Industry M&A Fulfilling High Expectations

Engineering Inc. magazine

High expectations are often hard to realize. The pace of deal-making by A/E firm buyers and sellers in the first six months of 2024, however, has the industry on track to meet Morrissey Goodale’s forecast of a near-record 450 mergers and acquisitions for the year, which would trail only 2022’s record volume of 485 transactions.

Despite the Federal Reserve Board keeping interest rates higher for longer than expected in the first half of 2024, Morrissey Goodale tracked 243 deals involving U.S. design and environmental firms, matching the total for the first six months of 2023 and second only to 2022’s high-water mark of 268 first-half deals. M&A activity continues to be propelled by a surge in federal funding that has spurred public and private investments in infrastructure, an increasing emphasis on technology integration and environmental compliance, private equity firms pursuing aggressive acquisition strategies, and investors seeking growth-oriented opportunities.

The first half of 2024 also saw an uptick in the number of high-value transactions, with 11 deals exceeding $100 million, up from eight during the same time frame in 2023. The growth in deal sizes contributed to total revenues acquired, climbing by 9 percent in the first six months of the year, reaching $4.4 billion.

A/E and environmental firms that serve the water and wastewater market continue to be in the greatest demand, thanks to the urgent need to modernize aging infrastructure and comply with increasingly stringent environmental regulations, coupled with a $50 billion infusion of federal funds from the Infrastructure Investment and Jobs Act. Firms working in the transportation and energy markets are also in high demand, while interest is lower for firms working in the commercial, retail, and hospitality markets, which are struggling with increased debt burdens due to interest-rate hikes and shifting consumer behavior resulting from inflation.

Click here to continue reading the article.