Private Equity’s Power Play

Engineering Inc. magazine

As Investors Flood the Engineering Sector, Valuations Rise and Firms Become More Strategic and Business-Oriented—But Not Without Potential Risks

Amid a booming industry, engineering firms—like many professional services compa­nies—have still faced grow­ing succession challenges and increased consolidation over the past decade. At the same time, private equity (PE) investment has grown significantly, creating additional options for firm ownership and capitalization, while also impacting valuations and merger and acquisition strategies.

PE’s interest in the industry reflects many factors, including a recognition of the government’s Infrastruc­ture Investment and Jobs Act, which has brought bil­lions of dollars to fund projects across the United States.

“Nothing gets the attention of investors like a multi-year, multibillion-dollar spending program by the federal government, because you can plan and execute long-term strategy around it,” says Nick Belitz, principal of advisory services at Morrissey Goodale.

PE firms also see engineering businesses as an oppor­tunity for them to diversify their portfolios.

“PE firms are looking for alternative investments,” says Brendon Cussio, principal of mergers and acquisitions advisory and the sell-side practice at Morrissey Goodale. “Historically, they like businesses with physical, tangible assets. With professional services, the assets are the people. It’s a different model, but they’ve found it to be successful, assuming the proper alignment of incentives.”

U.S. acquisitions made by PE firms have increased from 12 percent in 2016 to 39 percent in 2023, accord­ing to Morrissey Goodale. Over that period, the percent­age of Engineering News-Record Top 100 firms backed by PE shot up fivefold, from 4 percent to 22 percent.

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