A Manifesto for the AE Industry (Part 2)

A Manifesto for the AE Industry (Part 2)

Welcome to the second installment of our three-part manifesto for the AE industry. Last week in Part 1, we took the wide-angle view of the overall State of the Industry—strong and stable, but with a more nuanced story playing out beneath the headline. This week we zero in on a force reshaping the industry faster than any other: Industry Consolidation and (Re)Capitalization. Next week, Part 3 will be dedicated entirely to Artificial Intelligence.

So, the headline. Industry consolidation is running at record levels. A decade of strong profits, a wave of leadership transitions, and an influx of private equity (PE) have combined to rewrite the capitalization map of the industry. And there’s more change to come. 

Where we are today:

• Deal volume is at record highs. Annual transaction counts have more than doubled over the decade, with 2025 being the first year on record with more than 500 completed domestic transactions.
• PE-backed acquirers and/or PE recaps now account for more than half of all design and environmental consulting firm deals. 
• The largest firms are increasingly PE-backed, and employee-owned firms are a shrinking share of the ENR Top 100. (See “From True Believers to Deal Signers.”)
• Most sellers are still (relatively) small—72% of 2025 deals involved firms under $10 million in revenue.
• But buyers keep getting larger; the median buyer has nearly doubled in size in five years.
• Serial acquirers—those doing two or more deals a year—have tripled since 2016 and now drive much of the activity. M&A has gone from a periodic event to a core, repeatable growth strategy.
• Valuations keep rising, and scale commands a premium. Firms above $100 million in revenue are seeing values rise fastest.
• International buyers hit record levels, with 50-plus ENR firms sold or recapitalized to overseas interests over the last 24 months.
• For those firms with a “roads and roofs” business model, geographic expansion is a primary deal driver, with Texas and the Southeast the most targeted regions (infrastructure follows population, and so do acquirers).
• AI has entered the M&A conversation (just like it has everywhere else). From deal sourcing to deal diligence and everything in between.

Our outlook—The next 12 months:

• Deal-making will stay near record highs with over 520 transactions this year.
• PE will remain a driving force, with many of the platforms approaching potential exit windows over the next several years.
• Most of those PE exits will be recapitalizations to other PE firms—resetting values higher each cycle. (This is the “Re” in (Re)Capitalization, and it’s often the part of the cycle that surprises first-time sellers most.)
• Large strategic acquisitions will keep growing. Deals for sellers above $25 million have already doubled.
• Valuations will hold firm, especially for scaled, high-growth, lower-volatility firms.
• AI maturity levels in sellers will start to matter more. Acquirers will more and more favor/target sellers that demonstrate a cultural openness to the deployment of AI efficiencies. 

And over the next five years:

• Consolidation continues, and the ENR rankings keep reshuffling.
• International and cross-border buyers become a larger force in U.S. deals—call it globalization redux. 
• Generational ownership transition keeps feeding a steady supply of sellers.
• The valuation gap between large and small firms widens—scale and market positioning increasingly drive the outcome. (As my colleague David Thornhill likes to say, “In a consolidating industry, being small is not the risk. Being small by default—without a strategy to scale, specialize, or partner—is.”)
• The gap will be even larger between sellers that have “figured out” AI and those that continue to live in the past.
• Smaller firms face mounting pressure to scale, specialize, or partner. Those that cannot keep pace with technology and scale requirements will be far more likely to pursue a transaction.
• For more and more firms, M&A becomes not a once-in-a-career decision but a permanent part of the growth strategy.

Excellence in Acquisitive Growth Awards application window is now open:

Industry consolidation and (re)capitalization continues at pace with implications for employees, project owners, and, of course, shareholders. And that’s why we created the Excellence in Acquisitive Growth Awards series. In doing so we wanted to recognize those acquirers that are in the vanguard, improving how consolidation happens in the AE industry. And we wanted to create a forum to share M&A best practices so that the industry collectively achieves better outcomes in terms of client satisfaction, employee engagement, and value for investors.

The application window is open for two of the three annual Awards: The M&A Best Practices Award and the Best Post-Transaction Performance Award. You can learn more about both of these Awards and how to apply for one or both of them here.

Industry M&A and capitalization are the entire focus of The M&A and Capitalization Symposium in Houston this October. It’s where over 140 AE industry CEOs, corporate development executives, investors, experts, and deal-makers gather to do business in one of the nation’s fastest-growing cities. If you’re thinking about buying, selling, or recapitalizing in the next few years, this is the one event where you’ll meet the buyers, the sellers, and the investors all under one roof. Early-bird registration closes July 31—register now and save.

To connect with Mick, email him at [email protected].