Over the last few years the architecture and engineering industry has seen a marked increase in mergers and acquisitions activity. Since reemerging from the depths of the recession, the industry has been ripe with activity; with everything from the expansion of the ever growing reach of firms like DLR, Perkins & Will, and HOK, to the merging of small businesses to facilitate the retirement goals of local industry experts. Considering there is typically a few year lag between economic fluctuations and corresponding changes in M&A activity, as the bull market run is approaching nine years, this type of inorganic growth activity shows no signs of slowing down.
As an industry agnostic mergers and acquisition leader, Benchmark International is in touch with leaders from a variety of industries on a daily basis. We’ve seen significant movement from corporate development teams in a number of industries which are beginning to expand their services to grow not only their customer base, but also to gain additional wallet share of their existing clients. This type of cross pollination has occurred in interior design, surveying, construction, architecture, engineering, and technology. We currently are in the midst of closing a transaction which would allow a specialized electrical engineer which focuses on the commercial and healthcare markets to broaden their end market to include the hospitality sector, and their service offerings to include the upstream design, planning, and engineering components of a building’s IT infrastructure needs.
The last few quarters have shown us that the companies commanding the most attention from acquirers are highly specialized in specific practices. Due to low interest rates and a corporate friendly administration, strategic buyers appear to be more-keen on growing their market share of existing services organically rather than through acquisition. The transactions which garner the greatest attention are the deals which allow buyers to break into a brand new market. For example, Benchmark International is currently representing a company which is an industry leader in the education architecture space. Traditional small and medium-size architecture firms seem to specialize in a specific type of building, say mid- or high- rise, and sell that service to a variety of end markets, such as residential, commercial, and government organizations.
The company previously mentioned is unique as it offers all types of architectural services for a specialized and highly demanding niche, the education market. Similar to the education market, the government has unique needs and has created a variety of businesses with specializations to service those needs. Benchmark International currently represents a pair of these businesses: a construction firm located in our nation’s capital which specializes in building Sensitive Compartmented Information Facilities (SCIFs), and an electrical engineering company which specializes in providing the secure technology infrastructure required by United States government buildings in foreign lands, such as embassies and consulates.
We expect to see the number of architecture and engineering mergers and acquisitions in the lower middle market to continue to rise over the next few quarters. The demand for companies to become one-stop shops for all architecture, engineering, and design-related services has caused a surge in the demand for specialized companies in this industry. The current business environment of deregulation and tax cuts is primed for well-run companies to experience increased free cash flow. This trend, paired with rising interest rates, is the perfect environment for firms to put funds to work to grow their companies through acquisition.
WE ARE READY WHEN YOU ARE.
Call Benchmark International today if you are interested in an exit or growth strategy or if you are interested in acquiring.
Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkCorporate.com
Europe: Carl Settle at +44 (0)161 359 4400 / Settle@BenchmarkCorporate.com
Africa: Anthony McCardle at +2721 300 2055 / McCardle@BenchmarkCorporate.com