Rosa) have acquired neighbors in
the same state.
2. The march of private equity continues. In addition to
DC Capital's deal with Pond & Co. and CHA Consulting's
acquisition of Wolverton & Associates, Inc., TRC Companies
(Lowell, Mass.), backed by New Mountain Capital, acquired
a division of EC Source (Houston). Anser Advisory (Orlando,
Fla.), backed by RTC Partners, acquired DHS Consulting,
LLC (Santa Ana, Calif.). This continues a trend tracked by
Morrissey Goodale showing private equity firms accounting
for nearly 20 percent of all A/E industry deals.

Engineering Inc. - September/October 2019

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