The M&A market for architecture, engineering, planning and
environmental consulting firms is expected to accelerate in 2011 and
some of the firms looking to buy may not even be based in the U.S.
“If you’re a strong firm in the U.S., if you’re looking to partner or
exit, you should consider an international buyer,” said Jeff Clark,
managing director and principal of the M&A team for
ZweigWhite. “Many successful international firms are working
on projects that are truly making a mark on the world and are able to
pay higher multiples for talented U.S. firms. With the
prospect of working on better projects overseas for principals that
stay on with the acquired company, and larger payouts for those looking
to retire, the opportunities are there and very attractive for the top
firms.”
2011 is also expected to be a year where the strong will get stronger
and the weak will likely get weaker.
If the economy continues to drag, the few companies doing very well and
not considering an exit will be hunting for bargains and distress sales.
“Those not doing very well are looking for stability,” said Franklin
Agardy, president of Forensic Management Associates, Inc., an
environmental consulting firm in San Mateo, CA. “They can ultimately go
out of business if they don’t team up with someone.”
“I think the market actually is going to accelerate in terms of mergers
and acquisitions,” he said.
Aggressive companies with cash to spend or the ability to borrow will
be looking for more opportunities to buy in 2011, as the number of
firms barely hanging in there is likely to increase if the economy
doesn’t recover fast. This presents a great opportunity for cherry
picking, Clark said.
“There are going to be some bargain hunters out there that are going to
buy these distressed firms, and consolidate them,” he said.
Clark is bullish on the prediction that major players based outside the
U.S. are looking to invest here and firms operating in the water
markets are the likely targets.
“A lot of big players looking for those type of firms in the U.S.,” he
said. “If you’re a strong firm in the U.S., if you’re looking to exit,
you should consider an international buyer.”
While big players with money to spend are looking to grow bigger and
stronger by snapping up hot firms, midfield players are looking to
become more competitive through strategic and surgical acquisitions,
including firms that have struggled in the recession.
“There are deals out there for some of these troubled companies. They
need to make a move,” said Robert Brewer, a partner with Grassi
& Co. a Jericho, New York-based accounting firm.
A factor in that gamble is the loosening of credit markets that could
make it possible for more deals to happen.
“That may be the start of more of 2011 and 2012 activity,” Brewer said.
“It’s taking some time for sure. They’re going cautiously.”
What could also return as the economy improves are the mega deals that
went missing in 2010, Brewer said.
Bottom line, Clark said, is that in 2011 “everyone should wear an
M&A hat.”
“I think more people are looking in to M&A as an option,” he
said. “More people will try and more people might fail. You
need to build an M&A team internally and with external advisors
that know the discipline and the changing landscape of M&A in
your markets to ensure success in 2011, more than ever.”
Clark and other M&A experts will discuss transaction and
integration strategies at the 2010 AEC Mergers & Acquisitions
Summit December 2-3, 2010 in Palm Beach, Fla.